Procurement’s cost focus will become a network growth focus

The last 10 to 15 years have seen intense inward cost focus. The coming 10 years will see attention turn to growth via digitally connected networks that empower buyers to discern, qualify, connect, and collaborate with suppliers, peers and partners. This is the consensus among Procurement Executives who responded to an Ariba survey on Procurement in 2020.

Analyzing spending to the Nth detail. Fixing and automating processes. All that inward-looking, intense focus on cutting costs is going to end. Replacing it will be a new outwardly pointed focus on driving growth and expansion through exclusive and integrated supplier relationships and innovation.

“Much of what procurement does today is driven by spend management, but I think, in 10 years, those disciplines will be much more integrated into the normal ways of doing business,” remarks Larry Welch, former Vice President of Indirect Procurement for Hewlett-Packard.

“We have seen procurement adopt an aggressive role in executing massive cost reductions,” agrees Tim Cummins, President and Chief Executive Officer, International Association for Contract and Commercial Management (IACCM). “And, while this has been seen as fundamental to business competitiveness, we all know it is not an endless opportunity.

“I think we are probably coming to the end of the cost-reduction trend that has been very much with us for the last 15 or 20 years.”

In lieu of that intense focus on reducing costs, the procurement executive for a major U.S. insurance company sees life for procurement becoming much more outwardly focused and collaborative.

“We will ask:
• What are the core capabilities suppliers have?
• What are the core capabilities we need in order to do our business well?
• How can we align and link our business strategies with suppliers’ business strategies? and
• How can we drive to best-in-class performance with the suppliers that are best positioned to help us execute our business strategies?

“In the shorter term, it will be all about defining how this is going to work,” he says. “When you look out 10 years, it is going to be all about execution.”

And while, owing to performance gaps, the executive sees some hesitancy to pursue deeply integrated supplier relationships today, he believes it is more important to identify suppliers with the greatest potential for long-term alignment than it is to find perfect performance in every aspect.

“In the end, you need supplier relationships that are tied to your goals. If you can find those, you will have little difficulty working with them to close performance gaps.”

The information in this article was sourced from the report ‘VISION 2020 Ideas for Procurement in 2020 by Industry-Leading Procurement Executives’.

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