Seafood prices will  continue to be volatile  in 2018, particularly tuna ©Getty
Seafood prices will continue to be volatile in 2018, particularly tuna ©Getty

The coming of strategic procurement

Will Green is news editor of Supply Management
19 January 2018

Technology, economic uncertainty and a need to adapt quickly will drive the business focus

It will be a year of organisational hunger for procurement, predicts Jonathan O’Brien, CEO of Positive Purchasing. “Hunger for true strategic procurement that delivers big value and builds competitive advantage, widening the gap between those realising this and those still doing tactical buying.”

While forward-thinking CPOs will search for the next generation of digital procurement tools, he predicts they will not yet be able to find fully integrated solutions. “Instead, they will begin to figure out how to connect islands of technology, which will be the first step towards a digital procurement world.”

However, Shivani Govil, VP of solutions management at SAP Ariba, believes such integration is already possible, and that firms will turn to platforms that connect the procurement puzzle. “Information will flow intelligently from sourcing and orders through invoice and payment in a closed loop, helping procurement drive optimal decisions that, beyond savings and efficiencies, deliver broad business value.”

For Guy Strafford, EVP of market engagement at consulting firm Proxima, all this adds up to a need for speed. Rather than 2018 being about AI, big data and digital – the agents of change – “it will be about something more fundamental – how CPOs respond to the desire to move faster”, he says. He also expects to see more CPOs reporting directly to the CEO, a decline in use of time-consuming RFIs and big suppliers replaced by smaller, more nimble firms.

Others predict sustainability will become front-of-mind for consumers, which will have a knock-on effect on procurement practices. Packaging disposal will be one area of focus, says Benjamin Punchard, global packaging insights director at Mintel, and collecting waste plastic from the sea to recycle into new packaging will not be enough. “In order to keep plastic out of the sea, a renewed effort towards the circular economy is needed to keep packaging material in use,” he says.

While around 200 electric and ultra low-emission vehicles could be available in the UK, Clive Buhagiar, fleet firm Alphabet’s head of pricing and planning, warns: “Even with improvements in fuel efficiency and increasing numbers of alternative powertrain vehicles on fleets, global conditions in 2018 increase the probability that fleet fuel costs will rise.”
Inflation in wholesale food prices should ease to an average 3.6%, though volatility is expected in seafood, vegetable oils, dairy and, due to the fipronil scandal, eggs. Shaun Allen, chief executive of Prestige Purchasing, says: “With all the current uncertainty that surrounds our exit from the EU, the year after (2019) still looks a very high-risk year for the cost of food and drink.”

And finally Brexit. Think tank Fast Future expects it will contribute to sterling parity with the dollar, with UK growth plummeting to zero and below. Brexit concerns will see more companies leave the UK, it says, while those that stay will rein in spending and engage in deep discounting. Growth will start to stabilise by 2022 and crawl above 1% in 2023.

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