Zip has unveiled a powerful suite of new and enhanced AI capabilities that allow companies to gain control of their spending by streamlining procurement.

The AI-powered spend orchestration platform has built on its existing capabilities and now offers tools such as Zip AI assistant, AI document extraction and AI intake automation.

Simplifying procurement

The purchasing process can often be slow, complex, and riddled with inefficiencies, involving countless steps, extensive paperwork, and numerous approvals and security reviews. Zip’s AI-powered platform streamlines the entire procurement lifecycle, from initial request to final payment, thereby saving businesses valuable time and money, while enhancing spend visibility, risk management, and compliance.

Hundreds of industry leaders including Sephora, Discover, and Reddit as well as leading AI companies like OpenAI use Zip to increase operational efficiency, generate hard savings, and reduce risk.

The latest AI features bring even more advanced and impactful capabilities to Zip:

• AI assistant: Zip’s AI assistant guides employees through the purchasing process to reduce the time and effort required to navigate complex company spending policies. For example, if an employee wants to buy an Airtable software subscription for their team, they can send a message to Zip’s AI assistant as if messaging a coworker, and Zip AI will automatically start the purchase request, guiding them through what is needed to complete the request. 
• AI document extraction: AI document extraction parses data from order forms, contracts and other documents to create a comprehensive, single source of truth. With AI document extraction, users can scan documents such as MSAs, DPAs, NDAs, SOWs, Amendments, and more in seconds. This puts valuable information to work, allowing users to autmate more tasks.  
• AI intake automation: AI intake automation pre-fills purchase requests with data from order forms, eliminating manual data entry and saving time. Employees simply need to upload the order form they receive from their vendor to have key purchase and supplier information — such as price, item quantity, and billing frequency – automatically included in their purchase request, saving them valuable time and reducing the likelihood of errors. 

Better customer experience

“Zip has become an indispensable tool for OpenAI’s procurement process,” said Hugh Drinkwater, OpenAI’s Head of Procurement. “We are thrilled Zip has integrated OpenAI’s technology to power their Zip AI suite to help us further reduce time spent on manual tasks, create a better buying experience and improve the productivity of our teams across the organisation.”

With Zip’s suite of AI solutions, companies can eliminate thousands of employee hours and dramatically reduce the need for procurement, legal, security, finance, and IT teams to spend time on error-prone data entry and time-consuming vendor contract reviews. For example, Miro uses Zip AI to save time with the legal contract review process; Coinbase uses it to streamline millions of dollars of invoices per year; UCI Health is implementing it to rapidly scale contract conversions during a merger, ensuring inclusion of key stakeholders and continuity of patient care — allowing doctors and nurses to focus on providing life-saving medical treatment without administrative delays, or disruptions to services required.

Today, Zip powers global payments in over 140 countries and has helped customers save almost $4.4 billion in less than four years since the platform launched.

It’s a time of radical change for the procurement sector. Not only is procurement itself transforming to become a more strategic part of the overall business, but industry trends are changing the shape of the sector from the outside as well. 

A new report from KPMG breaks down the “numerous forces” that are conspiring to change the “future trajectory of procurement.” WIth procurement teams facing uncertainty on multiple fronts, the report argues that procurement teams should “brace themselves for a myriad of potential scenarios.”

Primarily, the trends shaping the future of the procurement sector, according to KPMG include: the heightened risk of supply disruption, the impact of technologies like predictive analytics and generative artificial intelligence (AI), and increasing ESG and regulatory demands. 

Disruption is the new normal

KPMG’s report, which surveyed 400 senior procurement professionals from a range of industries, found that concern over the increased likelihood of supply chain disruption is becoming an increasingly common fear. Of the executives surveyed, 77 % told KPMG that risk of supply disruption is a critical external challenge.

Geopolitical tensions are mounting in multiple regions. As a result, a retreat from globalisation, and conflict in certain parts of the world are impacting food markets and energy prices and deterring trade routes. 

According to KPMG’s report, these disruptive pressures are putting a strain on supply chain resilience. As a result, many organisations are being forced to rethink their sourcing strategies as they try to reduce the risk of shortages and rising prices. Strategies like nearshoring and China-plus-one are expected to significantly reshape supply chains in Asia and beyond over the coming years. 

AI, analytics, and digitised supply chains 

According to the executives surveyed, predictive analytics and generative AI are the two technologies most likely to have a major impact on procurement functions over next year and a half. Robotic process automation was a distant third. 

However, despite widespread consensus that AI and analytics are essential to the next phase of procurement’s evolution, many executives also cited limited data and insights as their top internal challenge. KPMG’s report argues that this indicates an urgent need to invest in this area.

Sustainability, ESG, and tightening regulations 

Increasingly, procurement is emerging as one of the key areas for sustainability reform as the conversation shifts towards Scope 3 emissions. Companies in Europe, in particular, are facing stringent regulatory and reporting requirements, with just under two-thirds of KPMG’s respondents arguing that increased regulatory and ESG demands will heavily influence strategic sourcing in the next 3–5 years. 

According to KPMG, businesses must demonstrate that their manufacturing and supply chains are not only low-carbon and environmentally friendly, but also provide adequate pay and conditions for workers. 

Technology is advancing at an exponential rate. Now, advances in AI and analytics mean devices will likely expand their functionality and capabilities well beyond the date of their original procurement. 

That means that for any IT-related investment, it’s not enough to focus solely on traditional factors such as the legality, functionality, suitability, and cost of the product itself at the point of purchase. It’s just as important to understand the viability, trustworthiness and any likely risks that could result from association with its manufacturer and suppliers for the entire predicted lifetime of that product.  

This is particularly relevant to the realms of video surveillance and the Internet of Things (IoT). Increasingly, governments are tightening regulationsto prevent the ongoing use of devices associated with human rights abuses or that present an unacceptable level of cybersecurity threat. 

Supply chain blind spots

According to the Cyber Security Breaches Survey 2024, commissioned by UK cyber resilience to align with the National Cyber Strategy, just 11% of businesses assess the risks posed by their immediate suppliers. In a predominantly digital age, that is deeply concerning. 

It suggests there is not enough emphasis on the origin of devices responsible for the breaches or manufacturers who made them. Without this, how can any organisation ever hope to demonstrate compliance with its own commitments to uphold the highest standards of cybersecurity and ethics in procurement? 

If they don’t appropriately audit and document these issues, how can organisations possible identify the technical, financial and reputational risks of selecting one manufacturer over another?

Risk management in procurement

Risk can never be reduced to zero, so it must constantly be reassessed based on an organisation’s activities, sensitivities, and risk tolerance. These risks will manifest in several different forms, some of which the procurement function can actively control and others which it can only react to. With the appropriate forethought, however, organisations can idenitify many of the most likely risks in advance. They can therefore take steps to reduce, mitigate or transfer the risks before disruption strikes. 

For example, when evaluating any IoT related ‘smart’ device or solution, cybersecurity must be a key consideration. Organisations could reduce risk by stipulating that they will only consider working alongside suppliers who have achieved relevant accreditations and who submit themselves to regular third-party penetration testing. 

They could then look to mitigate this further by doing their own due diligence of the cybersecurity track record for each tender response. Finally, they may choose to transfer some of the remaining risks by revisiting the organisation’s cyber insurance coverage. 

Building bridges between IT & procurement 

As outlined above, a growing threat is that of scheduled upgrades increasingly leading to the adoption of ‘smart’ IP connected devices, requested and managed by departments other than IT. These devices no doubt provide valuable new functionality. However, they also come with additional responsibility for their on-going management that organisations need to consider.  

Responsible procurement professionals have a duty to ensure they bring in the right individuals from across the business to ensure their appropriate evaluation. This is where the proactive involvement of the IT department becomes so vital. It brings much needed familiarity and expertise with the process of ensuring a product is viable. With the involvement of the IT team, it’s much easier to determine if a product can be securely and cost-effectively adopted over a multi-year period. It therefore puts procurement professionals in the best position to take an informed view of which of the presented options are in the best long-term financial interests of the business. 

‘Digital asbestos’ & CCTV blind spots

Technology used for video surveillance and physical security is many organisations’ biggest blind spot. This is because these cameras typically make up the largest software system deployed within a business not managed by IT. Internally, man organisations still think of security cameras as the “closed-circuit” analogue devices that were in circulation 20 years ago. 

Consequently, as a society we have witnessed, and continue to see, the widespread adoption of insecure cameras and other IoT devices. These devices are manufactured by state-owned companies with strategic interest in exfiltrating data, intelligence or intellectual property from rival governments, private businesses, and individuals. This is especially true when the country and the companies in question have a widely demonstrated and well-documented set of cyber risks associated with them. 

In the UK, the Central Government has banned devices manufactured by Chinese state-controlled companies on national security grounds. And yet, organisations across the public and private sectors continue to deploy these devices at scale. That isn’t sustainable or wise.  

Of course, we shouldn’t blame procurement professionals for the purchasing decisions taken before these risks became widely known. It’s the same as asbestos several decades ago. Today, however, the risks are known and documented. Procurement professionals have a duty to stop adding to the problem and take steps to mitigate the risks. As with asbestos, the first step once the dangers were clear, was to no longer add to the problem. The second was to put plans in place to deal with what had been put in place by an earlier generation. 

Final thoughts

No procurement leader wants to be the person who ignored the warning signs and forced the organisation into “buying cheap, buying twice”. Or even worse, exposed the organisation to damage from which it was unable to recover. Price is of course an important factor, but the true goal should be to achieve value. 

The Procurement function has never been more important in terms of building the culture, people and processes needed to ensure buying decisions are taken that are in the best long-term interests of the business. For procurement professionals, and those sat around the boardroom table, it all comes down to understanding the risks, accepting responsibility and having the determination to invest

A report from the European Institute for Gender Equality (EIGE) asserts that current public procurement spending represents “a missed opportunity.” 

According to the EIGE’s new study, public procurement has the potential to leverage public spending in a way that results in a fairer allocation of economic resources between genders. Effectively implementing such a policy would, the report argues, improve living standards for both women and men. 

Public procurement and gender equality 

Public procurement in the European Union (EU) is a massive economic phenomenon. Authorities in the EU spend roughly 14% of the bloc’s GDP on public procurement. This amounts to approximately €2 trillion per year. 

According to the EIGE, the sheer size of public procurement in the EU means the process is “of high economic importance.” New regulation could, the EIGE suggest, take advantage of public procurement’s status as a “powerful instrument for influencing market relations and competitiveness.” 

Until now, however, regulators have largely seen and treated public procurement and gender equality as two distinct issues. This is especially true of industries where the public sector is the market’s principle buyer. These include energy, transport, waste management, defence, information technology, and health and education services.

The EIGE report notes, however, that links between the two issues are absent at almost every level, from national governments to the EU as a whole. They believe this represents a missed opportunity for the EU, as public procurement has the potential to be “an important transformative lever for social issues and in particular gender equality.” Not only this, but a lack of gender parity in public procurement is an economic pain point for the EU.  

The case for gender-responsive public procurement

The EIGE argue that the extent to which businesses owned and operated by women are under-represented in tender competitions and contract awards means that public bodies are missing out on a large segment of the market that may offer value for money and innovation in public service delivery. 

Gender-responsive public procurement (GRPP) is a gender mainstreaming tool advocated by the EIGE that promotes gender equality through public procurement. “GRPP is procurement that promotes gender equality through the goods, services or works being purchased,” explains the report. 

Gender equality has strong, positive impacts on GDP per capita, which increase over time. Therefore, economists argue that gender equality is a relevant lever for catalysing economic growth. Increased gender equality, the EIGE estimates, could lead to an increase in EU GDP per capita of 6.1–9.6 % by 2050, amounting to EUR 1.95–3.15 trillion. GRPP could contribute a significant part of this, as it helps to tackle structural inequalities at both a national and pan-EU level.

The nature of the procurement function is undergoing a radical transformation. Additionally, the ways in which procurement is being perceived from outside the department are also changing. More and more leadership teams are looking to procurement to solve increasingly challenging problems. 

CPOs are finding themselves a valuable part of the C-Suite, important decision-makers within the corporate hierarchy. Hervé Le Faou, CPO of Heineken, said late last year that “Fundamentally, the CPO is evolving into a ‘chief value officer,’ a partner and co-leader to the CEO who is able to generate value through business partnering, digital and technology, and sustainability, which are new sources of profitable growth in a shift toward a future-proof business model.”

