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Procurement in 2020

A New Decade and a New Era


The first “Procurement 2020” report I came

across was a Spend Matters article - back in

2013. Back then, there was a lot of hope in

what we would accomplish by 2020. Key

themes in that report included talent,

technology and risk mitigation. Sound

familiar? Because those themes are still

present today – not much has changed in 7

years.

I’ve talked to many members of the

procurement community about this. Why

haven’t we gotten the function to where we

thought it would be by 2020? Why are the

conferences, trainings and networking

events seemingly covering the same topics

over and over again?

Some say we were too aspirational – maybe

we expected too much.

Maybe industries and professions don’t (or

shouldn’t) change that drastically over a 10

or 15 year period.

One of the people I spoke to about the 2020

conundrum was Phil Ideson, founder of the

Art of Procurement podcast and expert on all

things procurement. He compared our

function to that of Marketing.

Just look at how much marketing has

changed, as a profession, in the last 15 years.

The function and industry has completed

transformed from the ground up, including

the tactics used, the types of resources

(people/process/tools) needed in a best in

class org, and the suppliers that support it.

In 2008 advertisers were still placing ads in

physical newspapers, magazines and AM

radio as a fundamental strategy – imagine

that today!

Well, I can imagine it – in Procurement.

Newspaper advertising is the procurement

equivalent of paper copy POs and invoices

that are physically keyed into a system. Even

customers we support with fully integrated

P2P systems still have invoice-keying

resources.

We haven’t figured it out yet – but why not?

Blockchain, AI, the success of consumer-

focused buying portals like Amazon, and

online communities such as LinkedIn and

Facebook should have had broad implicative

changes for procurement by now, yet they

haven’t. Why haven’t we changed?

Well, if I look back at some survey

results from the last several years,

I see a few trends that could point

to the source of the problem . . .

1. First, as a function, we don’t

invest – in digitization or in

training.

2. Second, Procurement still

struggles to distinguish itself as a

business partner.

3. Third, when we get a seat at the

executive table, we don’t use it.

Whatever Happened to Procurement 2020?

PROCUREMENT 2020 — INTRODUCTION



The Last Decade

First, as a function, we don’t invest – in

digitization or in training.

You cant build and improve if you aren’t willing

to invest. Last year’s Deloitte CPO Survey

showed just 32% of procurement organizations

have digitized. That means up to 68% still are

still processing paper, still don’t have spend

visibility, and still manage suppliers with

spreadsheets and emails alone.

This year, less than half of all CPO’s surveyed

believe their teams have the basic skills needed

to support the function – less than half!

Imagine if accounting were to say the same

thing! What’s worse, this number has gone

down every year since the survey began.

Second, procurement still struggles to be seen

as a business partner.

That same survey shows that executive support

for the function continues to drop for the

function, year over year – another metric going

in the wrong direction. Exacerbating this issue,

only 24%1 of procurement organizations are

rated as “excellent business partners” and this

number continues to drop as well.

Third, when we get a seat at the executive

table, we don’t use it.

Even in large organizations with robust

procurement organizations and highly digitized

procurement and supply chain systems are still

treating things like supply chain sustainability

and ethical sourcing as buzzwords.

Those that do commit to higher standards tend

to fail because they can’t get the right

organizational alignment. What is the point of

a seat at the table if we arent using it to

improve our business in transformational

ways?

So where do we go

from here?




How do we start to make progress, so we

don’t lose another ten years to humdrum

attitudes, a lack of self-awareness and a

perception that we arent a driver of business

outcomes?

My challenge for procurement leaders, to

break out of this cycle, is to live by three

fundamental tenants.

These tenants should be aligned to

everything we do as a function, and if

something doesn’t align, move on.

Generate a High ROI - First and most

fundamentally, we should be demonstrating

that Procurement, more than any other area

of the organization, has a capacity to drive

dollars to the bottom line. Of course savings

is a statistic we all use, and $1 dollar of

savings is worth multiples against $1 of sales,

but beyond sales we can create efficiency

and effectiveness in the organizations we

support. Streamlining procurement

processes and policies, making it easier to

follow a process then to buy off-contract,

responding to business needs and driving

value – these are all elements we should be

measuring and leveraging within or

organization.

