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January 20, 2020

The 2020 Procurement and Supply Predictions from the Market

Spend Matters, 08 January-Continuing our series of procurement and supply chain related predictions for 2020, we have gathered a variety of predictions from leading vendors in the procurement and supply chain market, and will add our own sprinkling of endorsement from analyst Magnus Bergfors in a follow up post.
Today let’s hear what Europe-based procurement and supply business management consultants, INVERTO (a BCG Company) have to say:

Sourcing at speed
Procurement has three major levers to deliver the ‘sourcing at speed’ opportunity whilst keeping cost under control. Firstly, we need to continue purposefully seeking innovative solutions and doing things differently. Procurement, as all functions, needs to keep its fingers on the pulse of the market and categories to scope out opportunities, approaches, and relationships to improve speed. Secondly, in terms of our core activities, procurement needs to ensure maximum efficiency and coverage in sourcing activities. Procurement will have to endeavor to become more agile, empowered, and collaborative. Finally, procurement needs to aspire towards new delivery models through partnerships, self- service, automation, and knowledge / insight augmentation

Creating a Zero-based culture
The number of large companies that employ ZBB has been increasing 57% year-on-year since 2014. Some have evolved to apply the principles across their organisation, they may even have zero-based headcount and tools, not just external spend. Zero-based consumption and culture with ZBB at its core will only become more prevalent. Procurement is a natural catalyst to test budget assumptions and, depending on the spend category, to establish them. ZBB is not only about cost assumptions but rather about fundamentally and culturally questioning what is required and whether this suits the company strategy. We expect and recommend that, in the next few years, and as data clarity and skills improve, ZBB will continue the path to become a predominant budgeting approach, applied cyclically across categories and business units, to ensure dynamism and responsible costing are maintained.

Commercial champions
Working capital has, following direct EBITDA levers, often be dubbed as the next value driver. Working capital management and addressability via procurement is no longer a technical business school staple but is rather becoming a more accessible way to realise tangible impact. The past few years have seen the advent of several payment intermediaries in both the consumer and the b2b space. In a similar fashion and as end-to-end platforms, with integrated analytics capabilities including for finance, become ubiquitous working capital improvement and the application of supply chain finance will become more sophisticated and impactful. This enables both suppliers and buyers a better cash flow outcome via payment intermediaries as credit checks, histories and approvals are carried out in real time. This will extend procurement's role as company commercial champions.

Sustained and sustainable Triple Bottom Line impact
Inclusion of sustainable supply base management is the most significant step change that procurement can make to impact the triple bottom line of people, planet, and profit. Changing customer and employee preferences, in addition to the business and political engagement in global issues such as climate change, mean sustainable procurement is accelerating. In 2020 and the 2020s companies will become yet more serious about their societal and ethical responsibility and procurement will become more directly involved, beyond certifications and figures. Companies that truly engrain and apply this purpose will perform better in both Total Shareholder Value and Total Societal Impact to build sustainable companies and brands versus those that let sustainability pass.

Hyper Supplier Collaboration & Innovation
Procurement is on the spot not to hamper, through death of process, but rather aid and accelerate innovation. We are seeing a continued rise in supplier-led strategies such as category captaining, supplier-managed inventories, and collaborative knowledge exchange and solutions. We view this as the natural progression to long-term supplier partnering. Innovation is not just a new solution as part of RFPs and improvement is not just a rarely monitored commercial continuous improvement clause. In the sharing economy pan-industry partnerships will become more prevalent to keep suppliers close and terms even.

Read more at SPP Newsletter-Spendmatters

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