What’s creating change in the supply chain? Globalization, technology, a changing workforce and more.
Late last year, Procurement Leaders, published a 3-part series on technology trends for 2016. The second article in the series focused on the procurement sector’s shifting responsibilities and goals. Procurement Leaders is a global membership network providing intelligence and other services to senior procurement and supply chain executives.
The trends enumerated in the article follow very closely to what we’re seeing occurring within our clients’ enterprises as well as our own business; but we recognize four trends that seem to be having the most impact.
To describe how globalization has affected the supply chain, I’d have to say it’s been like putting complexity on steroids. With the vast range of suppliers and a growing list of compliance issues, taking control of the supply chain has never been more important. The 2016 trends (which are very much a continuation of what’s been occurring, rather than a broad transformation) look to streamline, simplify, and organize the processes that make the supply chain function, even in the most difficult situations. Here are the four overarching trends set to grow in 2016:
- Conversion of silos into collaborative communities – In the past, each segment of the business had its specific functions and communication was not always forthcoming. Now functions overlap, communication is ongoing, and every executive in a successful company wears multiple hats. Procurement executives now have to be negotiators, strategists, data aggregators, and financial analysts. Automation of financial processes has broken down the barriers between procurement and accounts payable and accounts receivable. Likewise, the ability to accumulate and analyze data has enabled procurement specialists to make more strategic decisions regarding product expansion, inventory capacity, choice of suppliers, and more.
- Digitization of the supply chain – In an increasingly competitive global economy, companies are constantly looking for ways to reduce costs, increase efficiency, and bring value to the enterprise; but a dependence on paper and manual processes has often stood in the way of achieving those goals. Technology has changed all of that, enabling companies to electronically connect all trading partners in its network. From POs to ASNs to invoices to payment, going digital has made every process in the order-to-cash continuum simpler, more accurate, and more efficient.
- Greater emphasis on data and analytics – Companies now gather data from so many sources, including social media, buyer behavior, as well as internal reports and KPIs. Many of the software solutions available have robust analytics and reporting functions that will give procurement the data necessary to make decisions throughout the enterprise. Big data will allow companies to bring into the equation any historical or geopolitical data that could imply greater risk; this would give procurement the ability to make supply chain and trading partner changes that could mitigate this risk.
- Control over indirect spend – This is a problematic issue in many companies. When it comes to direct spend, controls are in place, accruals are accurate, and cash flow is well-managed. But when indirect spend enters the picture, that control is gone. Since this is often handled in functional areas or business units of a company, indirect spend is frequently managed independently, and procurement professionals often feel they lack the power to control this purchasing category throughout the organization. Fortunately, there are now solutions that centralize the procurement and payment processes, while still enabling individuals to purchase as they have in the past. These solutions automate indirect spend, validate contract pricing, and provide valuable data that will give procurement the information they need to accurately forecast ongoing spend.