Procurement teams are expected to be sources of strategic value creation, drivers of digital transformation, and the first line of defence against disruption in an increasingly volatile world. It’s a far cry from the somewhat transactional, cost-conscious back office role the function performed just a few years ago. And, with responsibility and importance, comes a raft of new challenges. 

According to data gathered by KPMG in April, the current procurement landscape faces a diverse array of challenges, from tightening ESG restrictions to the uncertain (but undeniable) impact of generative AI. These trends are already creating new headwinds for procurement teams, and they’re likely to develop further as the decade wears on, not to mention be joined by others that are only now starting to emerge. 

1. Risk management 

The profound disruption to the global supply chain caused by the COVID-19 pandemic has receded, but it has left behind a world obsessed less with the idea of “just-in-time” than “just-in-case”. 

Market fluctuations resulting in cost-spikes, material shortages, and delays, are all going to be front of mind for procurement teams this year. However, internal issues like siloed departments, inefficiencies, and fraud also have the potential to prevent procurement from living up to its potential. Procurement’s role in managing third party risk is going to increasingly place the function at the heart of organisations’ response to potential threats. Leadership teams will expect CPOs to find answers and ways around these dangers. 

2. Transparency and data quality

Whether from an ESG perspective or simply a desire to shock-proof your value-chain, attaining good, plentiful data about your supplier ecosystem and the market forces that affect them is a high priority and a daunting challenge for procurement teams. 

The consequences of poor quality internal data trickle down into the decision-making process, and could cause the business to lose out on crucial opportunities. Likewise, a poor understanding of your suppliers and their activities could cause Scope 3 emissions to skyrocket, and even involve organisations in practices that damage brand reputation or result in the purchase of inferior quality products. 

KPMG’s industry survey found that implementing data analytics procurement leaders view implementing data analytics as the single most important activity they would engage in the next 12–18 months. However, respondents also cited limited data and insights as their top internal challenge, “indicating an urgent need to invest in this area.”

Organisations are awash in a sea of disorganised data, and the growing influence of generative AI looks ready to make this problem worse before it gets better. 

Generative AI has rapidly become the most widely-discussed (not to mention heavily invested in) technology in multiple industries. While many organisations are keen to explore the potential for generative AI to automate functions, create new sources of value, and do any number of other things, the technology has the potential to have just as many negative effects on the industry as good ones. 

3. Regulation, compliance, and Scope 3 Emissions  

Whether tied to sustainability reporting or the movement of goods across international borders, the global regulatory landscape is becoming more stringent, and the penalties for violation more severe. 

Procurement teams need to stay abreast of fast moving compliance landscapes, ensuring they (and their suppliers) are up to date with changing requirements lest they have their operations disrupted and potentially face costly fines. Automation and AI have a role to play in this process, potentially monitoring, analysing, and completing compliance documentation without the need for tedious manual work. 

Many organisations, especially in Europe, face increasingly strict regulatory and reporting standards regarding ESG. KPMG’s survey found that 66% of respondents believed that these growing regulatory and ESG demands would heavily influence strategic sourcing decisions over the next 3-5 years. 

Businesses must increasingly demonstrate that their production and supply chains are low-carbon, environmentally friendly, and ensure fair wages and good working conditions. This trend spans various industries, with financial services and government sectors facing intense scrutiny. 

Over the last several years, it’s undeniable that the pace and impact of disruptions felt by global supply chains has increased. From the COVID-19 pandemic, a looming recession, and the increasing severity of the climate crisis to war in Ukraine and genocide in Gaza, disruption feels more like the norm than the exception. 

In the 2023 Gartner Balancing Sustainability and Resilience Survey, researchers found that 53% of supply chain and procurement leaders reported their supply chains were facing disruptions half of the time or more often.

Procurement plays a more vital role than ever in helping organisations combat disruption, but risks can’t be avoided if they can’t be identified. In this article we have organised the 9 most common causes of disruption procurement faces today.

1.  Human Error

Procurement requires a great deal of repetitive, error-prone work. Human errors in manual processes can lead to purchasing mistakes such as incorrect factory orders, resulting in unnecessary costs. In addition to delays and increased costs, human error can incur additional penalties as the result of breaches in compliance, not to mention the long term potential reputational damages. Repeated mistakes amplify the financial impact, emphasising the need for accuracy in purchasing, logistics, and inventory management processes. Upgrading to technologies with built-in automation can minimise such errors and associated expenses.

2. Economic, political, and environmental factors

Global events like armed conflicts or economic sanctions can affect supply chains. In just the last few years, the number of disruptions to agriculture and manufacturing from climate crisis-related events has risen, in addition to geopolitical conflicts. Diversifying suppliers, nearshoring supplier ecosystems, and scenario planning can help businesses respond to such challenges.

3. Lack of contingency plans

Companies must plan for worst-case scenarios by monitoring suppliers’ financial performance to identify those at risk of going out of business and reducing dependence on them. Diversifying supplier pools and reducing reliance on politically unstable countries can help mitigate supply chain risks. Additionally, taking care over the quality of internal and external data, as well as implementing a vendor management system, can help mitigate this risk. 

4. Security Threats and Corruption

Cyberattacks like ransomware can cripple procurement operations just like any other part of the company. Procurement, as a highly porous department with lots of contact with outside entities and potentially tens of thousands of interactions per day, is particularly vulnerable. Investing in information security solutions and cyber insurance can mitigate this risk. Procurement is also one of the most common breeding grounds for corruption and fraud. Ensuring rigorous oversight of the procurement process with mechanisms for independent auditing, as well as centralised data management practices to encourage transparency can help reduce the risk of fraud.

5. Flawed forecasting

Inaccurate demand plans can lead to underproduction or overproduction due to stale data, potentially resulting in unsold inventory, product markdowns, and reduced profit margins. Manual forecasting processes without sophisticated demand planning applications may contribute to overestimation of demand.

6. Internal business changes

Reorganisations or key personnel departures can lead to the loss of institutional knowledge, disrupting procurement’s ability to function efficiently. Also, a great deal of deal-making and supplier management still relies on interpersonal connections, which can be severely damaged by staffing challenges. Standardising procurement processes and automating tasks can mitigate disruptions caused by upheaval and turnover.

7. External business changes

Acquisitions or workforce shortages at supplier companies can disrupt the procurement process. Diversifying supplier pools and adding alternative sources can help mitigate disruptions.

8. Pricing fluctuations

Raw material shortages, demand spikes, or natural disasters can lead to price increases. While procurement can’t control these factors, they can plan for them. Stockpiling, diversifying supplier networks, and chasing efficiencies wherever possible can cushion the blow when prices skyrocket.

9. Transportation delays

Delays in transportation due to weather, labour strikes, or breakdowns can disrupt supply chains. Although transport problems have eased compared to previous years, delays remain common.

Being a procurement manager has never been more challenging. You’ve had to become the ultimate multitasker: securing the best prices, finding reliable suppliers, and now steering the strategic decisions that will define your organisation’s future.

So, what sparked this shift in your role? You have Enterprise Resource Planning (ERP) systems—Oracle and SAP – to thank.

Transforming ERP is a generational challenge

These systems are vital for integrating and managing core business processes, yet their inflexibility and high maintenance costs present novel challenges to corporate IT everywhere. As businesses strive for greater agility and efficiency, procurement teams are central to transforming ERP systems from static, costly burdens into dynamic assets that boost business growth and operational efficiency.

As a procurement manager, you’re at the heart of transforming these ERP systems into flexible, valuable assets that not only support growth but also adapt to changing business landscapes. Your mission? To ensure these critical systems don’t become financial sinkholes, while ensuring that your systems keep pace with necessary innovation initiatives and evolving business demands. Every pound saved or cleverly renegotiated is funnelled back into your company, fuelling innovation and sharpening your competitive edge.

Navigating the complexities of ERP systems, you’ve likely considered third-party software support as a game-changer. It’s the buzz in the industry—a strategic move that promises innovation, functionality, and substantial cost savings. Partnering with a tech-savvy ally who intimately understands your systems and is dedicated to your company’s growth sounds like a winning formula, right?

But here’s the reality check: some businesses aren’t jumping on board with the idea of taking their ERP support and maintenance away from the vendor’s contract. And to make matters worse, ERP vendors themselves are actively discouraging it. They paint a bleak picture, highlighting concerns about security, compliance, and access to cutting-edge products.

So, when you’re advocating for third-party software support to drive innovation, save money, and ensure the stability, security, and compliance of your ERP systems, you need to be armed with the facts.

Managing risks while driving innovation

As a procurement manager, your role increasingly involves bridging the gap between IT departments and strategic business needs. IT teams often lean towards the safer route, preferring the predictability and stability of established ERP vendors like SAP and Oracle. Their concerns? Potential disruptions, security risks, and the upheaval of adopting a new support model.

However, this reliance on traditional vendor support introduces hidden dangers. It locks your organisation into the vendor’s ecosystem—tied to their upgrade schedules and captive to their pricing strategies—restricting your ability to innovate and adapt. This can divert your business from pursuing avenues that better align with its strategic ambitions.

Consider the situation with Birmingham City Council. The cost of the council’s move to a new Oracle ERP system was initially projected at £20 million but escalated to around £100 million due to unforeseen complexities and the need for a highly specialised software instance that ultimately could not be delivered effectively. This example highlights the significant risks and costs that can accrue when projects are not carefully managed and tailored to the specific needs of an organisation.

Adapt, don’t start over

More importantly, this case teaches us an important lesson: migration and large-scale projects are not the only paths to innovation. Sometimes, the key to adding strategic value lies in supporting and improving current systems rather than replacing them entirely. This approach not only avoids the risks of vendor lock-in but also enhances operational flexibility, allowing organisations to adapt more dynamically to changing needs.

How can your business achieve this? With third-party software support. This alternative doesn’t just mitigate risks—it propels innovation. Third-party providers maintain and optimise both current and legacy systems more effectively. This prevents the disruptive upgrade cycles imposed by traditional vendors. They specialise in custom solutions tailored to the unique needs of your business. By doing so, they enhance system performance, and ensuring ERP systems are responsive to your strategic goals.

Moreover, third-party support addresses interoperability issues and customisations often overlooked by standard vendor support. This reduces operational disruptions and offers a more stable transition experience during system upgrades. Financially, opting for third-party support results in substantial cost savings in both the short and longer terms as these services come at a more competitive price than traditional vendor support contracts, and also allow your organisation to avoid costly, non-essential upgrades and migrations especially as systems age. These savings can be redirected towards strategic initiatives, enhancing your competitive edge.

Convincing your C-suite to transition to third-party support involves shifting the narrative around risk. It’s about highlighting that the real danger lies in sticking with a roadmap from a vendor which might not match the company’s direction – or ambitions. The potential for stifling innovation and operational agility is a significant threat.

Tackling security and compliance as a CPO

Security and compliance are critical, and they are often cited as reasons to remain with a vendor’s in-house support. Yet as vendors shift focus to newer software, support for older systems diminishes. This exposes businesses to increased cybersecurity risks and regulatory compliance challenges. Third-party software support can help with this, too.

Third-party providers are not limited by a product lifecycle. Their priority is to secure and maintain the ERP systems you rely on, regardless of their age. This proactive approach ensures that your systems stay up to date with the latest security measures. Not only that, but is also aligns them with evolving compliance standards without forcing costly upgrades.

By choosing third-party support, you ensure your ERP systems are secure, compliant, and perfectly aligned with both current regulatory demands and your organisation’s long-term strategic objectives.

For procurement managers ready to advocate for third-party software support, the key is demonstrating how this option turns perceived risks into strategic advantages.

This move can safeguard your company’s future, ensuring that your ERP systems evolve in line with your business needs. Not just according to a vendor’s agenda. 

In the past few years, major strides have been made to level procurement’s gender playing field.

While women are still under-represented at the top of the c-suite, steps forward have been made in terms of general gender diversity. A recent report from research firm Oliver Wyman surveyed 300 CPOs across Europe, United States and Asia and found the total number of women working in procurement to be increasing.

Around 60% of CPOs surveyed revealed that the number of women working within their procurement functions was a higher total than three years prior. Those interviewed confirmed they were feeling the benefits with 76% reporting “more creativity and innovation” within their teams as a result of the presence of women.

However, there is still a significant disparity when it comes to female representation in leadership positions. Today, the proportion of women in leadership roles sits at around 25% which signals more work is still to be done in this area.

