Insight

2023 Procurement Predictions

December 21, 2022

Highlights – 2023 Procurement Predictions.

We’ve experienced many external trends, ranging from economic uncertainty to the impacts of global conflict, that have shaped the way companies have had to adjust to navigate their procurement journeys. Those trends have also had a significant influence on what is to come in 2023. Here are five trends that deserve serious consideration as we go into the new year:

Environmental, Social, and Governance (ESG)
Procurement Talent
Macro Forces & Enhancing the Value of Procurement
Digital Procurement
Supplier Management

What is in store for procurement in 2023?

It’s been a while since anything has felt predictable. As 2022 winds to a close we would be remiss if we didn’t reflect on the past year and consider top priorities (and constraints) for 2023. Earthshattering year-over-year changes are uncommon in the procurement world, so many of the trends we should expect to see will follow a common thread with those we’ve observed and managed over recent years.

The nuance associated with those trends in terms of direction and trajectory inform how to factor each into your planning to realize procurement’s objectives while maintaining a strategic role within the enterprise, serving the business’s needs, and driving innovation. So, while you may not be surprised by some (or all) of the trends ,bear in mind that there is more to planning for each than merely being aware of them.

Environmental, Social, and Governance (ESG)

ESG initiatives have become increasingly common in response to pressures ranging from government regulations to demands from customers, advocates, and investors. In response to this, enterprises have become proactive in their ESG efforts. In some cases, strategies to eliminate risk, innovate, or drive growth dovetail nicely with ESG objectives.

For example, in the wake of the pandemic, companies focused on local sourcing strategies to mitigate supply risk, which happens to also align will with environmentally friendly goals. Similarly, as climate change has resulted in increasingly frequent, devastating events, companies must consider both the potential for disruption in their supply chains and whether viable alternatives may be available, again serving as an opportunity to evaluate ESG goals while addressing risks.

If not for risk mitigation and innovation, business performance is another strong motivation to companies considering ESG engagement. Numerous studies (e.g. this one from Harvard) have shown a strong correlation between ESG investment and accelerated growth and better valuation compared to peers and competitors that have not made ESG such a priority, a most-welcome biproduct of doing the right thing!

As procurement organizations ramp up ESG efforts, keep an eye on the market for emerging trends such as ESG facilitating technologies, circular supply chains, and evolution of industries like green warehousing and logistics.

Macro Forces & Enhancing the Value of Procurement

Procurement organizations have always had to navigate macro forces influencing supply, cost, and strategy. In 2023 procurement will continue to face significant macro forces such as inflation, governmental policy, climate change, talent challenges and labor shortages, geopolitics, recession, and currency fluctuations.

What makes this trend especially important for 2023 is the complexity of their interdependence have not let up since the onset of the COVID-19 pandemic. This has necessitated procurement organizations to become more introspective and focus on becoming proactive yet nimble. Successful procurement organizations will be extending their focus beyond traditional cost savings objectives to reducing risk, hedging on cost, and mitigating price fluctuations in 2023.

Procurement leaders are rethinking their organizations and strategies while acclimating to the range of influences that have crept into the day-to-day lives of their teams. They will also need to maintain an awareness of the ongoing macro trends that will materially affect their goals and plans. There is no end in sight for the macro forces mentioned and at the rate things have been going we should probably expect the unexpected.

In 2023, the focus on agility, adaptability, and resilience will be the name of the game. Adding breadth and depth to transformation strategy around supplier management, category management, stakeholder engagement, technology, innovation and ESG will be imperative for companies to maintain a competitive edge.

Procurement Talent

Over the past few years, procurement organizations have been turned upside down from furloughs to staff budget cuts, to rapid turnover associated with the ‘Great Resignation.’ This coupled with labor shortages has made attracting and retaining procurement talent even more critical. To maintain a proactive posture, it will be necessary for procurement leaders to tackle talent from two angles: attracting and retaining employees and driving efficiency by eliminating or streamlining tactical activities.

You can’t build on top of a crumbling foundation. Establishing a strong team with longevity is the only way to build (or rebuild). Maintaining what’s in place is the primary imperative. As demonstrated by the ‘Great Resignation,’ employees seek more flexibility with their schedules and the location from which they work. Many employees have left their old jobs for opportunities with new organizations that are better aligned with their needs. This talent migration is not over, further turnover should be expected.

Add to that the fact that ongoing challenges faced by procurement teams are still turning up gaps on teams that need to be filled. Companies will need to come up with new and innovative ways to put the right people in the right roles and keep them there. Increased flexibility, enhanced benefits, training and mentoring programs, tuition reimbursement, and more should be on the table.

Maintaining the right team is only half of the equation. Ensuring they’re able to promptly focus on the right priorities is also critical. This includes leveraging technology to streamline processes or eliminate tactical activities. It should also include deeper and more real-time access to data and meaningful insights from that data to avoid reacting to changing conditions.

Digital Procurement

Digital Procurement is not a new trend, but it’s going to continue picking up steam as companies who have not digitized increase urgency to do so and more mature procurement organizations bolster and/or re-evaluate their processes and environments. The market is more competitive than ever, and many procurement leaders have identified that taking a hard look at their technology current state and how it supports (or doesn’t support) their goals is critical to success.

As enterprises consider where they are and where they want to be with their digital procurement environment, they’re considering their requirements for data access and visibility, process streamlining and automation, integration, and of course security across the entire source-to-contract and AP lifecycles.

As the market accelerates, bringing AI, machine learning, RPA, blockchain, cloud, big data, and mobile into the picture, it’s important for procurement teams to understand where they are and where they want to be so they’re best positioned to evaluate their requirements and all of the current and emerging technologies available to help them realize their objectives.

Supplier Management

Supplier management is a necessary discipline for any business, as it helps ensure that the goods and services required for operations are delivered on time and at the right price. The need for agility and resiliency is undoubtedly a common thread of procurement trends during uncertain times and supplier management is foundational to becoming more agile and resilient.

Cost and supply risk mitigation, contingency planning, ESG, process optimization, and innovation all play a part in achieving these ends. Expect a shift to closer partnering with suppliers to address these matters, maintain a proactive posture, and bring additional value to the organization.

What should procurement departments do?

As the circumstances of the world are driving some of this focus, and by extension the business, procurement is (or should) be as well. To compliment the shift, technologies are becoming increasingly deep in their facilitation of better supplier management, giving companies better real-time insights to data, enabling supplier evaluations, onboarding, and management, while providing end users better access to a wider range of suppliers, facilitating price and service comparison as well as order placement, electronic payment, tracking and monitoring tools, and automated processes for processing orders.

Take a look at your 2023 strategy, and make sure you have accounted for these trends, and any additional risks you may have identified. If you need help planning, feel free to reach out to us!