Create a competitive advantage – Yes, we

should make it easier for our companies to

buy what they need to support business, but

we should also be looking for ways to make it

easier for suppliers to do business with us.

Supplier engagement and relationship

building leads to suppliers that will do things

to you that they won’t do for your

competition – this has both bottom and top

line impact. Institutionalize the right level of

supplier engagement and both train and

challenge your team on this every single day.

Be a leader, not a follower – finally and most

importantly don’t expect to have a seat at

the table unless you have something to bring

to it. Part of our job is being a business

enabler, but when procurement is done

right, we are leading the decision making

process. Whether it be helping IT/Marketing

or other business functions build

requirements that align with industry

standards and business goals, providing

market intelligence that would help

outperform competitors, or building

sustainable procurement and supply chain

strategies that will help the world as well as

the bottom line, we won’t be seen as a

leader unless we become one.

With those things in mind, I look ahead

to Procurement 2030!

Joe Payne, SVP of Source-to-Pay @ Corcentric

Where Do We Go From Here?


www.sourceoneinc.com 1


Opinions of the business world have gone from

bad to worse.

According to Deloitte’s most recent millennial

survey – the first to consult members of

Generation Z - just 12% of respondents believe

businesses are successful in “improving and

protecting the environment.” Just 16% believe

they’re interested in improving society or the

livelihoods of their employees.

At the same time, these convictions are more

likely than ever to sway their purchasing and

professional decisions. 36% of respondents will

“start or deepen” relationships as a result of

ethical behavior. 37% would “stop or lessen” as

a result of unethical behavior.

Procurement’s the function to change the

conversation and win back future generations.

While leadership traits like innovation and

positive disruption are still in short supply, the

function is increasingly trusted to serve as a

role model

It now enjoys an opportunity to finally provide

the visibility and transparency that customers

and stakeholders demand. By insisting on

accountability, conducting more thorough

audits of suppliers and partners across the

supply chain, and taking care to source

ethically, Procurement not only win back public

opinion, but build stronger connections than

ever before.

Do you Believe Businesses

Behave in an Ethical Manner?

2018: Yes (48%) No (45%)

2017: Yes (65%) No (30%)

2016: Yes (64% ) No (33%)

2015: Yes (52%) No (44%) 2

Changing the Conversation

PROCUREMENT 2020 — PREDICTIONS & TRENDS



Procurement

Risk was a prominent theme for this

year's Deloitte Global CPO Survey. Asked to

identify the top risks facing their

organizations, CPOs pointed to a number

that did not rank highly in previous surveys.

Most notably, these included an economic

downturn, the ongoing trade war, and Brexit

uncertainty.

When it comes to addressing these financial

risks, Deloitte reports that CPOs are mostly

"practicing patience as these issues play out

in the larger political landscape." 3

They've opted for small adjustments and

incremental action rather than sweeping

changes to their supply chains.

Small action won't work for much longer

when it comes to environmental risk factors.

Climate change forecasts are increasingly

dire and people around the world are

increasingly vocal about the issue.

Companies who fail to take action - in a

timely, transparent manner - face a number

of economic, reputational, and even

existential risks as they enter the new

decade.

For many, the demands for action aren't just

coming from outside factors like consumers

and governments. Many corporate giants

have seen their own employees and

investors call for more responsible, ethical,

and environmentally responsible operations.

In the days leading up to the Global Climate

Strike, both Amazon and Google revealed

ambitious plans to take environmental

action. Amazon CEO Jeff Bezos pledged to

meet the Paris Climate Agreement's goals a

full decade early, invest in reforestation, and

purchase 100,000 electric vehicles. Google,

for its part, announced what Sundar Pichai

called "the biggest corporate purchase of

renewable energy in history."

Neither move was enough to keep

employees from joining demonstrations

across the world. Amazon Employees for

Climate Justice (AECJ) called Bezos'

announcement a "huge win," but

acknowledged that the proposal was not

nearly enough.

Though AECJ credits workers at other Big

Tech companies like Google, Facebook, and

Microsoft with helping start a "journey

toward a livable world," their official press

release was less kind to employers. Calling

out "Big Tech's complicity in accelerating the

climate crisis," they promise that the Global

Climate Strike is just one milestone in a

journey that will continue throughout the

next decade.


