Artificial intelligence, global connectivity, resource scarcity, environmental degradation, wealth and health inequalities, rising populations, and political shifts are positioned to transform societies, test our values, and frame the decisions we make as procurement and supply chain professionals. By Malcolm Harrison
These are exciting times for procurement. The demands on today’s professionals are much broader and more complex than in the early days of my procurement career a few decades ago. More challenges and more opportunities combined have become the catalyst in creating a shift towards how procurement can add more value.
Because the technical skills of procurement are well understood. The functional, back office activities of decades past speak of cost savings and improved processes. But, the procurement professional of the future, is more akin to those of a successful business unit leader; and I see that happening now.
A range of major developments are already affecting business such as artificial intelligence, environmental degradation and political shifts – all of which are set to transform society. All these megatrends as they are called, are transformative and disruptive as the pace of change accelerates in our fourth industrial revolution. These technologies are blurring the lines between the physical, digital and biological spheres as nanotechnology and the Internet of Things demonstrate.
These developments are already impacting our organisations, both directly and indirectly and we must become agile and resilient to cope. The companies that respond and thrive in this new future landscape will become the sustainable and surviving businesses in the coming decades but it is anyone’s guess how that landscape will be created. Our research in the paper Future of Procurement and Supply Management, a study into the procurement landscape of the next 15 years has culminated in the development of two possible futures – the Networked and the Titans.
The Titans are the ‘tech giants’ such as Facebook and Google but also those companies that use digital transformation to manage networks and create mass efficiencies. This future will result in a few, large organisations across all sectors, but especially IT and they will be characterised by close integration of processes and high levels of trust and collaboration.
These organisations will have access to big data, and vast amounts of it, but this use of data will not be without its problems. Just as data will encourage collaboration and integration between business groups, it will also become divisive and increase rivalry. Competing groups will shun suppliers working for the other side and more processes will become arms-length and automated, further creating broken communication. These integrated processes will not only be highly-efficient, but also highly vulnerable from shocks such as cyber-attacks. Data security will be a huge risk, with supplier and internal breaches having the potential to destroy businesses.
The major contribution from procurement professionals will be their ability to contribute to risk management and strategic decision-making. They will need to react with swift decision-making and understand the impact of volatility and predictability on their businesses. Without major infrastructure developments to enable the management of big data such as essential IT systems, and have trained, skilled professionals in place, they will be slow to respond to these highly-dynamic markets.
This scenario offers a future less polarised by the size of the different organisations that make up its whole comprised of small firms and with a more even distribution of market power and stronger connections between organisations. There will be a greater focus on sustainability supported by technological advances, and decentralisation. The circular and sharing economies will grow, fuelled by protectionism and more regulation, resulting in a stronger regional focus for business with fewer large corporations and smaller, micro businesses. Companies will be judged on their impact on social, environmental and economic activities and not financial metrics alone as stakeholders keep an eagle eye on developments and will keep a tighter control on what businesses can do.
A wider range of business models will mean the procurement professional of the future will have to become more adaptable, more agile, as organisations pool their resources, and develop more co-operatives to increase their buying power. Professional buyers will have to become adept at managing their networks and strategising rather than just reacting. Rivalry will become more collective and reduced and stakeholders will be consulted over key procurement decisions.
Procurement and supply chain professionals have a huge part to play in whatever scenario comes to pass. Today’s sourcing decisions will shape tomorrow’s markets and companies, and working the way we always have will not get us far. This new world needs foresight, insight, integrity and highly-developed strategic skills.
Whether it’s modern slavery, Brexit strategies or cyber security, business leaders are increasingly turning to procurement for answers. These complex questions make it all the more important for the profession to take a holistic supply chain view rather than just procurement and lead their organisations into the future.
Malcolm Harrison is Group CEO at CIPS. The Chartered Institute of Procurement & Supply (CIPS) is the world’s largest procurement and supply professional organisation. It is the worldwide centre of excellence on procurement and supply management issues. CIPS has a global community of over 200,000 in 180 different countries, including senior business people, high-ranking civil servants and leading academics. The activities of procurement and supply chain professionals have a major impact on the profitability and efficiency of all types of organisation and CIPS offers corporate solutions packages to improve business profitability.