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How Procurement Leadership Is Changing

Dec. 23, 2020
Value chain disruption related to COVID-19 is having a tremendous effect.

Business leaders never chart a journey assuming that they will sail on smooth seas. That said, COVID-19 changed the way we work, live and learn overnight, accelerating shifts in customer expectations that were already underway and impacting our global economy. This combination of disruptive forces can only be addressed with steadfast leadership and digital innovation, as we have experienced over the last several months.

COVID-19 has disrupted the value chain, and this is having a tremendous effect on the market. Yet this disruption was building long before the pandemic, with digital technology driving change in consumer expectations and preferences—and forcing businesses to also transform their operating models and cost structures.

More than ever, exceptional performance at the enterprise level requires vision, leadership, and cross-functional alignment. Every team has a unique but critical role to play, in the short term and to rebuild for the future, ensuring that the application of digital innovation continues to meet the needs of the business and serve its target market.

The role that procurement leaders are called to step up and fulfill in this age of value chain disruption is bigger than anything they have faced before.

There are three common characteristics of businesses that are successfully driving growth and innovation in the next normal: a radically different mindset, technology that is disruptive in its own right, and an innovative and inclusive approach that applies the best that humans have to offer to deliver a reimagined experience across the value chain.

1. Disruptive Mindset

The procurement of goods and services has changed from a transactional model to deeper strategic partnerships across the enterprise. No longer is it the responsibility of a single organization. It’s now part of every leader’s role to engage in upstream collaboration, supplier relationship management, category strategy development, truly strategic sourcing, and evangelizing the benefits of joint supplier innovation.

Despite the understandable emphasis often placed on technology, procurement leaders must stay in touch with the human needs and requirements of the business at the same time. There is a significant opportunity at hand for chief procurement officers who are willing to harness the energy and destabilization of disruption to deliver accelerated digital innovation and transformation.

Although the supply chain was procurement’s initial focus, the best human thinking will drive results throughout the broader value chain, including B2B services.

2. Disruptive Technology

As mentioned in Bain’s recent report, “Digital Procurement: The Benefits Go Far Beyond Efficiency,” “80% of procurement professionals believe they need to do more to take advantage of the latest digital solutions.” There is no time like the present. We see increased adoption of “disruptive” technologies by CPOs who leverage advances in AI, machine learning, and automation for short- and long-term business growth.

This is not an efficiency play but rather a deliberate push to bring together the unique power of humans and machines to deliver a reimagined value proposition. If procurement teams are doing work that can be replaced by machines, and there is no higher-level focus for their efforts once automation is available, they are falling short of their potential.

A. T. Kearney’s recent report, “The Future of Procurement,” highlighted that “too much attention is paid to costs, arguing over contract terms, and insisting upon control over every aspect of the buying process. Administration, rigid processes, and complexity have often reigned supreme at the expense of function, utility, and the ultimate needs of the business.”

It is the human approach¾one that cannot possibly be replicated by machines¾that companies need now, not a less expensive way to execute transactional spend management. Those humans must be digitally empowered and informed if they are to make value-oriented decisions at the speed of business 

AI, machine learning, and natural language processing can analyze millions of relevant data points. They learn from every sourcing event and interaction to maximize outcomes by better understanding each need and contextualizing data to drive future decision-making. Although platforms do the heavy technical lifting, procurement is able to build relationships based on crowdsourced feedback, reducing the time spent to align business stakeholders and procurement users.

3. Disruptive Impact

As with people and technology, now is the time for leaders to think dramatically differently about bringing diversity and social impact to the value chain. Identifying highly qualified diverse businesses and connecting them with the right opportunities has never been more important. Employees expect an inclusive supply base, consumers demand it, and innovative suppliers deserve the chance to be a part of it.

Diversity milestones that were once merely numbers on paper have become a lifeline to the community. The same human principles that allow procurement to have a positive impact on the value chain and harness the capabilities of technology can create a transformational moment for small and diverse suppliers¾one that every participant in the process benefits from.

The current state of value chain disruption is our new normal. Digital transformation is no longer a best practice or a prevailing trend. It is a business imperative that all companies must take seriously if they hope to differentiate themselves and turn today’s complications into tomorrow’s competitive advantage.

Keith Hausmann is chief revenue officer, Globality.

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