In this exclusive article, we hear insights from leaders who give us their viewpoint of what the future for women in procurement could look like.

How to bridge the gap

Clare Harris, Chief Operating Officer at Proxima, believes both genders must work together in order to reach parity. Harris explains while there are promising signs, there is more work to do, and it must not fall solely on women leaders to drive change. “It is incumbent on all those who can make a difference to step up and continue to actively push for more diversity and inclusion in the industry,” she explains. “The future of procurement promises to be exciting, and those organisations preparing to face the challenges ahead with diverse teams will undoubtedly have a competitive advantage.”

While Emma Mottram, Director of Operations at Efficiency North, affirms women must act as trailblazers for one another and show a way is possible. “It’s looking incredibly strong, although we need to do more as a sector to attract women into procurement jobs,” she explains. “It’s important that women currently in the industry pave the way for other women to see what can be achieved – all organisations thrive with new faces and fresh ideas.”

But Shamayne Harris, Head of Procurement at Pagabo, believes the future of procurement for women varies depending on the industry. “Take the construction industry for example, it’s typically male-dominated, however, there are a lot of positive initiatives to create opportunities for women in the sector,” she says. “When it comes to women in procurement, the challenge here often relates to a legacy issue due to traditional family dynamics, which is a general issue and not procurement-specific. Procurement can play an important role in gender equality by embedding social objectives into procurement processes.”

Women’s rise in procurement

And Laura Smith, Vice President of Sales at Ivalua, believes there has never been a better time for women to be involved in procurement. “In the not-too-distant future, I see women playing an equal role in helping organisations to manage their spending power and turn vendors into partners in their diversity, equity, inclusion, and sustainability initiatives,” she explains. “This will have a real impact on the world and drive firms to be even more socially responsible. Change is already happening, and procurement is at the forefront, as we’re seeing more women making their mark on our industry. In fact, a survey by Gartner reveals that women now make up 41% of the supply chain workforce.”

Smith believes the rise in women in procurement is down to several changes in the industry on the back of COVID-19 and a global drive towards more diversity. “Flexible workplace environments following the pandemic have allowed working mothers with young children to remain in the workforce; there are more communities for women in business; and there’s been an increased investment in diversity, equity, and inclusion initiatives within organisations,” she discusses. “But, while we’ve come a long way, and female representation at the executive level in procurement has never been better, we’re still making progress and I’m excited to support this to help pave the way for others.”

Procurement’s change

However, Libby Burn, Senior Manager, Life Sciences at 4C Associates, believes it is important that women shouldn’t forget the importance of having the correct skills while stressing women shouldn’t just be given a role to become a statistic. “There is still a level of accountability that remains with women to be worthy of this future and invite support instead of criticism,” she says. “While we should undoubtedly be able to expect corporate cultures, (including employee policies and mentoring programmes) that are progressive, open to diversity, and supportive of a level playing field, women should not forget the need for credibility and talent. Then the future for women in procurement (and indeed any function) will be as open to us as our talents and commitment warrant it to be.”

It’s clear that procurement is changing, and that transformation is bringing an evolution in the workforce too. As the function and indeed the wider world is encouraging greater diversity, procurement will richly benefit from a fresh perspective, varied leadership abilities, and an organisation-wide drive to adhere to ethical practices which are all contributing to positive change. Working alongside their male counterparts, women have a big part to play in procurement’s future which will mean the function will be an even stronger force to be reckoned with within the c-suite.

Generative artificial intelligence (AI) exploded into the public consciousness in early 2023. Since then, the technology has attracted vast amounts of media attention, controversy and, crucially, investment. Now, tech companies are struggling to bridge the gap between hype and reality. Between the billions upon billions of dollars spent to bring AI to market and the reality that it may not be the game-changer it’s being sold as. Increasingly, it appears as though it might be a very expensive, complicated, ethically flawed, and environmentally disastrous solution in desperate search of a problem.

“AI chatbots and image generators are making headlines and fortunes, but a year and a half into their revolution, it remains tough to say exactly why we should all start using them,” observed Scott Rosenberg, managing editor of technology at Axios, in April. 

Nevertheless, Generative AI is seeing huge investment across virtually all sectors. In the procurement market, the technology is on track for substantial growth. Market projections estimate the value of AI in procurement to soar to more than $2.2 billion by 2032. 

Can we use AI for procurement?  

In January, Gartner found that 43% of procurement leaders were planning to implement the technology within the next 12 months. It’s worth noting that this investment in generative AI lags slightly behind the supply chain function in general. However, it’s still close to half of alll CPOs planning to buy an AI tool. Maybe a slower approach for the industry as a whole wouldn’t be such a bad thing. 

It’s likely that AI will have applications that are worth the price of admission. One day. 

Its problems will be resolved in time. They have to be; the world’s biggest tech companies have spent too much money for it not to work. Nevertheless, using “AI” as a magic password to unlock unlimited portions of the budget feels like asking for trouble. 

As Mehul Nagrani, managing director for North America at InMoment, notes in a recent op-ed, “the technology of the moment is AI and anything remotely associated with it. Large language models (LLMs): They are AI. Machine learning (ML): That’s AI. That project you’re told there’s no funding for every year — call it AI and try again.” Nagrani warns that “Billions of dollars will be wasted on AI over the next decade”. Applying AI to any process, including procurement, without more than the general notion that it will magically create efficiencies and unlock new capabilities carries significant risk. 

Tom Whittaker, director at independent UK law firm Burges Salmon, warns that “Use of AI in procurement requires clear purpose. Purpose drives the design, development and deployment of an AI system, how it will be incorporated into existing systems and processes, and how those responsible for the AI system measure performance and legal compliance.” 

Without clear intention and thoughtful execution, AI risks becoming a multi-million pound albatross around a procurement department’s neck. 

The problem with AI chatbots and other “low hanging fruit” 

According to GEP, AI represents a broad array of “low hanging” fruit for the procurement sector. These low hanging druit include “automating invoice processing, optimising spend with AI and augmenting capabilities through AI chatbots.” Companies looking to drive quick value from AI can supposedly exploit these options to save money and easily increase efficiencies. 

But is that true? 

Let’s talk about chatbots. The technology has struggled to perform as a replacement for human customer service reps.

In the UK, a disgruntled DPD customer—after a generative AI chatbot failed to answer his query—was able to make the courier company’s chatbot use the F-word and compose a poem about how bad DPD was. 

Parcel delivery firm DPD have replaced their customer service chat with an AI robot thing. It’s utterly useless at answering any queries, and when asked, it happily produced a poem about how terrible they are as a company. It also swore at me. 😂 pic.twitter.com/vjWlrIP3wn

— Ashley Beauchamp (@ashbeauchamp) January 18, 2024

In the US, owners of a car dealership were horrified when their AI chatbot started selling cars for $1.

After Chris Bakke, who perpetrated the exploit, received over 20 million views on his post, the car company announced that it would not be honouring the deal made by the chatbot. It argued that, because the chatbot wasn’t an official representative of their dealership, it didn’t have the authority to offer discounts. 

I just bought a 2024 Chevy Tahoe for $1. pic.twitter.com/aq4wDitvQW

— Chris Bakke (@ChrisJBakke) December 17, 2023

Evangelists for the rapid mass deployment of AI to the procurement sector seem all too ready to hand over vital processes like contract negotiation to AI that can, without much difficulty it seems, be convinced to sell items worth tens of thousands of dollars for roughly the cost of a chocolate bar.

BirchStreet Systems is the leading global technology provider of P2P operations solutions to the hospitality sector.

Over the years, its solutions have been developed through deep collaboration with customers to deliver groundbreaking and innovative work throughout the likes of hotels, casinos, restaurants and food management companies. BirchStreet offers a robust modular platform that optimizes end-to-end procure-to-pay process and provides data and insights that hospitality customers use on a global basis across its properties to make better purchasing decisions. The company works to deliver a significant amount of value to its customers, as it enables them to capture spend in one place while focusing on price and discounts with suppliers, as well as full accounting compliance.

John Fay has been the CEO of BirchStreet since 2022, which has been working with Marriott International since 2009. Fay recognises the collaboration between the companies: “Our focus has been on building and enhancing that relationship with Marriott as Marriott has grown both within existing markets and in new markets,” he said.  “That collaboration is strategic for us at BirchStreet. Our objective is to understand Marriott’s purchasing and strategic focus and then to work closely with Marriott to help drive more effectiveness from the platform related to purchasing, financial control and payments.”

An effective business relationship needs to be mutually beneficial and built on trust and transparency. “One of the very unique roles BirchStreet plays is that we are the neutral purchasing platform at the centre of the hospitality business. While we work extensively with Marriott, we’re also addressing similar issues for other large hospitality brands. We also form non-commercial working groups in the industry to tackle questions that affect the whole space. As a result, BirchStreet can offer hospitality brands access to a very special community, consisting of users of our platform who face similar issues and challenges in their operations.”

Fay says, “Since we only focus on the hospitality sector, we are able to incorporate specific feedback into our product roadmap and build unmatched depth of functionality within our P2P platform that none of the generic horizontal platforms can deliver. It’s a win-win.”

Transparency is key.

Operating sustainably isn’t a choice in today’s world of 2024. Legislation and customer demands dictate otherwise. Inaccurate supplier information can lead to unexpected and costly supply chain interruptions. It is a key reason why transparent supply chain practices act as the base for a more sustainable and responsible business landscape.

Knowing this all too well is Walt Sheffler. He is the President at Avendra and has been involved in the organisation for over 23 years. During that time, Avendra has become one of North America’s leading hospitality procurement services providers. Its supply chain management solutions are tailored to each client’s business strategies, while offering unparalleled service through a dedicated customer care team that deliver benefits beyond great savings.

Sheffler explains the importance of operating with transparency in sustainable procurement practices, as it enables stakeholders to evaluate the environmental, social and ethical impacts of purchases. “This transparency fosters critical outcomes, including greater accountability, continuous improvement, and the establishment of trust,” he explains. “Transparency in sustainable procurement drives improvement. We strive to enhance supply chain efficiency, reduce waste, and minimise negative impacts wherever possible, while proactively managing risks and promoting reliability and resilience throughout our relationship. By openly communicating our assessments of supply chain partners, we empower our customers to make better-informed decisions. They gain a deeper understanding of the sustainability-related aspects of their choices.”

Over the past 20+ years, Avendra has formed a key, strategic relationship with Marriott International to create distinct identities with each of Marriott’s 30+ brands in mind.  “Marriott’s relentless pursuit of excellence fuels our drive for continuous innovation, while their guest-first philosophy resonates with our own,” says Sheffler. “As we anticipate customer needs, we recognise that every decision revolves around the guest experience. It’s a collaborative force that inspires us to be better every day, ensuring that each property thrives. Our relationship is both inspiring and impactful, reinforcing the belief that ‘success is never final and built hand-in-hand’. From a sustainable procurement perspective, we’ve fine-tuned our approach. It’s about sourcing the right product for the right brand at the right price. Collaboratively, we ensure that each hotel brand meets guest expectations seamlessly.”

Looking ahead, the future of the relationship with Marriott seems bright. As Marriott expands globally, Avendra is streamlining its procurement practices across diverse regions. Our approach is grounded in understanding local dynamics, respecting cultural differences, and adapting to regional supply chains. This ensures consistency and efficiency across international operations, aligning with Marriott’s unwavering commitment to excellence.

“Marriott continues to thrive through meaningful growth, continually pushing boundaries in both geography and innovation,” explains Sheffler. “Looking ahead, our focus remains clear: enhancing experiences through exceptional hospitality. Achieving this objective requires a multi-dimensional approach, anchored by our dedication to fostering franchise growth, which serves as the driving force behind Marriott’s expansion. Our goal transcends mere efficiency and cost savings; we aim to empower Marriott franchisees to prioritise what truly matters – creating memorable moments for their guests.”

2020 was a year of significant disruption and change.

Many people and businesses experienced their toughest years yet amid lockdowns and global restrictions. For procurement and supply chain, the industry was one of the hardest hit.

But despite catastrophic turbulence on an unprecedented scale, there was still opportunity to be uncovered.

Enter Zip.

The rise of Zip

Zip is a world-leading intake-to-pay suite which provides a single front door for any employee to initiate a purchase or vendor request. The company helps businesses gain clear and timely visibility across all purchases, while dramatically improving the employee experience. The platform’s no-code configuration and intelligent workflows integrated across disparate systems enable businesses to automatically route requests for faster approval across finance, legal, procurement, IT, security and other teams.

