As 2020 marks the dawn of a new decade, SM rounds up the key procurement trends expected to emerge this year.
Uncertainty reigns supreme
Ongoing tariff wars between the US and China and an impending Brexit deadline means uncertainty is likely to stick around in 2020.
Last year, a CIPS survey found one in 10 UK firms believed they would go out of business if they were unable to receive supplies from the EU. Meanwhile, a separate survey by commercial insurance provider CNA Hardy found that fewer than a third (30%) of UK transport and logistics businesses expected to feel confident in their ability to grow and prosper in 2020, with political risk cited as the primary reason.
Alex Saric, chief marketing officer at Ivalua, said: “Uncertainty such as tariff changes presents a unique challenge for businesses as any rise can affect the cost structure for products, potentially making certain supply chains untenable.
“This means prices could be caught in a state of flux and cause temporary dips in production if organisations look to change suppliers to avoid being impacted by tariff changes. For procurement teams, the challenge is about ensuring they have visibility into the impact of tariff scenarios on their overall supply chain and viable alternatives.”
Bernadette Bulacan, chief evangelist at software firm Icertis, added: “Even if Britain and the EU come to terms around Brexit, there will continue to be significant business disruption into 2020. Businesses trading between Britain and the EU will need to spend significant time realigning their business relationships to address the new trading environment.
“This will include a major effort to audit and amend their contracts throughout early 2020, both those in the pipeline and legacy agreements already in place.”
Technology enables speed
Brexit preparations led to an increase in stockpiling in 2019, which in turn impacted warehousing. In July 2019, the UK Warehousing Association reported UK warehouses were full.
However, the new year could bring a greater migration towards smart warehouse adoption with employees using mobile devices for picking and scanning and ‘mobile warehouses’ stocked with commonly ordered items to enable same hour deliveries.
Mel Tymm, industry principle at e-commerce firm Maginus, believes the year will also see a move towards the adoption of automation and collaborative robots (cobots) to work alongside employees and assist with heavy lifting and repetitive tasks.
“A by-product of this trend is that we are also likely to see a reduction in the cost of implementing smart warehouse technology over the next year, a cost that has traditionally been restrictive. Whilst still in the early adoption phase, cobots are becoming smaller and cheaper, making them a more feasible choice. Add this to the fact that they’re becoming easier to integrate into a warehouse – physically and technically – and it’s easy to see why adoption is increasing,” she said.
Tom Kieley, CEO at software firm SourceDay, added that consumer demand for instant gratification fuelled by disruptors such as Amazon will mean supply chains will have to operate faster and more efficiently if they want to compete in 2020.
“To do this, businesses will need to eliminate data silos that create costly waste; waste that drains revenue and resources, often resulting from bad ERP data. 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 favor of increased automation.”
Customers demand transparency
Global climate strikes saw millions of people take to the streets to protest a lack of action by governments to combat climate change in 2019. Sustainability – both environmental and social – is going to become a crucial aspect of procurement.
Padmini Ranganathan, global VP, risk and sustainability at SAP Ariba, added: “Consumers will vote with their dollars and because of this companies are leveraging their impact on issues such as climate impact, forced labour and impact on livelihood and job opportunities as part of their brand promise.
“To be credible, the smart ones will shift from focusing just on cost savings and compliance to true value creation and avoid greenwashing. Squeezing suppliers on cost just doesn’t cut it anymore. Buyers and suppliers are coming together to create value for their mutual customer, and where else can this happen but from the beginning of the procurement process when sellers come calling with their business card or buyers scan the globe for the best suppliers?”
Procurement must avoid returning to the ‘dark ages’
While there is plenty of promise on the horizon, geopolitical factors could lead to a global recessions and see organisations refocus on the bottom line and cutting costs, 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 that benefit both parties in the long run.
“A recession risks setting back this progress with a renewed emphasis on costs above other objectives. At a time 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,” he said.
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