Insight

Interview: Procurement Considerations for 2023

January 12, 2023

As we enter 2023, I had a chance to catch up with David Pastore and discuss some procurement considerations that every organization should be considering in 2023. Below is the transcript of our interview.

Mike Jasper:
Hi Dave, it is great to be able to sit down with you for a few minutes! The timing of this interview couldn’t be better. I have spoken with many procurement practitioners, and they all are asking what they should be considering in the new year, that they might not have already thought about.

One topic I think about is the need to be better at prioritizing all the different goals and objectives they will manage this year. How do you think procurement organizations need to prioritize their time to maximize productivity in the upcoming year?

David Pastore:
One of the most important things that procurement organizations will need to accomplish in 2023 is keeping the business engaged by continuing to provide value and being responsive to stakeholder needs. Especially amidst all of the disruption that’s been going on and continues to go on, whether it’s related to supply chain issues, inflation, or workforce challenges. Making sure that procurement is a reliable resource for the organization has got to be procurement’s, #1 priority. Then on top of that, all these other emerging trends that you’re seeing like digital transformation, sustainability initiatives, and so on will need to be part of the road map for 2023. They can’t be something that’s just nice to have. There needs to be a plan associated with them that’s actively being worked upon. Even if that’s in small, incremental phases.

Mike Jasper:
You brought up a lot of different things that procurement’s going to have to prioritize next year. With all those balls in the air, how can procurement organizations become more flexible and adapt to all these different challenges in the upcoming year?

David Pastore:
I think flexibility is more important now than ever to keep up with what’s going on in the market and in the world. Whether it’s geopolitical, supply shortages and so on. Like I mentioned earlier, keeping track of the market is as important now for indirect categories as it is for directs, and that’s been the case over the last few years since the pandemic. Flexibility can also be facilitated by technology and by collaboration, maintaining strong relationships with suppliers, internal stakeholders or within the procurement team itself. Flexibility is also something to consider when structuring your supplier contracts. Work with your suppliers to make sure that you have the agility that you need to pivot if necessary or to adjust as conditions change in the marketplace.

Mike Jasper:
You’ve mentioned digital transformation a few times so far. Can you expand on the role that digital transformation will play within procurement in 2023?

David Pastore:
Many procurement organizations have gone down the road of adopting technology at some level within their organization. Whether that be e-sourcing, procurement, contract management, supplier management, spend analytics or payments. I think that irrespective of if those adoptions, organizations need to continue to mature their source-to-pay technology strategy. It’s something that needs to be considered ongoing because it’s a landscape that’s constantly evolving and there’s always room for improvement. Whether that’s adding some of the layers that I mentioned or reviewing your processes and the people that are playing a role in those processes and making sure that you have good alignment to what’s going on with your technology. The other thing is, as I mentioned earlier, the landscapes are always evolving. We’ve been talking about AI, machine learning and similar technology trends that are supporting things like analytics and automation. Those things are quickly becoming a reality and need to be considered because you’re going to start to see these new technologies quickly adopted by organizations to help them stay competitive. It’s something that requires strong awareness and consideration.

Mike Jasper:
A lot of times innovation is synonymous with digital transformation. In reality, there’s a lot of other ways that procurement organizations can be innovative. Can you give some examples of how procurement organizations utilize innovation to gain competitive advantage?

David Pastore:
Historically, you would tend to see most innovation occurring within the supply chain on the direct side of things. Close supplier partnerships will bear fruit from an innovation standpoint, even in indirects. Going up the supply chain or, just looking for different ways of accomplishing the same thing but doing so by partnering more closely with the suppliers and working with them to potentially bring new products or services to market that are some of the ways to get the biggest wins. I think it’s important to stay open-minded about the possibilities rather than just going through the motions of sourcing the same old categories year over a year.

Mike Jasper:
One of the topics that we’ve heard a lot over the last few years is ESG and sustainability. Sustainability is an ever-growing issue that procurement organizations need to understand and consider when they’re putting together their strategy. While building an ESG program is a long-term initiative, what steps do you recommend procurement organizations take in 2023 towards the ESG?