Zip was founded in July 2020, just a few short months after the beginning of the COVID-19 pandemic. Lu Cheng, Co-Founder and Chief Technology Officer at Zip, admits his company’s starting point was “interesting” but without being born against the backdrop of the pandemic, Zip wouldn’t have been able to get off to such a fast start.

Using Covid

“We certainly wouldn’t have been able to have the number of conversations with procurement leaders that we had in the early days,” he discusses. “The company being formed during Covid helped with our own resilience, and it shone a light on the importance of procurement as a strategic function. Business continuity has been so much more important for businesses — this is demonstrated by the last five to 10 years, where the number of vendors has grown dramatically. Companies are increasingly focused on their competitive advantage and outsourcing more of their work to vendors. They’re no longer on the software side of things, and instead of building all software and technology in-house, are leveraging third-party vendors for things like new R&D development. Today, one of the reasons you see so many SaaS providers is because the majority of companies are not building AI in-house.”

Cheng reflects on a decade ago when he was working at Airbnb and the level of transformation the space has undergone in the past few years. “That certainly wasn’t the case when I was at Airbnb,” he reveals. “We had over 4,000 engineers and we built our own AI platform with AI data. But today, companies are focused on outsourcing more of that work with vendors. It impacts other verticals too, like life sciences, financial services, manufacturing, retail and even marketing companies, which are leveraging external marketing and design agencies more and more.”

Gen AI boom

And the newest and most talked about form of technology in today’s world is generative AI. Natural language processing (NLP) tools such as ChatGPT are being heavily considered by many procurement functions as a way of saving time and money. According to Cheng, he has witnessed first-hand how the demand for machine learning processes like Gen AI has skyrocketed industry-wide and beyond.

“A lot of the acceleration of AI today is due to the quality and level of output, which has dramatically increased over the last few years, especially in the past year and a half alone,” Cheng explains. “NLP wasn’t very well leveraged before because the use cases weren’t broad enough and you had to spend a lot of effort to train various specific models. The rise of compute power, the ability to support and calculate a large amount of data and draw it from a wide knowledge base and the quality of output has been significantly better, which is why we’re seeing many more general purpose applications built on top.”

Scaling efficiency

While Gen AI has been widely praised for the efficiency it brings, the concern surrounding hallucinations remains. Hallucination data is incorrect or misleading results that AI models create. These could be caused by a range of reasons such as insufficient training data, incorrect assumptions made by the model, or biases that the data has used to train the model. Cheng explains that the way Zip’s product works is by providing companies with two key elements that contribute to accurately training AI models.

“First, Zip provides companies with one entry point for any employee to engage with procurement intake. The second thing we provide with our workflows is orchestration and visibility. We are taking a lot of processes that happen offline and bringing them online into a very clear workflow while digitising the process,” he reveals. “At a broad industry level, in the next one to two years there will be very rapid developments and improvements in the accuracy and quality of generative AI data and at Zip, we are ahead of that curve.

Keeping the human in the loop

“Where generative AI comes in and why we’re very strategically positioned to take advantage of Gen AI:  we have all of the data to automate those workflows. The first product we launched with Gen AI was around documents. If you look at where the bottlenecks and challenges in procurement are, there are a lot of manual reviews that happen. Legal may spend two to three hours reviewing a single MSA — checking the box against 50 to 60 different risks that the company doesn’t want to be exposed to. The security and compliance teams may be reviewing documents around the company’s security posture information as a business and scanning against those different things.

“With our generative AI capabilities, you can scan 100 different risks within 10 seconds automatically, and report the results back to generate valuable business insights along the way. The thing that’s really important is that this is not automating away any type of work, it’s just making it easier and faster. The way our interface works is that there is still a human involved, reviewing the results of Gen AI, meaning you can dramatically reduce the time it takes for a security or legal review that previously took a couple of hours. The human-in-the-loop aspect is still very important today.”

Meeting challenges head-on

For Cheng and Zip, time-to-value holds the key. Upon starting the company almost four years ago, Cheng explains that due to procurement’s complex workflows across the entire business, it was a challenging start to life at Zip. “The purchasing process varies based on a number of factors including the category of spend, which subsidiary is making the purchase and where you’re located. It’s going to be a very different process purchasing something that’s $10,000 versus $500,000,” explains Cheng. “It also changes if key company information is shared with the supplier. One thing we found is that the complexity of procurement made time-to-value a unique challenge for us to solve for our customers.”

Future-focused procurement

Just four years into its founding, Zip has significantly reduced time-to-value to between eight and 12 weeks. Cheng explains that it’s not only about adopting the product but also making sure the product works for all of a customer’s use cases. “It’s really about rethinking and taking a closer look at your process along the way,” says Cheng. “We have a world-class product that’s able to support almost any kind of use case out there as well as meet any type of workload, including enterprise-level workloads and scalability. We have this working for over 350 customers from high-growth late-stage startups all the way up to our global 2000 customers. We’ve built a world-class solutions team that advises customers on how to create the right processes and, how to best implement the system and best practices.”

Looking ahead, Zip is showing no signs of slowing down. Indeed, the company recently announced new generative AI capabilities for finance and procurement teams. Cheng explains that Zip believes generative AI holds the key to transforming the entire intake-to-pay process. “We’ve made a big bet in leveraging Gen AI to improve all aspects of the platform,” he says. “It’s really the beginning for us l and Gen AI is a core area of focus — continuing to bring generative AI to all parts of the intake-to-pay suite from intake to sourcing to vendor management to helping assess supplier risk to some of our newer products like procure-to-pay. It’s about making that entire process seamless and automated as much as possible.”

UK procurement leaders face pain points ranging from rising costs to geopolitical uncertainty. The ability to be agile and adaptable is separating successful organisations from those in danger of failing. 

 “More than ever, CPOs require agile procurement processes and enabling systems to adapt to changing market conditions,” says Tom Whittaker, director at independent UK law firm Burges Salmon. 

However, the current regulatory framework surrounding procurement in the Uk creates headwinds for procurement teams. “More than ever, CPOs require agile procurement processes and enabling systems to adapt to changing market conditions,” says Whittaker. According to him, this is something the Procurement Act 2023 seeks to facilitate. The Act will ‘go live’ in October this year and will likely have a significant impact on UK procurement.

Will the Procurement Act increase agility for UK organisations? 

The Procurement Act 2023 aims to reshape the regulatory landscape underpinning the UK’s procurement sector in several major ways. These range from reworking supplier selection to changing the ways that tendering works. The aim, reportedly, is to open up public procurement to new entrants such as small businesses and social enterprises. Ideally, this would allow them to compete for and win more public contracts.

According to Whittaker, “A key challenge for CPOs under the existing regime is the ability to design agile procurements that can adapt to changing stakeholder requirements.” He admits that the Procurement Act will still maintain some limitations. However, Whittaker notes that the new legislation will provide a clear framework for such changes during the procurement process. 

“Conditions of participation (previously selection criteria), tender requirements and award criteria can all be amended or refined at various points under the new regime,” he says. “There will be significantly more scope under the new regime to design a procurement process that fits the specific nature and scope of an organisation’s requirements.” In essence, companies have more leeway to adapt their tender process as circumstances shange around them.

However, while he advises a more agile approach and amending selection criteria in the face of changing circumstances, Whittaker says the process “must always be managed with care.” He argues that “the value this can potentially deliver will depend significantly on the skills and understanding of the procurement professionals responsible for delivering the change.”

This is a time of significant change for public procurement in the UK. The Procurement Act 2023 (“PA23”) is due to “go live” on 28 October 2024. The legislation represents the most significant transformation to purchasing law for decades. Through it, the UK Government seeks to break away from the current European law-based procurement regime. The act, they hope, will “speed up and simplify public procurement processes” and meet a variety of other domestic objectives. The PA23 intends to consolidate and streamline the current regulatory framework, which is currently based on legacy EU law. In doing so, it will simplify the procurement process to better meet the UK’s needs.

This is part of a series of deep dives into the new procurement lifecycle. It focuses on the selection stage of a procurement and the introduction of a new ”debarment” regime.

Conditions of participation

The PA23 introduces a change in terminology by replacing selection questions with “conditions of participation”. Unlike under the current regime, the inclusion of conditions of participation by a contracting authority is not mandatory.

A contracting authority may only set conditions of participation in relation to the award of a public contract if it is satisfied that the conditions are a proportionate means of ensuring that suppliers have the legal and financial ability or the technical ability to perform the contract. Whether a condition is proportionate depends on to the nature, complexity and cost of the public contract.

There remains some ambiguity in the PA23. It isunclear whether a contracting authority must or may disregard any tender from a supplier that does not satisfy the conditions of participation. Further guidance is required to resolve this point. 

Excluded and excludable suppliers

Before permitting a supplier to participate in a competitive flexible procedure, the contracting authority must assess whether a supplier is an “excluded” supplier or an “excludable” supplier. If a mandatory exclusion ground applies, the authority must exclude the supplier. The applicability of a discretionary ground for exclusion will render the supplier ”excludable”. This means the contractor may exclude the supplier if they choose. 

The Act also introduces provisions which permit the exclusion of suppliers by reference to their sub-contractors or where an “associated supplier” is excluded or excludable.

The mandatory and discretionary grounds for exclusion are based upon the grounds under the existing regime, but with some changes. Both contracting authorities and bidders should familiarise themselves with these grounds. It’s important they note the introduction of a discretionary exclusion ground for breach of contract and poor performance. This allows a contracting authority to exclude a supplier in situations where:

• the supplier has breached a contract and the breach was ‘sufficiently serious’
• the supplier has not performed the contract to the authority’s satisfaction. They have also failed to do so when given the opportunity to improve
• a Contract Performance Notice has been published by a contracting authority evidencing either a breach of contract or poor performance.

What happens when a contract is breached?

A breach of contract will be “sufficiently serious” for these purposes if it results in meaningful consequences. These include partial/full termination of a contract, the award of damages or a settlement agreement.

It will be interesting to see how this new discretionary exclusion ground operates in practice. It’s worth noting that poor performance is typically managed on a commercial level by the parties. Failure to improve performance does not consider circumstances beyond a supplier’s control. The occurrence of a force majeure event, for example, would not count against supplier performance.

The risk to suppliers may be mitigated by the requirement for a contracting authority to “have regard to” procurement objectives. These include an obligation to act with integrity. However, it is unclear how this will in itself apply.

The debarment regime: What is it?

The Act introduces a new debarment regime, which allows a controlling authority to add excluded suppliers to a central, publicly available debarment list. Addition of a supplier to this list must be preceded by an investigation in the first instance and has the potential to automatically exclude that supplier from all future procurements for up to five years.

What kind of impact will the new debarment regime have?

The debarment regime is likely to be significant for both contracting authorities and bidders. We anticipate the contents of debarment notices will be closely scrutinised.

If a contracting authority decides to exclude a bidder from a procurement, the contracting authority must notify the Cabinet Office of the exclusion within 30 days.

Exclusion in itself does not mean a bidder will be added to the debarment list. It is possible that, following investigation, the relevant Minister (likely acting through Cabinet Office) decides whilst it is correct for the bidder to be excluded from that particular procurement process, the bidder does not need to be added to the debarment list.

However, if it is determined that debarment is appropriate, the supplier’s name will be added to a list. The list will be central and publicly available. The entry will also confirm the applicable exclusion ground, and whether it is mandatory or discretionary. It will also include the date on which it is expected the exclusion ground will cease to apply. This will help contracting authorities identify suppliers that must or may be excluded from a procurement process. Also, with contracting authorities now permitted to apply exclusion grounds to “associated persons” (including subcontractors), should also help identify risks within the wider supply chain.

The supplier will be notified of the intention to add it to the debarment list. Then, once a debarment notice has been issued, a “debarment standstill period” will commence. This will prevent the supplier’s name from being entered on the debarment list until eight working days have passed. A supplier cannot be added to the list if there is an outstanding application for interim relief.