The Call is Coming from Inside the House


As employees at one of the largest and most powerful companies in the world, our role in facing the

climate crisis is to ensure our company is leading on climate, not following. We have to take respon-

sibility for the impact that our business has on the planet and on people.

- Amazon Employees for Climate Justice 4


On paper at least, CPOs are committed to

closing the analytical skills gap to make more

predictive, accurate forecasting a reality. 43%

have identified "predictive analytics" as their

primary focus when it comes to nurturing digital

skills3 in the next twelve months. They've got a

long road ahead.

Digital skills gaps like this one are widely

acknowledged as perhaps the most pressing

challenge facing today's Procurement teams.

As markets grow increasingly volatile,

technology grows increasingly mature, and

consumers grow increasingly discerning, they'll

need to close these gaps both quickly and

definitively.

Procurement teams that fail to make accurate

forecasts and take proactive action run the risk

of alienating consumers who have grown

increasingly conscious of supply chain ethics

and environmental responsibility.

Even especially proactive organizations have

learned that forecasts can be a double-edged

sword. In October, both Nestle and Procter &

Gamble announced that they would fail to

meet many of the goals they set at the start of

the decade. Both consumer products giants

promised to fully eliminate

deforestation across their global supply chains

before 2020. Though both made considerable

progress thanks to visibility-boosting

technology, they will enter the new decade

with work to do.

Sweeping promises have become de rigueur

for businesses hoping to win over customers

and stand on the right side of important issues.

P&G and Nestle, however, present a cautionary

tale.

Organizations that can't live up to their

promises, can't make their forecasts a reality,

run the risk of disappointing their customers

and even damaging their reputations. With

those two CPG giants as cautionary examples,

It's possible that organizations will think more

carefully before revealing the details of their

forecasts and action plans.

Forecasts Alone Aren’t Enough




Entering a new decade, Procurement faces a

host of new challenges, obstacles, and

strategic opportunities. so hectic for

Procurement and Supply Chain that the very

definition of "complexity" has grown more

complex. Mastering complexity doesn't just

mean overcoming one challenge. Rather, it

means assessing and addressing a number of

challenges both within the and across its

supply chain.

External Complexity: Mastering external

complexity means addressing everything

"outside the four walls of the organization"

that Procurement has to interact with. 2018

and 2019 saw a number of new external risk

factors emerge begin to exert pressure.

These include the ongoing trade war

between China and the United States as well

as the misgivings associated with a potential

recession. To mitigate external risks,

Procurement needs to develop contingency

plans and identify opportunities to

restructure the supply chain.

Internal Complexity: These challenges have to

do with the relationships between different

business units and their priorities. For most

of the last decade, Procurement's primary

internal challenge was securing buy-in from

its peers. The function has been mostly

successful. Within most organizations,

Procurement is regarded as an effective,

valued business partner. Few organizations,

however, rate Procurement as an "excellent"

partner. According to Deloitte, just 26% of

organizations would offer such high praise.

CPOs can begin to close this gap by

automating tactical processes and freeing

Procurement's time to focus on alignment

and enablement.

Talent Complexity: Talent is another area that

has challenged Procurement throughout the

last decade. Just a fraction of CPOs believe

their teams have the skills necessary to

deliver on their objectives (let alone

organization-wide objectives), but training

budgets remain tiny. It's not enough for

Procurement to ramp up these investments

and hope for the best. The function needs to

ensure it aligns its recruitment, on-boarding,

and long-term talent management processes

to best serve the organization's broader

goals. It's also important to start casting a

wider net. After all, the definition of

Procurement excellence is changing.

Digital Complexity: It's been a digital decade

for Procurement. Nearly half of Procurement

teams are already partnering with IT to align

on objectives and the function fully intends

to realize a digital transformation sooner

rather than later. Unfortunately, most

organizations' hopes are still vastly

outweighing their actual capabilities. A

majority of businesses hope to make digital

skills a priority during the new decade. As

with talent, it's crucial for Procurement to

align its digital strategy to support

organization-wide goals and serve the entire

business.

Addressing Every Kind of Complexity




The term "blended workforce" has historically

referred to the practice of leveraging different

types of resources (most often, a "blend" of full

-time and part-time employees).

