Procurement-relevant topics included tech, tariffs and building a sustainable world
At this year’s World Economic Forum annual meeting a hot topic was how to build a sustainable world. Over 3,000 world and business leaders meeting in the Swiss town of Davos discussed issues ranging from carbon emissions and offsetting to building transparency and trust in supply chains.
Climate concerns have been well highlighted before Davos. Last year, global climate strikes saw millions of people take to the streets to protest a lack of action by governments. And sustainability – both environmental and social – has been identified as a key trend for procurement for the coming year.
Businesses have the opportunity to take the lead while governments are at loggerheads on how to deal with the impact of climate change, Alex Saric, chief marketing officer at Ivalua, a sourcing and procurement platform, told SM. “This will be particularly important as organisations face increasing pressure from customers, who are expecting brands to mirror their values,” he said. “Procurement has a vital role to play here, helping companies to transform their purchasing practices, identify environmental risk and incentivise behaviour by suppliers.”
Padmini Ranganathan, global VP, risk and sustainability at SAP Ariba, agrees, adding that firms are using their impact on climate issues and forced labour to appeal to consumers. “The smart ones will shift from focusing on cost savings and compliance to true value creation and avoid greenwashing. Squeezing suppliers on cost just doesn’t cut it,” she said.
Tariff talk at Davos arose when US president Donald Trump made fresh threats to levy huge tariffs on European cars. Uncertainty, through tariff wars and Brexit fallout, is likely to remain a key procurement concern this year.
Bernadette Bulacan, chief evangelist at software firm Icertis, told SM: “Even if Britain and the EU come to terms around Brexit, there will continue to be significant business disruption into 2020. Businesses trading between the two will need to spend significant time realigning their business relationships to address the new trading environment.”
Another key theme emerging from Davos was the need to integrate technology such as automation and AI so it coexists alongside a human workforce. Tom Kieley, CEO at software firm SourceDay, believes consumer demand for instant gratification will mean supply chains will have to operate faster and more efficiently if they want to compete.
“To do this,” he said, “businesses will need to eliminate data silos that create waste that drains revenue and resources. They also need to put themselves in the position to be able to reach and manage real-time change before the change impacts their ability to meet customer demand. This type of transformation is only possible if supply chain and procurement organisations are committed to replacing outdated processes in favour of increased automation.”
While the year is set to bring change to the function, geopolitical factors and the threat of a global recession could see organisations refocus on the bottom line, Saric warned.
“Procurement has progressed in leaps and bounds over the last few years, going from being a price slasher to a department that adds strategic value through risk management, supplier collaboration and building relationships,” he said.
“A recession risks setting back this progress with a renewed emphasis on costs above other objectives. When businesses are more reliant than ever on suppliers, such a procurement relapse would be difficult to manage and damage the progress made, stifling innovation.”
Analysis: "Davos is where billionaires tell millionaires how the middle class feel."