Challenging debarment

The PA23 provides three ways in which a supplier can challenge the decision to be entered on the debarment list:

• Application for interim relief: A supplier may apply to the High Court for suspension of the Minister’s decision to enter the supplier’s name on the debarment list. The application must be made within the debarment standstill period.
• Application for removal or revision of the entry: A supplier may apply to the Cabinet Office at any time for the removal or revision of an entry on the debarment list. The Minister is only required to consider the application if, “in the opinion of the Minister, there has been a material change of circumstances” since the entry was made or last revised. The PA23 provides no guidance as to what constitutes a “material change” – we expect secondary legislation or guidance will follow. Once the application has been determined, the Minister is required to notify the supplier of the outcome in writing.
• Appeal: A supplier may appeal to the High Court against the decision to enter the supplier’s name on the debarment list. The supplier must be able to demonstrate that the Minister made a material mistake of law which resulted in their exclusion. Applications to appeal must be made within 30 days of the date on which the supplier first knew, or ought to have known, about the decision the supplier seeks to challenge. If successful, the Court may set aside the decision and/or make an order requiring the Cabinet Office to compensate the supplier for any bid costs incurred prior to exclusion. 

The procurement sector is at a pivotal crossroads. As political pressures, inflation, and new technology work in tandem to place unprecedented strain on global supply chains, procurement teams are increasingly finding themselves in the driving seat as their organisations seek to meet strategic objectives. 

More than anything, however, it’s sustainability that appears to be the key driver of procurement’s move into the driving seat. 

Sustainability putting procurement in the driver’s seat 

A new report by KPMG looking at the trends shaping the future of procurement found that the changing nature of the procurement sector means that “Procurement leaders have a real opportunity to recast their functions as strategic influencers, enabled by generative AI and automation, to drive high-performing, sustainable purchasing activity.” 

The survey of 400 senior procurement professionals from a range of industries found that 66 % of procurement executives believe increased regulatory and ESG demands will heavily influence strategic sourcing in the next 3–5 years. 

Just over half (52%) of executives had a roadmap to guide investment in a sustainable supply chain over 1–3 years. The idea, according to KPMG’s report, is that by becoming more responsible and transparent, procurement functions can address increasing regulatory and market pressures to engage in more sustainable sourcing. 

The report stresses that “ESG also provides a chance for procurement to play a bigger strategic role,” in organisations. 

Procurement’s role is likely to shift towards being a coordinator of major organisational initiatives, including ESG and third-party-risk-management (TPRM), This will also mean procurement needs to collaborate more closely with other functions in the business. For example: risk, compliance, legal, sustainability, and supply chain. 

Scope 3 remains a daunting challenge

As scope 3 emissions are increasingly brought into the focus of regulators and public scrutiny, 

TPRM is becoming even more central to assessing ESG risks to the supply chain. “It’s likely that new TPRM policies will be necessary, with a need to vet suppliers for carbon footprint, circularity, labour practices and, ultimately, consolidating the supplier base according to its ESG/circular credentials,” say KPMG’s report authors.

Nevertheless, tackling scope 3 emissions remains a serious and, for some, seemingly insurmountable challenge for many organisations. According to a survey conducted in the UK by Lloyds Banks and Make UK, over three-quarters of small and medium-sized manufacturing firms are facing increasingly strict requirements from their customers relating to ESG topics. However, half of these businesses reported lacking the resources required to meet them.

Three in four (74%) of these manufacturers reported building ESG-related conditions into supplier contracts as part of revamped procurement strategies. 

Lloyds Bank’s head of manufacturing and industrials Huw Howells commented that it is “important for manufacturers to work with their supply chains to ensure that ESG strategies are a sustainable collective achievement and a force for future growth.”

Procuring the right technology that works for everyone and drives value can be challenging. Here are eight steps to consider. 

Introducing accessible and inclusive technology can deliver huge benefits for your organisation and for your disabled staff and customers. These include improved employee and customer retention, greater productivity and innovation, a positive brand reputation and improved compliance. 

Yet, with so many new and emerging technologies on the market, how can you be sure that you are procuring tech that meets the needs of everyone?

Making the case for inclusive tech

Developing an inclusive procurement strategy, whether for tech or any other aspect of your organisation always begins at the same point – the need to understand and make the case for inclusion. 1 in 4 people in the UK has a disability, with the majority of disabilities being not immediately visible. This means that many of your customers and employees will no doubt be living with one or more disabilities. Therefore, purchasing tech that improves the experiences of disabled people rather than creating additional barriers is vital. 

However, when budgets are stretched and procurement teams are facing competing demands, it is often the cost argument that can be the most persuasive. By law, organisations are legally responsible for ensuring the accessibility of any technology they procure and distribute to their employees and customers. If this has not been considered then an organisation may be discriminating against disabled people without even realising it. An example could be a new website that is incompatible with screen reader technology often used by people who are blind or who have sight loss.

If accessible alternatives were not built in from the outset, then some costly retrofitting may be needed. With the cost of retrofitting estimated to be up to 100 times more than building in accessibility from the beginning, the cost argument is clear. Obviously, fixes and patches will still be needed for technology that you introduced in the past but, whenever possible, it makes more sense to start with technology that is inclusive by design. 

Inclusive technology procurement 

So, how do you now turn your commitment to inclusive tech procurement into a workable strategy? Here are some steps to consider. 

1. Consider signing up to the Accessible Technology Charter

This affirms your organisation’s commitment to accessible technology. Commitment 9 covers procurement and states: “We will require, help and encourage our technology supply partners to develop and deliver accessible products and services. We will formally consider accessibility in all our procurement decisions. We will purchase solutions which are as accessible as possible.”

2. Commit to accessible procurement

Make a formal public commitment to procure accessible technology through an executive declaration. This will help to establish commitment and persuade any reluctant colleagues about the importance of accessible technology in the organisation. It will also give procurement teams the authority to prioritise inclusion in their purchasing decisions. 

3. Establish your needs

Establish your needs around assistive technology through consultation with employees and customers. This can involve surveys, focus groups made up of members from your disability network, feedback on the implementation of any workplace adjustments, as well as feedback from training and recruitment processes and user testing. 

4. Detailed, specific information for suppliers

Create a detailed specification for suppliers. Be specific with suppliers from the beginning about how the technology needs to work for disabled users. Terms like ‘accessible’ and ‘inclusive’ can mean different things to different people, so define what you mean by detailing what functionality is needed from any tech solution. 

5. Ask the right questions. 

Business Disability Forum has created a basic list of questions to ask suppliers when purchasing technology. As you gain greater levels of understanding as to the needs of your organisation and its disabled users, you can expand on these questions, tailoring them to suit your circumstances.

6. Partner with the right stakeholders

Involve the right people in the selection process. Get colleagues with knowledge of digital accessibility involved in analysing and awarding bids. 

7. Test appropriately 

User test for accessibility. Make sure disabled users test any technology throughout the procurement process. Testing with the appropriate users will much more effectively uncover problems or pain pain points than not.

8. Check on performance

Continue to monitor products to make sure they are meeting the accessibility standards agreed with the supplier. If they are not, work with the supplier to help them improve their knowledge and to develop a solution. You may want to put contracts on hold while this happens or even consider terminating a contract if the issue cannot be fixed.

Public procurement of medical equipment has, in the last few years especially, emerged as a complex, vital, and controversial topic. Now, small nations are experimenting with collective procurement in order to redress the inequalities that defined the COVID-19 pandemic response. 

COVID-19 vaccine procurement highlighted medical procurement inequality

The vaccines developed to inoculate against the coronavirus were the fastest-developed vaccines in history. In many ways, the speed and scale at which the vaccine rollout took place should be celbrated. WHO Regional Director For Africa, Dr Matshidiso Moeti, described it as the “largest and most complex vaccine rollout in history.” Today, more than 13.5 billion doses have been administered worldwide. In many respects, a triumph.

However, from the earliest days of the vaccine rollout, distribution efforts faced criticism. Who recieved vacciens and when highlighted the unequal access to medical supplies that persists between ex-coloniser states in the Global North and their former colonies. In September 2021, WHO Director General, Dr Tedros Adhanom Ghebreyesus, said that, while more than 5.7 billion doses have been administered globally, only 2% were administered in Africa.

Three years later, more than 70% of people around the world have received at least one dose of the vaccine. However, the vaccinated portion of the population in low-income countries is just 32.7%. 

COVID-19 vaccines were the rule, not the exception  

COVID-19 vaccines are a unique (one hopes) case in many ways. But the glaring disparity between the ability for low-income countries in Africa and Latin America to procure doses of the vaccine and wealthy nations in Europe and North America is not unique to Pfizer and Moderna. 

In a 2023 article by researchers at Debre Markos University in Ethiopia, authors Anderaw Yanet et al argue that “the availability and affordability of safe, effective, accessible, and high-quality essential medicines” represents a “critical benchmark” in measuring population health. Their conclusion: that in Africa, the availability and affordability of essential medicines face numerous challenges. Chief among them, they highlight “unaffordable prices and non-availability of medicines” for many people throughout the continent.  

If larger nations like Ethiopia, Uganda, and Ghana all experience systemic struggles when it comes to procuring medical supplies from overseas, the issue is compounded for smaller nations with significantly less buying power. 

Collective buying for small African islands states

In May, a pooled procurement program comprising Cabo Verde, Comoros, Guinea-Bissau, Mauritius, Sao Tome & Principe and Seychelles, that form the Small Island Developing States (SIDS) from Africa elected Mauritius as host. The decision, reports the WHO, is a critical step towards launching “joint operations for increased access to affordable, quality-assured and safe medicines and medical supplies.”

The program aims to coordinate the purchase of selected medicines and medical products affordably. It will also harmonise medicines management systems, improve supplier performance, and reduce procurement workload.

“As a collective we have come together to explore different ways of working so we can make our voices heard… Even if we don’t always have the capacity on our own, through SIDS we can do it. We may be small, but we can be big in our actions,” said Hon Peggy Vidot, Seychelles’ Minister of Health. 

Procurement teams face an array of pain points, from supplier relationship management to pricing volatility and sustainability goals. One of the critical issues preventing many procurement teams from overcoming these pain points, however, is visibility. 

The value chain is often long, winding, and frustratingly opaque. Gathering data on Scope 3 emissions has proven especially challenging in recent years, but the reliability of non-ESG information has proven to be a stumbling block as well. Even within the business itself, procurement teams can struggle to access data and make use of the information available to them. 

A report from SpendHQ found that, last year, 75% of procurement leaders said they doubted the accuracy of their data. As a result, 79% of non-procurement executives lacked the confidence to use procurement’s data to make strategic decisions. 

Digital procurement drives data quality 

Procurement departments in many organisations are aiming to meet increasingly complex demands and pain points with digital transformation initiatives.

According to researchers at Deloitte, digital procurement solutions have the potential to drive better decision making and improve efficiency. They do this by improving the quality of data inputs used to direct procurement strategy. 

Procurement leaders should be prioritising digital solutions that provide access to previously unavailable data, or that bring order to massive (but unstructured) data sets. 

For example, most procurement departments have thousands of contracts, purchase orders, and other files in hardcopy or PDF form. These formats aren’t easy to pull information from, which prevents procurement teams from easily accessing the critical data they contain. As a result procurement lacks rapid access to detailed specs, negotiated T&Cs, indexed pricing, and breach of compliance penalties. 

Deloitte highlights that “an intelligent content extraction solution enabled by machine learning will convert static documents into data points for review and action.”  

In organisations struggling with unstructured and disparate sources of spend information, generative artificial intelligence and machine learning-powered tools can read, interpret, and recognise the information procurement professionals require. Procurement teams can then extract this information and use it to build a centralised, consistently maintained source of supplier spend. 

Lastly, digital procurement solutions can also leverage AI to integrate third-party information like supplier data, commodity trends, social media insights, local media reports, duties and tariffs updates, as well as assessments of country and sociopolitical risks, into existing datasets. Many of these tools further enhance procurement’s own data with third-party datasets to support more sophisticated decision making. 

Ann Summerhayes is CEO of Inside Job Productions, a film production company and social enterprise who invest profits into training and employment projects supporting people with lived experience of mental health challenges or within the criminal justice system.

Traditional procurement practices focus primarily on cost, efficiency, and quality. Because traditional business models are all about profit first. 

However, as the world becomes more interconnected and socially conscious, corporations must evolve their procurement strategies to reflect these changes. Social procurement involves considering the social impact of purchasing decisions, which requires a fundamental shift in mindset. This approach not only addresses immediate business needs – you still get great service or products, work with brilliant people, and get a good price – but also contributes to broader societal goals, such as reducing inequality and fostering community development.

Social procurement isn’t charity; it makes good business sense

Contrary to the perception that social procurement is purely philanthropic, it actually makes strong business sense. Integrating social procurement strategies can lead to diversified supply chains, enhanced brand reputation, and increased customer loyalty. We know that people want to work with businesses that are doing good for the world, with studies showing  customers prefer brands with aligned corporate purpose and values and employees and employees wanting to work for companies who care.

