For many businesses, 2020 was defined by the difficulty of doing business effectively. The COVID-19 coronavirus pandemic and natural disasters like the Amazon rainforest fires wreaked havoc in global supply chains and seriously disrupted not only the what, but the how of business for companies all over the world. As the world leaves 2020 behind, the focus is shifting away from a mad scramble to adapt, improvise, and protect business continuity and toward charting a proactive and strategic course through recovery and beyond to whatever “new normal” lies ahead.
In considering (and potentially leveraging) the top procurement trends in 2021, procurement leaders will need to build on the lessons of last year. They’ll also need to practice intelligent change management, as understanding the global economic landscape and skillfully integrating new technologies and policy changes will have a significant impact on competitive strength, efficiency, and growth in the coming months.
Key Procurement Trends for 2021
1. Prioritizing Risk Management, Resilience, and Agility
The unprecedented business and supply chain disruptions created by the COVID-19 pandemic sent shockwaves through the world economy that will likely be felt for years, if not decades, to come. Lockdowns, social distancing, and a shift to remote working drove businesses to look for ways to increase their agility, versatility, and resilience.
In 2021, that emphasis will likely continue to grow, paired with greater attention paid to risk mitigation. Reducing risk and enhancing resilience go hand in hand, especially with global supply chains growing longer and more complex over time. Companies who prioritize supply chain resilience will reduce their risk exposure significantly. They’ll also be much better equipped to deal with disruptions—both anticipated and unexpected—and continue or resume operations much more quickly if and when disaster strikes.
In addition, organizations who want to further improve their risk management and strengthen their competitive advantage will likely take a much more proactive approach to incorporating agility into their business processes. Agile businesses are designed to anticipate volatility and develop systems that help them navigate disruptions to keep supply chains open and practice context-savvy sourcing. They also mitigate risk through digitization, the use of next-gen technologies such as machine learning, robotic process automation, advanced analytics, and the Internet of Things (IoT), and applying core concepts such as continuous improvement. They’re also much better equipped to take advantage of unlooked-for opportunities to streamline their procurement processes, build sustainability into their supply chains, and engage in strategic supplier relationships to capture new markets, drive innovation, etc.
In the coming year, it seems more than likely businesses with the willingness, access to technology, and process management skills will recognize the value inherent to both fair labor practices and sustainability in their supply chains and invest accordingly.
2. A Renewed Interest in Sustainability—and Social Responsibility
While the need for more ecologically responsible and sustainable procurement has long been clear, 2020 saw an increased interest in green procurement that was, like so many other ambitions, derailed by the need to address the pandemic. In 2021, however, sustainability is—much like our planet—hotter than ever.
With the United States shifting its footing to once again prioritize ecological responsibility through President Biden’s efforts and the European Union heavily invested in slashing emissions, promoting renewable energy, and improving energy efficiency via its 2030 Climate Framework, it’s likely corporations will follow suit in order to develop or enhance their competitive strength in a much greener marketplace.
Private enterprise is already well-invested in this particular supply chain trend. The Sustainable Procurement Pledge—a group of procurement professionals working pro bono to encourage companies to embed sustainability into their procurement functions—is working to ensure all supply chains are driven by sustainable procurement by the year 2030. Sustainability is particularly important in an economy where reduced resource consumption created by remote working has been counterbalanced by increased traffic and resource consumption due to increases in deliveries.
Another source of supply chain risk—unacceptable labor practices—will most likely share the spotlight with sustainability as more and more organizations seek to reduce their risk profiles, enhance their commitment to social responsibility, and build supply chains driven by ethical procurement. Using data management tools and proactive vendor relationship management practices, companies can dive deep into their supply chains to ensure suppliers at the primary, secondary, and tertiary levels are complying with not only legal and ethical requirements, but their own standards for supplier performance, fair compensation, and commitment to fight modern slavery.
In the coming year, it seems more than likely businesses with the willingness, access to technology, and process management skills will recognize the value inherent to both fair labor practices and sustainability in their supply chains and invest accordingly.
3. New Technologies
With procurement playing a growing role in strategy as well as finance and operations, procurement leaders are looking at new technologies that can help them capture more value and savings from their processes and supply chains. The technological advancements that come with Industry 4.0 are poised to make procurement a source of both savings and value through increased accuracy, higher productivity, and data-driven insights.
Some of the technologies procurement teams will be taking a much closer look at in 2021 include:
- Print-on-demand and rapid prototyping, which can slash production costs, reduce downtime for high-volume, low-complexity parts by allowing them to be made on site rather than ordered, and enhance sustainability by reducing resource demand.
- Blockchain, which improves logistics, enhances data security and scalability, and increases the versatility and functionality of automated workflows.
- Enhanced eCommerce experiences, for both internal stakeholders using guided buying to obtain goods and services (while complying with purchasing standards) and external customers placing orders. Integration with the Internet of Things, as well as the use of software robots and voice-driven chatbots may soon become the new standard.Powerful machine learning algorithms and natural language processing (NLP) will allow users to place orders, ask questions, and get support with only their voice. In addition, third-party software solutions will make it much easier for organizations to design and publish their own applications for both internal and external use.
- Centralized data management, particularly as part of a comprehensive software solution such as Planergy, allows companies to integrate not only their existing software ecosystem, but draw from a diverse set of data sources to augment their internal purchasing and supply chain management resources. Data from external sources can enhance supplier evaluation and risk management, and provide valuable insights procurement teams can use to streamline supply chains, strike up strategic partnerships with key suppliers, or quickly execute contingency plans to mitigate or avoid disruptions.
4. A Proactive Approach to Tackling Intricate Global Supply Chains
Nobody does business in a vacuum. The discourse between nations can have a significant impact on a company’s supply chain, along with its operations, profits, and, in extreme cases, its very existence.
2021 will see procurement professionals continue their efforts to navigate the fallout of Brexit, which has not only thrown something of a spanner into the works of procurement law in the UK, but created an array of logistical challenges for UK companies doing business with Europe, the US, and the rest of the world (and vice-versa).
Companies located in or doing business with the United States will be looking for ways to cut costs and build value through procurement while complying with the recently resolved United States-Mexico-Canada Agreement (USMCA).
They’ll likely be keeping a close eye on the ongoing U.S.-China trade battle as well, since Biden’s approach to both tariffs and negotiations will almost certainly be radically different from his predecessor’s.
5. Centering Procurement as a Value Driver
Along with its partner, accounts payable, procurement touches every area of the organization it supports. Traditionally a source of cost savings alone, procurement has grown in prominence as companies realize how essential efficiency and efficacy of spend are to supporting overall business practices—and how strategically useful clear and complete spend data is to forecasting, budgeting, and preserving operational continuity.
In 2021, proactive chief procurement officers (CPOs) will continue to shift their procurement functions toward generating value as well as savings in several ways:
- An increased emphasis on managing total cost of ownership (TCO) for every purchase at all stages of the value chain.
- Leveraging new technologies such as robotic process automation, data analytics, etc. to maximize efficiency and provide a model for improved business process management across their organizations.
- Aligning procurement capabilities, goals, and practices with organizational priorities so leadership can leverage insights to improve decision making and planning.
Today’s Procurement Trends Drive Tomorrow’s Innovations
No one knows for sure what 2021 will hold for procurement. As 2020 made so achingly clear, nobody’s got a crystal ball with a clear picture of the future. But procurement teams who understand emerging trends and take steps to adjust their sails can navigate the stormy seas of commerce much more effectively than those who leave everything to chance.