Today, however, the term has begun to take on

a new, broader and more complicated

meaning. Organizations are still leveraging a

combination of contractors, temporary

resources, and full-time employees, but they're

also beginning to consider how they can

leverage a workforce that blends both humans

and machines. Leaders are beginning to find

that the right mix of automation and traditional

hands-on effort is necessary to maximize

Procurement's efficiency and equip it to enter

the 2020s.

While discussions around AI and automation

tend to sound apocalyptic, studies show that as

many as 67% professionals are actually

optimistic that automation will help them

perform more effectively and transition into

new, more strategic roles.5 It's worth noting,

however, that the same amount believe they'll

need new skills to succeed in the future. A

whopping 80% believe their employers should

provide the means to develop these skills.6

Most sectors have been slow to take these

steps.

Manufacturing is - unsurprisingly - one of the

industries that's made building a new kind of

blended workforce a priority. Jobs within this

sector are more vulnerable to automation than

almost any others. Oxford Economics predicts

that 20 million workers could find themselves

displaced within the next ten years.

America's National Association of

Manufacturers has pledged to meet this threat

head-on by offering "reskilling" to more than 1.2

million workers between now and 2024. It's a

start, but if estimates are to believed, it's clear

the industry (and other industries) will need to

ramp us these efforts sooner rather than

A New Kind of Workforce




While organizations plan to devote most of

their 2020 training dollars to traditional

strategic sourcing and category management

skills, it's clear their priorities are evolving.

More than 20% of Deloitte CPO Survey

respondents intend to train their teams

on ethical sourcing, a full 40% will place on

emphasis on project management. By

expanding Procurement into new areas, they

are hopeful the function can accept a more

nuanced role and distinguish itself as

indispensable.

Even more crucially, Procurement leaders are

starting to take so-called "soft skills" more

seriously. These are the attributes like

leadership, empathy, and emotional

intelligence that aren't easily learned or taught.

They are also the skills that will make

Procurement resources invaluable as

relationship builders, risk managers, and

business partners in the new decade. Most

importantly, they're skills that computers

cannot (and likely never will) replicate. As

automation continues to make an impact on

Procurement's workload, it's essential for both

businesses and individuals to consider how soft

skills can help create roles that machines can't

occupy.

Whatever strategies organizations employ,

whatever skills they emphasize in the new year,

it's clear they need to widen their net when it

comes to talent. From both a recruitment and

retention perspective, the definition of

Procurement excellence must evolve to suit a

new fast-paced, digital world.

Organizations should look for talent in new

places, retool their existing job descriptions, and

identify every possible opportunity to introduce

new skills.

Just 46% of CPOs

believe their teams

can deliver.3

Addressing the Talent Gap(s)




With unemployment at a near-record low and

open positions at a near-record high, the

phrase “it’s a candidate’s market” has never

been more true.

World-class candidates have almost limitless

opportunity to identify employers who don’t

just provide monetary benefits, but provide the

flexibility, challenge and sense of purpose that

they crave. That last piece has grown

especially crucial with 89% of executives

crediting a shared sense of purpose with

improved employee satisfaction, more

successful initiatives, and greater customer

loyalty.

It's also clearer than ever that an organization’s

behavior can impact its hiring efforts. With

applicants of all ages expressing their interest

in working for responsible companies,

sustainability has become a competitive

advantage and must-have for effective

recruiting and long-term retention. A recent

survey suggests that a small number of

applicants would even accept a big pay cut to

join a sustainable business. With so many

positions open, it's likely most won't have to

make that sacrifice.

Organizations should recognize, too, that a well

-equipped and well-supported Procurement

function is no longer a nice to have either.

While investing in Procurement was once a

privilege for select companies, it’s now a

prerequisite for any organization looking to

thrive amid economic uncertainty and nurture

a new generation of leaders and innovators.

What do professionals

really want?

1. A sense of mastery

2. A sense of community

3. A sense of purpose7

No More “Nice to Haves”




Another recession is on the way—don’t just

take our word for it. . . .

74% of Economists believe

we’ll see another by the

end of 2021,8

67% of Homeowners

expect one by 2021 at the

latest,9

and 77% of Procurement

Professionals anticipate one

by 2021.10

Whether it takes a week or a decade to rear

its ugly head, the next recession will present

businesses of all sizes with a host of new

challenges. It’ll also provide well-equipped

Procurement groups with the opportunity

they’ve been waiting for.