By the nature of their approach to business, social enterprises are doing things a little differently, and so partnering with social enterprises can drive innovation and bring unique perspectives that traditional suppliers may not offer – which can lead to sustainable business growth and a competitive edge in the market. The principle of shared value offers a way to manage impacts and challenges while generating mutual benefits. 

Shared value creates economic value by addressing societal needs and challenges. At the same time, social problems cost money, which can affect the entire economic model and supply chain. However, corporate shared value is often seen as a trade-off, with social impact initiatives perceived as additional costs that dilute profits. Social procurement tend to emphasise social ‘giving’ over ‘investment’. But actually it’s about expanding the total pool of economic and social value available.

ESG/CSR should include social impact

Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) initiatives are crucial for modern businesses. Including social impact within these frameworks ensures that corporations address all aspects of sustainability and responsibility. We see a strong focus on the environment and things like waste reduction and carbon footprint, but people are central to society and should not be forgotten. Social procurement is a tangible way to demonstrate commitment to social causes, thereby fulfilling ESG and CSR objectives. This inclusion helps corporations build trust with stakeholders and align their operations with global sustainability goals.

And it changes lives. Social procurement can involve helping organisations create employment opportunities, can improve mental health, can enhance economic development in communities and more. That’s as worthwhile as being green.

What social enterprises can do to stand out from the crowd

But as we said, this isn’t a charity initiative. Social enterprises still have to be good at what they do. For social enterprises to successfully compete and attract corporate partnerships, they must highlight their unique value propositions. This includes showcasing their social impact metrics, demonstrating quality and reliability, and being transparent about their operations. And like all businesses, social enterprises should invest in marketing and relationship-building to increase their visibility and credibility in the corporate sector.

How corporates can make it easier for social enterprises

Corporates can facilitate the integration of social enterprises into their supply chains by simplifying procurement processes (some of them really aren’t built for small enterprises and take so much resource it can be expensive trying to be a client), providing mentorship, and offering financial support. 

Establishing clear guidelines and criteria for social procurement can also help social enterprises understand and meet corporate expectations. And creating dedicated programs or partnerships to support social enterprises can enhance their capacity and readiness to engage in larger, more complex projects.

Embracing social procurement requires a shift in mindset from traditional procurement practices to a more inclusive and socially conscious approach. This shift not only benefits society but also brings significant business advantages, aligning with modern ESG and CSR goals. It is good for business, good for the economy, good for society and good for people.

Over the past few years, appreciation for the strategic potential of procurement has risen throughout the business world. In a report conducted by SAP, researchers found that 69.6% of respondents believed that insights from the procurement function were essential for implementing an organisation’s overall strategy. 

However, the same report also found that fewer (just 53.2% of) respondents believed that their procurement functions were “effectively collaborating with the rest of the organisation to meet the company vision”. That figure fell below 50% among COOs—the most common source of oversight in procurement reporting lines. 

“If you dive further into the survey, you’ll see that procurement has work to do to gain the confidence of the many respondents who aren’t confident in its ability to handle internal risks,” notes Baber Farooq, SAP’s SVP of market strategy and procurement solutions. 

Despite the widespread acknowledgement that procurement has a vital role to play in driving strategic innovation, reducing risk, cutting costs, driving ESG reform and other vital business initiatives, there is a lack of trust in procurement by organisational leadership. If they are going to be true drivers of value for the business, procurement leaders need to first drive C-Suite confidence in procurement itself. 

If they are aiming to build C-Suite confidence in procurement, CPOs can focus on the following areas. 

1. Building Relationships 

Fewer than 40% of procurement leaders directly report their priorities to the C-Suite, undermining procurement’s ability to forge the kind of cross-departmental connections that drive trust and willingness to collaborate. 

CPOs should leverage procurement’s power to solve problems through acquisition and indirect procurement, working closely with other members of the C-Suite to explore needs, update leaders on progress, and ultimately build closer connections. 

2. Embody Transformation 

The digitisation, automation, and integration of artificial intelligence and data are gradually eliminating the more routine and administrative aspects of procurement. The present moment calls for a shift in perspective, inviting procurement to reassess its role in advancing the business.

Embracing a strategic, agile, and innovative approach will not only bring procurement into harmony with the organisation’s broader innovation objectives but also showcase procurement’s capacity to lead transformation from the front. 

3. Speak “Chief Executive” 

Procurement is a newer addition to the C-Suite than many other roles, so CPOs and procurement leaders aren’t typically going to have as much experience with high level leadership. Likewise, CIOs, COOs and CEOs aren’t necessarily going to be as family with procurement as they are with areas of the business that have had more time in the boardroom. 

By adopting an approach that prioritises efficient, direct communication—converting complex and new procurement ideas into clear, impactful summaries, CPOs can more easily highlight the potential value their plans will have on the key objectives, targets and values of the organisation as a whole. 

Arnaud Malarde, Smart Procurement Expert at Ivalua, explores the need for procurement departments to digitise their operation in order to meet the evolving demands of the business. 

Over recent years, increasingly connected supply chains have exposed businesses to a wide range of geopolitical risks. As a result, the procurement department has become instrumental in helping businesses to tackle their greatest challenges. Whether it’s reducing supply shortages, curbing inflationary impact, or mitigating disruption from global black swan events – a high functioning procurement department is more important than ever.

But the procurement function is currently being held back by a chronic lack of digitisation. Research shows that procurement leaders say less than half (47%) of current procurement and supplier management processes have been digitised. Organisations are also wasting more than a fifth (22%) of their time dealing with manual or paper-based procurement processes. Half of procurement leaders (50%) recognise the issue, saying the rate of digitisation within procurement is too slow. Every organisation needs to evaluate their procurement digitisation progress, and ensure transformation is a top priority.

Procurement can help organisations react to future challenges, and ensure the business is on track to achieve ESG standards. But for this to happen, digitisation is essential.

The old ways are not always the best

The time to digitise processes was yesterday – as it’s already having a serious impact on the businesses which haven’t. A lack of digitisation wastes time through drawn out, manual tasks. Not only this, but it also limits organisations’ ability to make quick, informed decisions regarding their suppliers. After all, if procurement teams are bogged down in low-value tasks, and can’t access information quickly through digitised procurement solutions, how can they be expected to make informed decisions quickly?

Inflation currently remains high and for most, the economic outlook is uncertain. But, a lack of digitisation is also preventing organisations from tackling rising inflation and spiralling costs. Procurement teams need granular visibility into current supplier data. Without it, it’s easy for inefficiencies to pile up. As a result, businesses miss opportunities to identify savings through initiatives like early payment terms.

What’s more, slow digitisation is making it almost impossible to attract and retain the best talent for 41% of procurement leaders – creating more disruption for procurement teams in the long run, as they lose talent to more tech-savvy competitors.

Businesses need to act fast to utilise the full potential of digitising procurement processes. This will help drive savings and improve efficiency. Not only this, but it will also reduce risk at a time when curbing needless spend is crucial.

Don’t let AI pass you by

Businesses that remain reluctant on procurement digitisation are putting themselves at a disadvantage today. Not only that, but they are sabotaging their efforts in the future as well. By failing to digitise processes, businesses will be unable to make use of emerging technologies further down the line.

AI can be the catalyst for procurement transformation, with clear use cases for automating spend (re)classification, supplier deduplication databases, contract risk analysis, and invoice data capture. In fact, 63% of procurement leaders say they have already implemented or plan to implement AI or machine learning technology.

But to harness these technologies in full, it’s important to build a solid data foundation. To do this, 85% of organisations revealed they have implemented or are planning to implement data analytics within the procurement and supplier management function. But just 30% said they are “very confident” in the quality and accessibility of their supplier data when it comes to supporting effective procurement. Poor-quality data will limit the insights produced by AI and prevent organisations from achieving its full benefits. Organisations need access to actionable data insights into their supply chain processes.

Achieving this starts with digitisation. Businesses must take a smarter approach to procurement, which builds a solid and reliable data foundation that will inform decision making. This will help reduce the risk of ‘garbage in, garbage out’ and ensure organisations are on track to make the most of any emerging technologies.

AI-dapt or perish

To ensure their place in the future, businesses must digitise now. This will not only be fundamental to removing the tedium of manual, paper-based tasks – but also to put them at the forefront of the procurement AI revolution. To do this though, they must walk before they can run, taking a smarter approach to procurement that builds a solid data foundation for transformation.

After all, those who can transform quickly will be able to spend more time on high value tasks and improve visibility into suppliers to reduce risk or identify opportunities. This will help them catch up with other businesses and give them the edge over competitors.

Traditionally, a procurement function’s KPIs began and ended with cost. Spend less money to acquire the necessary materials and the department is doing its job. The result, pre-pandemic, was in many cases hyper-globalised, fragile, distributed purchasing ecosystems with a more transactional approach to supplier relations. 

Today, although cost is still a huge part of procurement, and supplier relations are in many cases more transactional and less strategic than we would like, things are nevertheless changing. Procurement is more and more being looked to not only as a driver of new strategic innovation, but as an ESG and risk management champion. 

As the nature or procurement and the demands placed on procurement teams changes, so too should the ways in which procurement performance is measured. Data collected as part of Amazon Business’ 2024 State of Procurement Report pointed to the fact that, although procurement departments are among the leading drivers of emissions reduction within their organisations, many departments are doing so unprompted (and unrewarded) by business leadership. 

Around 40% of procurement leaders that don’t have required responsible purchasing goals still take supplier ESG factors into consideration when purchasing, the report notes. If procurement is to embrace and direct the necessary funds and attention to things like improving ESG performance, then there needs to be pull from the top as much as there is push from below. The practice of procurement is evolving, and therefore so too must the key performance indicators (KPIs) that help measure successes.

Procurement KPIs that aren’t just cost 

While cost remains an important benchmark against which to measure the success of procurement functions, procurement teams should be evaluated (and be evaluating their suppliers) using more strategic metrics as well. 

Some examples include:  

• Scope 3 Emissions 
• Supplier Reliability and Compliance 
• Supplier Availability 
• Supplier Defect Rate 
• S2P Cycle Time 
• Lead Times 
• Emergy Purchase Ratio 
• Dark Purchasing Ratio to Overall Spend 
• Circular Economy Contributions  
• Contract Compliance 
• Compliance with Global Emissions Guidelines 
• Audits
• Communication Lead Time 
• Waste reduction 
• Plastic reduction 
• Distance travelled 
• Minority and women-owned enterprises 
• Small and Medium Enterprises 

Procurement and the metrics used to gauge success are in a continuous state of evolution. The ability to assess KPIs and procurement teams’ ability to meet them is also improving by means of e-procurement platforms, analytics, and big data. These tools are are enabling the rapid accumulation of a more detailed picture of the procurement process in many organisations. 

Fundamentally, the ability to measure performance is essential for improvement. Although relying solely on KPIs to gauge success is not a flawless approach, it does undeniably contribute to a more comprehensive understanding of the value provided by the procurement function.

The nature of procurement is changing. In response to contextual forces, technological adoption, and growing complexity, the procurement function is being pressured to become more agile, resilient, and more strategic. 

As a result, older approaches to business planning are starting to feel inadequate. Sales & Operations (S&OP) based procurement has been employed widely throughout the industry for years. Now, some argue, meeting the challenges of the modern procurement environment requires a fresh approach. 

In a recent episode of the Supply Chain Management podcast, Ben Sellers, a business advisor for Oliver Wight, argues that the time may be right for the industry to shift to a new, more modern approach called Integrated Business Planning (IBP).

Many procurement functions with an S&OP approach, he argues, struggle to plan for “easy-to-predict tasks, let alone for more complicated or unknown disruptions”. IBP solves that problem by more effectively preparing organisations to pivot when necessary. Also, the approach supposedly creates a more holistic understanding of the procurement process between traditionally siloed departments. Not only that, but it emphasises constant reevaluation and updating of the planning procedure. “Two-year planning cycles need to be updated monthly and even in some cases weekly or daily,” Sellers argues. 

What is IBP? 

Integrated business planning is an approach that uses software tools and a platform approach to integrate and streamline all aspects of the business planning process. This includes procurement, manufacturing, distribution, and sales. 

Using clever AI tools, an IBP tool can pull data from multiple areas of the business. It can then process it, and display the results through a single platform. This greatly improves the procurement team’s ability to understand the needs of the business. Not only that, but it also creates essential visibility into external forces that may create pain points outside company walls. 

