As we usher in 2023, the procurement and supply chain operating model will continue to evolve. Despite sustained uncertainty in the business landscape, consumers still need goods and services. And manufacturers still need to meet demand.
Suppliers hold a lot more power in today’s macro-economic environment than they have in the past. In certain sectors where supply is limited, the market is less open than businesses might like. Additionally, large manufacturers depend upon their supplier networks for on-time delivery, service and innovation.
It should come as no surprise that forward-thinking leaders place immense value on the contribution which their suppliers make. They understand that, without our suppliers, there would be no customers.
Last year, we saw leading businesses start to rethink the way in which they view their suppliers, and in 2023, I believe that this mindset will continue. Here are three key ways in which the procurement world will evolve this year.
Procurement will become more supplier centric. For the last two decades, procurement has been trying to reinvent itself. Now, as Generation X and Y employees start moving into leadership roles, we’re seeing a rebirth. This emerging workforce is introducing new ways of thinking and starting to reshape the procurement operating model.
Rather than just saving costs, business leaders are starting to create value across the enterprise and its supply chain. It helps to think of this as “supplier experience management.” What’s key to this mindset is that it includes all suppliers. As the focus continues to shift in 2023, we should see more businesses treating their entire network of suppliers — not just a strategic few — as part of the organizational whole.
We are already starting to see advertisements in recruitment websites for positions like supplier operations manager and supplier experience manager. This positive change is encouraging to witness, and this year I anticipate that even more businesses will begin to view their suppliers as valued partners. As a result, decisions in key areas — such as sustainability, risk, performance and innovation — can be more considered.
Bolder approaches will continue to emerge out of procure-to-pay (P2P) fatigue. The need to work more efficiently with suppliers will move procurement further away from a transactional approach and closer towards the supply markets.
In a recent catch-up with a CPO for large Global 5000 company, my contact opened up about his plans to embark on a new chapter in a relatively greenfield procurement technology landscape. He shared with me that putting in a P2P system is the last thing he wants to do. Experience at a previous organization taught him that taking over P2P could take over everything else! In his view, this distracts greatly from creating value.
Leading organizations are focusing less on each transaction, and more on working efficiently. Last year we started to see some prominent procurement leaders move away from a budget-control approach. In today’s landscape, where supply chain resilience is king, teams are questioning their processes. Is it really viable to approve 1,000 transactions for a single supplier?
Forward-thinking leaders realize that approving a supplier is much easier than approving every single one of their transactions. As this way of thinking evolves, we expect to see more leaders putting tech solutions in place to control the entry of supplier data into their system, right from the outset.
The experience of working together will improve across the board. As procurement focuses less on transactions and more on suppliers, the way in which the broader organization works with the full supplier base will change. One way in which the function can influence the direction of travel is to become much more service orientated.
In an “everything as a service” world, procurement teams that don’t deliver great service to all internal users and to all suppliers are missing a trick. Optimizing the journey across all parties to deliver maximum benefit can contribute towards business competitiveness. It’s just begging to be done, and I anticipate that we’ll start to see more procurement leaders make the end-to-end experience that both parties receive more pleasant and productive.
We saw more companies looking to improve the experience which they offer to suppliers in 2022. These businesses are trying to simplify the supplier journey by overlaying a technology layer that can help them orchestrate end-to-end processes across multiple platforms. This year, I expect that we will see more large organizations move away from the S2P suite as the core, and opt for a more data-centric core like an MDM or SIM solution.
There is no clear roadmap yet of how things like single sign-on will be solved with networks such as Coupa, Ariba and Tungsten, so meeting these challenges will take time. But as more enterprises move in this direction, more pressure might be put on these networks to become more open.
With the move to supplier experience, and focus on end-to-end services, it’s unsurprising that we’re seeing organizations apply an experience lens to how they work with buyers internally. This group effectively makes up everyone in the organization who works with suppliers, which is most of the business. As leaders embrace supplier experience principles, it’s likely that more organizations will also start to orchestrate experiences for their buyers.
Procurement and supply chain teams that embrace positive change will be best placed to build resilience and create value in 2023. By partnering with suppliers, adopting bolder approaches and making both supplier and buyer experience a priority, organizations can harness their supplier relationships to build true resilience.
Costas Xyloyiannis is CEO of HICX.