Visibility, relationship building, and

consistency are essential during the best of

times. During an economic downturn, they

become a matter of life and death for even

industry-leading businesses.

At the executive level, it’s time to stop

holding Procurement at arm’s length. By

bringing the function into enterprise-wide

strategy sessions and making the necessary

investments, recession-proof organizations

will take a new center-led approach to

Procurement. They won’t just survive the

next recession, but thrive.

For Procurement, it’s time to stop settling for

less. By taking pains to understand true

demand, identify critical suppliers, and

enforce flexibility, Procurement will

distinguish itself as a uniquely crucial

business unit.

Even if the next recession puts the ‘08

downturn to shame, Procurement cannot

afford to forget about the future. Resilience

will pay off when things turn around again.

Organizations that continue developing

talent and preparing long-term initiatives

throughout the recession will carry

momentum and vision into a new era and

outpace their competitors throughout the

decade and beyond.

Are you ready for

Procurement 2020?

The Moment of Truth

PROCUREMENT 2020 — CONCLUSION



About Source One, a Corcentric Company

Source One is a top provider of spend management solutions

ranging from spend analysis and strategic sourcing through

category management and Procurement Transformation.

Since 1992, Source One has helped industry leading

enterprises optimize their approach to countless indirect

spend categories including MRO, Facilities Management, IT &

Telecom, Professional Services, and more. Serving as an

extension of client resources, Source One’s category subject

matter experts deliver best practices, market insights, tools

that drive greater value out of the bottom line. To learn more

about Source One, a Corcentric company, visit us online

at: www.sourceoneinc.com.

About Joe Payne

Joe Payne, originally from Scranton, PA, lives in the Philadelphia suburbs, with his wife, Jill, and two dogs. He is the author, with William R. Dorn, of Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing. Joe graduated from the University of Scranton, with a degree in Operations and Information Management.

1Deloitte Insights. (2018) The Deloitte Global Chief Procurement Officer Survey 2018. Retrieved from http://www2.deloitte.com/uk/en/pages/operations/articles/cpo-survey.html

2 Deloitte Insights. (2018). 2018 Deloitte Millennial Survey. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-2018-millennial-survey-report.pdf

3 Deloitte Insights. (October, 2019). Deloitte Global Chief Procurement Officer Survey 2019. Retrieved from https://www2.deloitte.com/us/en/insights/topics/operations/chief-procurement-officer-cpo-survey/2019/revolutionizing-procurement-complexity-challenges.html

4 Amazon Employees for Climate Justice. (2019, September 20). Amazon employees are

joining the Global Climate Walkout, 9/20. Retrieved from https://medium.com/@amazonemployeesclimatejustice/amazon-employees-are-joining-the-global-climate-walkout-9-20-9bfa4cbb1ce3.

5 Gartner Unveils Top Predictions for IT Organizations and Users in 2020 and Beyond. (n.d.). Retrieved from https://www.gartner.com/en/newsroom/press-releases/2019-22-10-gartner-unveils-top-predictions-for-it-organizations-and-users-in-2020-and-beyond.

6 Amazon Employees for Climate Justice. (2019, September 20). Amazon employees are joining the Global Climate Walkout, 9/20. Retrieved from https://medium.com/@amazonemployeesclimatejustice/amazon-employees-are-joining-the-global-climate-walkout-9-20-9bfa4cbb1ce3.

7 Tomas Chamorro-Premuzic. (August 20, 2019). Why Are We So Bad at Choosing the Right Job?. Retrieved from https://hbr.org/2019/08/why-are-we-so-bad-at-choosing-the-right-job

8 Marcy Gordon (August 19, 2019). 74% of Economists in Survey See US Recession by End of 2021. Retrieved from https://apnews.com/3d77bbfda266497699554a754c124735

9 Realtor.con (August 28, 2019). Home Buyers Gear Up for Potential 2020 Recession. prnewswire.com/news-releases/home-buyers-gear-up-for-potential-2020-recession-300908185.html

10 Suplari. (2018). Plans & Tactics to Recession-Proof the Enterprise. Retrieved from https://www.suplari.com/recessionsurvey/

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