According to Sellers, “it often takes a crisis for a company to acknowledge a different approach is needed.” IBP, on the other hand, enables good management and leadership and through constant evaluation ensures the company is positioned properly for change.

Bringing together some of the most progressive minds in procurement. This exclusive invite-only event will be held in the heart of New York City at the iconic NeueHouse Madison Square Penthouse on June 12, 2024.

Speakers include:

• Scott Belsky, chief strategy officer and EVP of design and emerging products, Adobe
• David Rogers, author of “The Digital Transformation Roadmap,” Columbia Business School
• Tony Filippone, chief research officer, HFS Research
• Elouise Epstein, digital procurement futurist and author of “How to Hack Your Supply Chain: Breaking Today, Building Tomorrow”
• Pierre Mitchell, chief research officer and managing director, Spend Matters
• Christine Howlett-Perez, associate vice president and head of procurement, Definitive Healthcare

The DPW NYC Summit is anchored around the theme, “AIX: Breakthrough Thinking for Exponential Impact,” inspiring procurement leaders to tap into the full potential of artificial intelligence, fostering a culture of innovation and generating transformative results.

In addition to thought-provoking keynotes, attendees will gain insights from groundbreaking new research, learn from use cases around the transformative use of AI, participate in an immersive virtual reality experience, and develop a collaborative journey map for the future of procurement.

Founding partners for the DPW NYC Summit include Airbase, ORO Labs and Zip. Additional sponsors include Arkestro, Candex, Globality, LavenirAI and Sievo.

Qualified procurement and supply chain practitioners can request an invitation to attend at nyc.dpw.ai.

The DPW NYC Summit is DPW’s first event in the United States. This move comes in response to the overwhelming demand from participants and sponsors of DPW’s annual conference in Amsterdam, which attracts thousands of procurement practitioners, startups, solution providers, investors and media every year. DPW Amsterdam’s fourth annual conference will take place on Oct. 8-10, 2024. For details, visit conference.dpw.ai.

Matthias Gutzmann, the founder of DPW, said, “The DPW NYC Summit will redefine the expectations for procurement gatherings, challenging the status quo and facilitating deep, impactful conversations among the industry’s leading voices. This summit is much more than an event; it’s a stepping stone to genuine transformation.”

About DPW

Digital Procurement World is the world’s largest and most influential tech ecosystem for the procurement and supply chain industry. DPW brings together a diverse network of startup founders, investors, executives from technology and advisory firms, business leaders and academics to collaboratively tackle industry-wide challenges. Learn more about DPW at dpw.ai.

In many ways, procurement and marketing sit at opposite ends of the value chain. Despite being ostensibly different philosophically and in terms of their impact on a product travelling along the value chain, collaboration between procurement and marketing functions is more important to the success of the overall business than many people realise. 

The damage caused by a procurement-marketing disconnect can be quite serious. When procurement and marketing operate in their own siloes, for example, the customer can end up empty handed. For example, a car company launches a new vehicle to great excitement and demand. However, they didn’t anticipate that demand would be so high. As a result, there aren’t enough units ready to sell. The company doesn’t even have enough parts available to ramp up production to meet demand. As a result, customers are dissatisfied. The automaker has damaged their brand and lost revenue.  

As noted by Al Girardi, GVP, Marketing & CMO of GEP, the relationship between marketing and procurement functions is “symbiotic,” even if it isn’t obvious. “A stronger connection between marketing and supply chains will not just better satisfy customer demand but will also ultimately bolster brand loyalty.” 

The benefits of bringing marketing and procurement together 

There are plenty of different ways that closer working relationships between supply chain operators, procurement teams, and marketing departments can avoid unexpected pain points. A more collaborative approach can also create new instances of competitive advantage. 

Girardi highlights the shifting of promotional dollars to avoid overinflating demand for a product that’s experiencing a logistical delay as one way to harness marketing to alleviate supply chain pain points. He also notes that, if marketing is aware of the cost of certain materials, it can outmanoeuvre competitors by strategically increasing competition and prices, potentially, forcing the competition into a price war. “The competition may have no choice but to accept a loss leader status as it tries to overcome its supply chain limitations,” he adds. 

Working in harmony, marketing and the supply chain create real competitive advantage for an organisation. However, achieving this state of affairs isn’t always simple. 

Connecting marketing to the supply chain

Friction between marketing and procurement teams stems from a number of factors. First, there exists the simple fact that these functions have traditionally operated in siloes apart from one another. Because one may not have prior experience talking to the other, communications strategies may be lacking. There may likely be cultural clash. This is then exacerbated by the fact that marketers and procurement teams are motivated by different versions of the same thing.  

“Marketers—driven by consumer trends and brand promotion—often find themselves operating in a vacuum, detached from the financial implications of their strategies,” Girardi writes. “Procurement and supply chain leaders are charged with minimising costs across a complex, multi-tier and multi-geography value chain comprising hundreds and thousands of suppliers, not infrequently with little awareness of consumer or marketplace trends.” 

However, if the two can work in tandem, the results can be undeniable. 

Ideally, marketing departments use their understanding of market trends and consumer demand to furnish procurement with better data and intelligence. Procurement then uses this data to work alongside the marketing department in order to improve production and distribution schedules, along with other critical metrics for success. 

The potential benefits are huge, as are the risks for many organisations should their marketing and procurement functions remain siloed. “Today, agility and adaptability are essential to survival in the commercial world,” notes Girardi. The philosophical and historical gaps between marketing, procurement and supply chain teams not only erode profitability but also reduce an organisation’s competitiveness. He warns: “inertia here is a sure path to eclipse, irrelevance and collapse.” 

From backroom buyers to boardroom “orchestrators of value”, the procurement workforce is undergoing just as radical a transformation as the function that they perform.

Less visible—-or framed as a labour shortage—than the adoption of new technologies and methodologies is the fact that, while procurement teams may have adequate staff and skills to address the demands of the industry today, very few procurement leaders are confident in their talent’s ability to meet the future demands of the function—just 14% according to a recent Gartner report. 

The procurement skills shortage 

CPOs are increasingly facing a shortage of skills as procurement becomes increasingly saturated with complex technologies requiring a minimum level of technological know-how to make the most of newly adopted technology like advanced data analytics. 

This would be enough of a problem by itself, but Gartner’s study found that technology was far from the only at-risk area with regard to the gap between current ability and future demand. A staggering 96% percent of respondents reported at least a small gap in their needs for technology and data skills, while 86% reported the same when it came to business acumen.

“Procurement leaders are aware that the competencies required to drive transformation are different from traditional procurement skills, and that there are significant gaps between their current and future needs for the most important competencies,” said Fareen Mehrzai, Senior Director Analyst in Gartner’s Supply Chain Practice.

According to Scott Berkman, chief procurement officer at Elior North America, the answer lies not in seeking to hire staff with the technology and business acumen necessary to meet future need, but rather identifying employees with the ability to acquire those skills with proper development and training, as well as the right attitude and approach to the role. 

Hire for the DNA, train for the skill

“On the procurement side, it’s DNA. You hire for DNA and train for skill,” he said in a recent interview.  

Communication, curiosity, and the ability to function within a team are all key criteria for a good potential hire, Berkman added. However, he also noted “there is competition for talent, so based on that, in the hiring process, you have to be able to offer a differentiating environment.” Offering training on new technologies should be seen for the win-win that it is. By doing so, organisations allow procurement professionals to strengthen their skillset while also meeting the evolving needs of the business. 

The CPO of a technology company, interviewed as part of McKinsey’s 2024 procurement industry report, noted that “Procurement professionals are going to need to be much more digitally fluent, so that they can learn from the data that is available to them. Just figuring out what are the right questions to ask the data is something that more and more supply chain professionals are becoming adept at, and that’s really going to help people be more surgical in making selections, measuring supplier performance, and building future plans.”

At the same time, developing the business acumen side of things in order that procurement can step into the function’s increasingly strategic role successfully. Whatever technology, skill, or strategic competency CPOs need to ensure their function can handle the demands of the decade to come, however, McKinsey’s report emphasises the need to “gain, retain, and develop talent.” 

The COVID-19 pandemic tested global supply chains in ways never seen before. In particular, medical procurement functions were placed under unprecedented pressure to acquire critical supplies, from equipment like PPA and RNA tests to pharmaceuticals, including COVID-19 vaccines and booster shots. 

There are many success stories from the pandemic, with industries small and large pivoting at unprecedented speeds to meet new and unprecedented demand. The fact the world has largely recovered from the worst of the pandemic’s effects is partly due in a very real way to the procurement and logistical efforts of major health organisations and their ability to coordinate their supplier ecosystems. 

However, there are also more than enough stories of inefficiency, price gouging, and corruption. In the UK alone, Conservative peer Michelle Mone and her children had secretly received £29 million of profits from government PPE contracts which she had lobbied for during the COVID-19 pandemic. 

Corruption and lack of transparency 

In many cases, citizen groups argue, corruption within medical supply chains is a direct result of a lack of transparency that benefits public procurement organisations, drug companies, and those committing fraud, at the expense of citizens in need of effective and affordable healthcare. 

In early 2024, a group of more than 50 civil society organisations—including the People’s Vaccine Alliance, Public Citizen, and Health GAP—penned an open letter to the heads of the world’s largest pharmaceutical procurement functions. 

Addressed to top executives at UNICEF, the Pan American Health Organization (PAHO), vaccine alliance Gavi, The Global Fund to Fights AIDS, Tuberculosis and Malaria and the US President’s Emergency Plan for AIDS Relief (PEPFAR), the letter urges greater transparency—namely, the phasing out of “secrecy clauses”—in purchasing agreements with major pharmaceutical manufacturers.

“Shielded by their non-disclosure agreements, private companies are impeding the public’s interest in transparency, oversight, and accountability, fostering an environment conducive to corruption,” reads the letter. The scale at which these major buyers acquire medical products reflects the scope of the problem. The United Nations’ procurement system alone spent $10.6 billion on medical products in 2021 (this has admittedly fallen for the first time in the last year, as the effects of the pandemic abate).

A proposed end to secrecy clauses 

The letter’s authors go on to urge that major health procurement agencies use their buying power to reject secrecy clauses that are hindering “equitable access to essential medicines by making it harder to establish fair terms, reasonable prices, and timely supply”. 

“We believe it is time for the largest procurers of medical products, including UNICEF, PAHO, Global Fund, PEPFAR and Gavi to act individually to adopt new transparency policies and collectively to support the adoption and enforcement of a new common standard that rejects secrecy, and that supports more robust, accessible reporting of procurement contract terms and agreements.  Similarly, governments should reject coercive non-disclosure agreements, and simultaneously they should clarify or modify their freedom of information and drug procurement laws to ensure that supply, price, and distribution terms are publicly available,” the letter concludes. 

The last three years have demonstrated beyond a shadow of a doubt the potential for medical procurement to rise to immense challenges in times of crisis, as well as emphasising its absolute criticality in a world where access to medical care remains unequal and, in many places, scarce. 

Procurement, then, has a responsibility to drive transparency and cooperation throughout the medical supplier ecosystem and ensure that corruption, greed, and fraud have no place in the process of manufacturing, procuring, and administering life-saving materiel.  

The increasing movement of private enterprises and, more slowly it’s true, public sector organisations’ IT systems to the cloud is driving a significant shift in the way that the procurement, sourcing, and tender processes work. 

“Dramatic changes in the global economy, ongoing supply chain disruptions, the rise of a highly distributed workforce and the rapid digitalization of the consumer have pushed organisations to adapt swiftly and evolve to survive – not just from a procurement perspective but also their core business model,” said Kahly Berg, Senior VP, Digital Experiences, at SAP SE, reflecting on the findings of a 2022 survey and noting that “the digital marketplace is here to stay.”

The digital marketplace is “here to stay”

By this year, the majority of procurement professionals (54%) told SAP that they wanted to be buying goods and services primarily online, either through a vendor’s own site or a digital marketplace, with 44% of respondents citing a “one-stop shop for multiple vendors” as the most important feature in a digital marketplace.

More and more, public procurement divisions are turning to digital marketplaces, like AWS Marketplace, for a more competitive and cost-effective sourcing landscape. 

AWS Marketplace functions as a digital repository of third party cloud based software, made up of business applications, reporting tools, and migration utilities. Hosting more than 2,000 independent software vendors offering more than 12,000 products, the platform serves as a comprehensive resource for public sector procurement.

