6 January 2014 | Graham Copeland
1. Predictive spend analytics.
Finally, spend analytics tools and data management will break into the 21st century. Those who know who they spend with will finally understand what is spent and even when it will be spent again. After years of false dawns why might this finally happen in 2014? We have seen (finally) a surge in recognition data has to be the starting point of any good procurement exercise and investments are being made accordingly.
- Virtualisation of procurement
On-the-go, mobile app-led procurement is what more and more stakeholders are expecting. Lumbering e-procurement tools and e-sourcing tools are being replaced by shiny new ‘high definition’ versions and finally the opportunity long promised by these applications is starting to bear fruit.
- Professionalisation of procurement globally
Emerging markets in Africa, Latin America, APAC and BRICS are gaining momentum, and the traditionally European or American built procurement organisation is struggling to get to grips with far-flung, culturally alien markets. We expect to see a shift in resource deployment within the procurement world, with big procurement jobs emerging in countries like Nigeria and Brazil and more global companies adopting Barclays-style rebalancing to adapt to the new world.
- Re-emergence of marketplaces and true ‘aggregation’
With the world coming out of recession, and firms keen to start investing again, we expect to see a resurgence in B2B exchanges. Remember RubberNetwork, WWRE, Transora, eCement or Covisint? In their first guise back in the dotcom era these marketplaces were founded by the industry sector leaders and operated exclusively for their benefit. Inevitably, the business models were inward looking and suffered from mixed objectives among shareholders.
With technology costs for creating such marketplaces being a fraction of what they were a decade ago, the next generation of marketplaces will be brought about by existing brokers and middlemen who can see ‘the writing on the wall' for their current role in their sector. Seeking a disruptive business model, and with private equity backing, they have both the customer and supplier networks already in place. Aggregate buying will also feature within the mindset of the marketplace designers.
- Stretching spend under management to (almost) 100 per cent via tail focus
The last 20 per cent of spend, often unloved and not critical, is beyond the reach of the limited resources of most purchasing teams. Expect growth in third party service provider management of this area, and also the increasing use of technology to guide a ‘self-service’ model for end users to buy but still comply.
- Event cycles boosted by an emerging ‘middle office’
Category managers are expected to be heroes: expert negotiators, black belt process specialists, project managers, analysts and market researchers. The most enlightened organisations are already providing a ‘middle office’ support layer to their key category staff to free the frontline category specialists to work in the supply base and with stakeholders.
- Operating models
CPOs will finally start to look at their operating cost base and service levels with greater scrutiny. Cheaper alternatives, or more radical vehicles to boost stakeholder relationships or shareholder value, will be explored, usually in niche areas where gaps exist – by category, geography or process. For example, 40 per cent of CPOs intend to look at or expand outsourcing indirect spend next year.
- Knowledge empowerment
Marketing and sales professionals have never struggled to get access to subscription services that help them to understand their customers or the competitive landscape, but budgets for procurement teams rarely stretch to the best market supplier or market insight or search tools. All too often Google is still the purchasing organisation’s best and only friend. The best of the best will have a dashboard that filters the mass of information and will inform buyers when the best time to buy is.
- Value measurement
Like it or lump it, savings will remain a key KPI. Unfortunately in most organisations the tools used outside of direct procurement are poor. Value is usually measured when a contract is executed. But non-compliance means theoretical savings can evaporate unless they are carefully managed. Tools now exist to measure savings and track to the bottom line when a good or service is used rather than just when the deal is done. Watch out for more stringent CFO/CPO measurement criteria based on ‘real’ value.
- Supplier and external workforce management
For every direct employee, there are now more than two who support your company. Who are they? How do they know your business? How do you get them to pull for your organisation. Supplier relationship management needs to be embedded more effectively – to go beyond credit risk and quarterly performance management (although these should all be done more effectively too), and really understand the people who make up your extended supply chain and winning their hearts and minds.
☛ Graham Copeland is head of sales and marketing, Europe, at Xchanging Procurement Services. This blog was co-authored by Steve Trainor, managing director, EMEA, at Xchanging Procurement Services.