4 Ways Procurement is Evolving From Reactive to Proactive

Procurement teams must ensure consistent, efficient, and cost-effective supply of the goods and materials that keep a business in operation. When global supply chains grind to a halt, achieving that objective becomes challenging to say the least.

Fortunately, these clouds—as significant as they may be—have some significant silver linings. COVID disruption is helping to accelerate several positive shifts that were already happening across the procurement function. And for leading procurement teams, it’s helped demonstrate just how valuable those transformations can be.

Here are four big ways that procurement is evolving, getting leaner, and not only recovering from disruption, but becoming a stronger, more proactive function than ever before.

Evolution #1: Minimizing, mitigating, and sidestepping risk

How much can supplier selection really impact overall business performance? Just ask someone who relied solely on Chinese suppliers in the early months of 2020… Building a flexible and reliable supplier portfolio has always been one of procurement’s biggest goals.

But now, real-time data is helping procurement teams make faster, better-informed supplier choices. Equipped with early warning alerts and instant insights into supply chain risk, procurement teams can easily understand where risk to on-time deliveries really lies. So, when an issue appears that could jeopardize delivery timelines, procurement teams can take action and pivot to another supplier before their organization is forced to absorb the impact.

It’s not just about being able to make better supplier decisions in the moment, either. With reliable data built up over time, procurement teams can see where the real recurring bottlenecks in their supply chain and supplier portfolios are, and make changes before small issues can grow into full-blown operational risks. Now, procurement can finally start achieving a goal it has pursued for decades—becoming truly proactive rather than reactive.

Evolution #2: Automating, the right way

Automation is transforming virtually every area of the enterprise, and procurement is no exception. This is a hugely exciting prospect for procurement teams. Automation promises to free them from repetitive, routine tasks, so they can focus on delivering strategic value. But, as teams have started experimenting with it, many have come to learn that not all automation is good. If you automate a process that’s inefficient, you don’t make it efficient—you simply automate inefficiency. While frustrating for people who hoped for a silver bullet, that discovery has helped push procurement teams to dig deeper into their processes and find out where inefficiency is really coming from. Unsurprisingly, those going through the effort of identifying and removing entrenched inefficiencies and automating in just the right places are seeing the best results from procurement automation by far.

Evolution #3: Using reliable data to tackle maverick POs at their source

Real-time data isn’t just helping teams learn more about what’s going on outside the organization and make safer buying decisions—it’s also helping them stamp out rogue spending inside the organization. For decades, maverick buying has plagued the lives of procurement teams, undermining their efforts to optimize spending. But the real problem with rogue POs is that they’re extremely hard to tackle at the right time. Someone in another line of business goes rogue, and issues an unapproved PO. It goes through the same processes as other POs, and only gets detected days later, long after the goods or services have been acquired. In that situation, the best procurement can do is find the person responsible, sit them down, and haul them over the coals. The problem is, that person still got what they wanted, when they wanted it. No matter how bad the scolding, they’re not actually incentivized to stop rogue spending. But that’s all set to change.

With better-managed, real-time data, procurement teams can identify rogue POs automatically and stop maverick spending at its source—before it costs the company anything. Rogue buyers see real consequences, the company saves money, the sourcing organization can funnel otherwise rogue spend toward strategic contracts, and the procurement team improves its perfect PO rate.

Evolution #4: Using data at scale to strengthen supplier relationships

Mastery of supply chain and procurement data is also helping procurement teams transform their relationships with suppliers and supply chain partners. With immediate access to reliable data on everything from delivery cycle times to product defect rates, procurement teams can use their insights to let suppliers know how they can improve—deepening and strengthening the organization’s relationship with them. By using data to help build open, mutually beneficial relationships with suppliers, the procurement team can influence them to make meaningful changes to their operations.

Equipped with verifiable proof that a supplier’s delivery cycle times are inconsistent, for example, the procurement team can make an airtight case for change, reimbursement, or contract renegotiation. But that data is so much more than just a high-value bargaining chip. It enables procurement teams to embed a culture of transparency with suppliers. So, if an issue emerges that may threaten their ability to deliver, they’ll be far more likely to disclose it directly, enabling procurement to take action immediately to support business continuity.