David Pastore:
I think it depends on the maturity of the procurement organization and in a lot of cases, the industry, and what other priorities are within the company. It can be difficult to prescribe, a one-size-fits-all approach to ESG. I mentioned earlier that the most important thing is making a concerted effort and having sustainability as part of your plan for the year. The first step to take would be to understand or identify the company’s sustainability goals and objectives. Then conduct an assessment of your current supply base and then develop a policy. Over time you can implement that program. So even if this year is the year of identifying what the goals and objectives are and starting to assess your suppliers, at least you’re making progress.

Mike Jasper:
One of the things we see alongside sustainability and ESG is the globalization of the supply chain. With all our supply chains continuing to become more and more global, what steps can procurement organizations take to combat the risk that comes with that?

David Pastore:
I think it’s most important to look at your supplier management program. If you don’t have one, you should be looking to implement one that includes structured risk assessments. Make sure that you understand where your risk is and prioritize accordingly how you’re managing those relationships and contracts. To that point on contracts, make sure that you’re negotiating and drafting them to mitigate risk. I mentioned earlier facilitating some level of agility as well within your contracts, so this is something else to account for during that exercise. Finally, a recurring theme since the beginning of the pandemic has been to diversify the supply base because nothing’s been 100% reliable. With the uncertainty we continue to experience, the best thing that you can do is to make sure that you keep your options open so that you don’t end up in a situation where you can’t get the supply you need in order to run your business or produce your product or deliver your services.

Mike Jasper:
Last question for you. Being flexible and agile obviously can benefit any organization, but how can procurement organizations use these skills to their advantage in 2023?

David Pastore:
No matter how you consider all the things that we’ve talked about so far, writing down what your plan is going to be and that actually becoming reality is fairly unlikely. We’ve experienced over the last few years that it is imperative to have some flexibility and agility. I don’t think that 2023 is going to be any different. Keeping that in mind, procurement organizations should take proactive measures to prepare. Cross- training your team, make sure that your staff has the ability to pivot to different areas of the business and focus on where the priorities are. Make sure your team is actively building strategic supplier relationships and engaging your stakeholders. Driving a culture of innovation is also going to help, because when disruptions inevitably occur, you have to go off script from what you had planned to do for the year. The idea is that you need to have a well-trained staff that can pivot and address new risks or priorities without resource or skills bottlenecks. Having an out-of-the-box, innovative mindset across your internal and external constituencies will also bring up new ideas about solving the types of challenges that are likely to continue to come up and can either make or break year.

Mike Jasper:
Great! I appreciate your time.

David Pastore:
No problem, Mike!

About David Pastore: David is a results focused, strategic, and analytical Procurement thought leader who is passionate about elevating the role of Procurement to become a leader and create a competitive advantage for clients in their respective industries. For 15 years he has led teams of consultants that help market leading companies manage their most complex and strategic spends and supplier relationships. Pairing a technical background with his procurement expertise, he brings extensive experience sourcing, developing, and implementing source-to-pay technology. Most of all, David is genuinely committed to the people with whom he works. He has coached and mentored collaborators ranging from analysts to executives and deeply values the mutual growth derived from strong relationships.

About Mike Jasper: Michael has spent the past 22 years working with organizations to enable and implement enterprise technology in the ERP, accounts payable / receivable, and global compliancy verticals. He has helped companies of all sizes and industries improve their practices and achieve best in class status. In addition to his day job, Michael brings these skills to his position on the Leadership Committee of the Business Payments Coalition (BPC), a volunteer group supported by the US Federal Reserve who work to make B2B electronic payments more efficient across the end-to-end process.

About Velocity: Velocity Procurement is a consulting services firm, specializing in helping finance and procurement functions improve their financial results by evolving people, processes and technology. Our goal is to build customer loyalty and trust by solving problems, improving processes, and managing the cost of indirect and direct goods and services for any company, across all industries. We are in the business of improving our customers’ procurement operations through process innovation and cost reduction efforts.