Our fascination with the future has long roots. Back in the days of boxy televisions, we all tuned in to watch Star Trek. The gadgets and gizmos mesmerized us. We secretly knew that the technology imagined by science fiction was just around the corner and our lives would never be the same.
In public procurement, we don’t have our own version of Star Trek, but we have something almost as good: private sector procurement. In the last few decades, private sector procurement has led the way in innovations and transforming procurement from “buying things” (and reporting through finance) to strategic procurement (and reporting to its own vice president).
In 2010, Ariba, a major consulting firm specializing in spend management, assembled a group of leading private sector procurement executives – a bunch of Captain Kirks, if you will – and asked them what procurement would look like in 2020. The group included seasoned procurement executives and what some consider today’s vanguard, chief procurement officers in charge of high performing spend management organizations.
The next frontier
Not all of their ideas are new, but the executives identified ideas they believe will be the drivers of procurement transformation. Here are three issues discussed in their report that we predict will influence the shape of public procurement over the next decade.
1. Risk will become more visible and a larger factor in rewards, RFPs, vendor evaluations, contracts and performance measurement. As the new spend management pros get better at segmenting, defining and measuring value, they will begin to incorporate both gain- and risk-sharing into commercial relationships with suppliers.
Beyond sharing risks and rewards in contracts, some suggest they will accept greater risk in commercial relationships with critical suppliers by leaving out all the classic kinds of legal protections that can de-motivate suppliers.
Alongside the general awakening around supply-related risk comes more agreement around how to measure risk, more readily available third-party information, and networked communities where people pool data for operational risk assessment.
Former MetLife CPO Roy Anderson believes that acquisition, aggregation and management of risk-related information will transition fully to third parties and networked communities in the coming decade. “We see an awful lot of work being done today on the risk side, but we are never going to be risk experts, so it is a waste of time to create our own supplier-risk profiles.”
2. Everything will be automated, reducing transaction costs and freeing up valuable, highly trained procurement staff to deal with major issues, problems and strategic initiatives.
“Procure-to-pay (P2P), sourcing, contract management and other automation engines will be de rigueur in 2020; they will be integrated up and down supply chains, fully adopted, providing full transparency and real-time insight.”
As Debbie Manos-McHenry, chief sourcing officer for Huntington National Bank, envisions it, procure-to-pay systems will be open architecture, web-based, and able to interface with many systems; routine purchase transactions will be done by end-users with little to no involvement from sourcing; systems will enforce appropriate compliance, workflow and rules; contract management and administration will be highly automated, using templates and collaborative tools in traditional redlining of agreements between buyers and sellers; workflow will enable end users to produce agreements that meet minimum criteria while exceptions will be escalated to sourcing; and risk evaluation and assessment will be built into systems and processes
3. Goodbye products, hello solutions: public entities will tap into vendor expertise to harvest benefits not previously available.
Suppliers will continue to take on bigger pieces of things they already do for their customers. Think of it as integrated supply on steroids, where suppliers step out of their comfort zones to drive customer performance.
“I expect to see a lot more total solution-type relationships with suppliers, whether it’s an OEM, a third-party distribution partner, or a marketing partner,” says Larry Welch, former vice-president at Hewlett-Packard. So, for example, a supplier of printing hardware for the office will either morph into – or be replaced by – a supplier of total print-management solutions. The solution provider will take on the responsibility for things like optimizing office productivity in the placement and quantity of printers; reducing total printing costs from a 360-degree perspective; and developing and implementing printing best practices within the customer’s organization.
We don’t need to be Star Trek creator Gene Roddenberry or to have our own space ship to transform public procurement. We don’t even need more or better technology. Sometimes all we require is the ability to see where we need to go next – be it better control of risk as we suggest or something else specific to our organizations. With that and the help of a few “Scotties” (or excellent procurement engineers) we can build what’s needed to get there.