According to Jim Helou, worldwide leader of business development for AWS Marketplace public sector, there is a widespread push among states, cities, and counties in the US to transition their primary applications from on premises data centres to cloud platforms. 

In meeting that need, the AWS Marketplace has emerged as a crucial middle man between public sector entities and service providers. Simplifying product exploration is central to this effort, with the platform’s landing page providing IT directors with a user-friendly interface to navigate its extensive catalogue. 

Moreover, the Marketplace significantly expedites the timeline for researching, purchasing, and provisioning software. Procurement, often a daunting task within the public sector, is notably streamlined through Marketplace, reducing the procurement process by close to 50%. 

The UK will hold a general election in just six weeks time. The news comes following an announcement by Prime Minister Rishi Sunak. Britons head to the polls on July 4th, leaving less than two months until the country could see its first change of ruling party in 14 years. 

Despite Sunak’s assertions on Wednesday that the UK economy is improving and inflation is falling, other key elements of the Conservatives’ platform remain unfulfilled. With Sunak’s party facing criticism over immigration, environmental policies, and the privatisation of utilities like Thames Water, there is a very real chance that the UK could see the Labour party leave opposition for the first time in over a decade. 

As the election nears, what might a Labour government look like for procurement in the UK? Would a Labour government create the necessary procurement reforms to buoy the country’s economy? How might that look different from another five years of Tory rule? 

What would Keir Starmer do for UK procurement? 

Labour Leader Sir Keir Starmer has been accused of making frequent U-turns on policy issues like scrapping tuition fees and increasing income tax for the UK’s top 5% of earners. His critics have also also pointed out that he has stayed relatively quiet with regard to big, pre election promises, instead focusing on his six priorities he would address first upon becoming prime minister. 

In its pledge to provide “a new deal for working people,” the Labour party said in January that it will “use public procurement to support good work” and “promote high standards”. In practice, this appears to hint that public procurement under Labour would encourage the reshoring of construction, infrastructure, and other public procurement contracts.  

Labour claims that it would use the public purse to support the businesses that strengthen local jobs and supply chains. They add: “Labour will make, buy, and sell more in Britain to raise standards, awarding more public contracts to British businesses and bringing the jobs of the future to the UK.”

Small businesses promised a bigger seat at the table 

Labour’s plan for small business in the UK also references procurement. In the UK, there are £30 billion worth of public contracts that “would be suitable for smaller businesses”. According to Labour’s research 90% of them are still being awarded to big businesses.

Promising “a fair chance at public contracts,” Labour’s plan would require that at least one SME makes the shortlist when any smaller, suitable contract goes out to tender. 

When you consider the lifecycle of a typical piece of IT equipment — from the materials used for components, to energy consumption and disposal — it quickly adds up. And that’s not to mention the logistics of getting shipments to businesses in the first place. It is perhaps unsurprising that this state of affairs is placing an increasing burden on businesses to disclose their sustainability metrics and evidence ways in which they are improving. IT procurement is one area which businesses can address to make a difference. Ian Nethercot at Probrand highlights the following three tachniques for more sustainable IT procurement.

Sustainability has been on the corporate agenda for a number of years and procurement professionals are now under increased pressure to demonstrate responsibility through their supply chain. 

At least 90% of the tenders we complete as a business today include questions linked to sustainability; from the products we stock to the logistics of getting them to and from our clients. Some organisations we work with are going further, appointing a dedicated sustainability lead to ensure any IT purchases — and other business activities — align with the company’s sustainability goals. So, how can IT and procurement teams reduce their environmental impact and improve their sustainability credentials when refreshing and purchasing IT equipment, without compromising on quality or budget?

1. Rethink refurbished

Traditionally, schools and other public sector organisations have been the primary buyers of refurbished equipment, largely due to budget constraints. This is beginning to shift and we’re now seeing private sector organisations actively seeking refurbished IT to help support their sustainability agenda and help budgets stretch further. On average, refurbished hardware costs 30% less than the equivalent when buying new, but the advantages go far beyond price. 

The standard of refurbished IT has improved dramatically in recent years and the quality of the hardware is often good as new. If physical condition is important — such as for certain devices that you want to be blemish-free — opt for Grade A. Items of a lower grade could be suitable where signs of wear and tear are less of an issue. 

Warranties on refurbished equipment have also improved in recent years, with many vendors offering two-year no-quibble guarantees on refurbished products. This could be twice the length of the warranty on a new product, providing a safety net for those who still have doubts when it comes to second-hand purchases.

Buyers who opt for new equipment can investigate the materials used in the hardware and accessories, choosing those made from recycled materials wherever possible. Items such as energy-saving displays and devices with automatic power-off functions can also make an environmentally friendly contribution. Some vendors will actively promote these sustainability credentials in the product listings and descriptions, but in other cases it can be harder to find. To avoid doubt, it is always worth checking with the supplier to query the materials, condition and terms of warranty. 

2. Look at logistics

Beyond ensuring the equipment itself aligns with sustainability goals, it is important that buyers consider the methods used to deliver their purchases. 

Next-day delivery can be convenient for emergency items but will often come with an environmental implication. Buyers should consider consolidating deliveries into one bulk order. This can be dispatched once all items are ready and could drastically reduce the impact of delivery. However, this might not be possible with all marketplaces, as some resellers do not have warehouses capable of storing stock and therefore only offer immediate dispatch directly from the vendor.

The packaging of items is another consideration when it comes to sustainability, as this can place a huge burden on businesses that are ordering IT equipment in bulk. 

Not only can packaging be expensive to dispose of in the most environmentally friendly way, but it also has an associated ‘soft cost’ in the labour it takes to unpack each device. Instead, try researching vendors and suppliers who offer the option of delivering ‘packaging-free’, or explore third party packaging-removal services. 

Everyone has experienced ordering a small item, only for it to arrive in a giant box with excessive packaging. Even for items that are packaged more economically, if you’re a large organisation putting in regular orders, it can add up. A ‘Delivery to desk’ service can help here. As the name would suggest, this involves delivering equipment right to the user’s desk, unboxing it and taking all packaging away to be properly recycled. There is usually a cost associated with this service, but it is typically offset by the savings in labour and packaging disposal. 

3. Dispose responsibly 

When purchasing IT equipment in a more sustainable way, IT teams should examine how they go about disposing of the old technology it’s replacing. 

Devices should never be thrown away alongside other business waste, which is illegal under the Waste Electrical and Electronic Equipment Regulations 2013, and there are regulations regarding the protection of data that the devices contain which should be adhered to by law. There are a growing number of accredited IT waste disposal companies who will handle this in the most sustainable way and many vendors offer recycling schemes free of charge. 

There is often a lot of residual value in items such as laptops, PCs, monitors and display units. As such, IT teams should examine what they can recycle instead of sending to a landfill. This is particularly true for those businesses that invested heavily in new equipment during the pandemic, when a shortage of supply meant that a number of IT teams purchased whatever was available. 

In many cases, this resulted in equipment that was a higher specification than necessary. In the next IT refresh, the IT department could trade this equipment for refurbished devices of a more appropriate specification. This would result in cost savings and potentially providing physical cash back for the business. Before disposing of any IT — whether recycling or trading in — remember to backup any data and clear your equipment of all sensitive information in advance. 

Taking the next steps

As an industry, it is vital that we share knowledge and some of the small practices that can add up to make a big difference. There are a host of available resources, from LinkedIn groups to vendor newsletters and networking events focussing on sustainability within the IT sector.

Manufacturers also have their part to play in helping to drive the change. Marketing products according to their sustainability credentials and making the specifications sheets as clear as possible will help vendors, buyers and — ultimately — the end user to make better choices. If we can each take a small step today, we can begin to improve as an industry, not only helping to achieve our sustainability goals but becoming more competitive and potentially more profitable in the long run. 

The UK’s National Health Service (NHS) could save potentially “billions” of pounds a year with the introduction of new procurement criteria for medical supplies. 

Following an 18 month campaign by Essity, a hygiene product manufacturer, the NHS is reportedly planning to alter the criteria by which it procures medical supplies. The campaign hinged on the need for value-based procurement practices in the NHS, which faced recent scrutiny in a recent report by the National Audit Office (NAO). An NAO report found earlier this year that the NHS, which has approximately 1.6 million interactions with patients every day, is not fully utilising its spending power to save money when purchasing medical equipment and consumables. 

The report also, according to an open letter to the Government Essity submitted in January, found that delivering the right products for the NHS at the cheapest sustainable price is essential to make every pound count for patients. However, Essity expressed concerns that “the current focus by NHS procurement on acquisition costs alone is failing to acknowledge the importance of value for money across the whole patient pathway, and that lowest price does not always translate to best value.”

In support of its campaign, Essity also demonstrated that, by opting for the cheapest incontinence products on the market, the NHS is incurring an additional £520,418,989 annually as a result of the products’ poor quality. 

The Mirror reports that a pilot project in several NHS Community Trust care homes found that higher cost items resulted in long-term savings due to higher better-quality and more suitable products, not to mention improvements to patient care. 

Next steps for value-based NHS procurement

The new guidelines for value-based procurement in the NHS will likely take effect later this year. Karen McNamara, business director for Essity’s Health and Medical division in the UK, hailed the decision as “wonderful news for our NHS. Finally, patients can look forward to a better quality of care no matter their illness or condition.”

Lord Philip Hunt, a member of the House of Lords and a fervent supporter of Essity’s proposal, announced the policy alteration. Lord Hunt has been a vocal advocate for value-based procurement since meeting with representatives of the company in 2023. 

“Who would have thought that the humble absorbent continence pad could have such an impact, so quickly, on something as important as NHS procurement policy and practice—but it shows what can be delivered when a campaign for change is built upon irrefutable evidence that a change will be a win-win for patients, for carers and for NHS and social care providers alike, particularly when it is taken forward in a constructive, cross-party campaign,” said Lord Hunt. 

Collaborative procurement is one of those ideas that, on the surface, sounds so obvious it’s hardly worth talking about. Of course procurement is collaborative. Obviously, the relationships built up throughout your value chain can significantly impact your organisation’s performance. It goes without saying allowing the relationships and mechanisms of collaboration within your supply chain to degrade is bad. If left unattended, it can hurt your business outcomes, increase costs, and expose you to risk. 

Collaborative procurement: not as easy as it sounds

However, just because something is obvious, doesn’t mean it doesn’t bear a second look. Just because something appears to be working, doesn’t mean that a new approach wouldn’t be beneficial. 

The procurement sector is undergoing a profound transformation. Procurement teams are evolving away from the backroom, transactional function of years past. What’s emerging it something new—something streamlined, agile, strategically responsible, and digitally integrated. The role of the CPO is changing, too. 

“The CPO is not only the chief procurement officer anymore, but the chief partnership officer as well—partnerships externally with suppliers and internally with other functions and business units—with procurement being a knowledge broker, creating value from the collaboration between inside and outside of the company,” the CPO of a large industrial company wrote in response to a recent survey by McKinsey & Company. Collaboration is not only in direct collaboration with an external network of suppliers, but it also serves as a porous membrane to facilitate collaboration between the business and its ecosystem. 

Digital transformation is impacting procurement’s ability to analyse large data sets with machine learning and AI. These next-generation tools also help manage risk, predict trends, and automate repetitive, error-prone tasks. Perhaps more importantly, there is also room for technology to improve the ways procurement collaborates within and without the business. 

The benefits of collaboratively approaching procurement 

Collaborative procurement can reduce costs, improve quality, increase innovation, and enhance relationships between procurement and its suppliers and partners. 

Mike Edmunds, Managing Director at Trade Interchange, argues that “accepting sub-par methods of communication and collaboration, and allowing these to negatively impact your process and consequently your company’s success, simply doesn’t make sense.” 

Collaborative procurement can be digitally transformed with a variety of tools. These can range from cloud-based platforms that support real-time communication, as well as document and data management, to e-procurement systems like SAP Ariba, which automate and streamline procurement processes. Adoption of these management platforms and communications tools is nothing new. However, they are often underutilised in service of collaborative procurement. 

Whether implementing simple tools or AI-powered automation, determining the goals of the collaborative digital transformation is essential.  Edmunds writes that, “the impact of effective collaboration is extensive, rippling throughout a business in order to nurture a success-driven environment in which great achievements can be accomplished.” However, he adds that “It is as much a mindset, a determination, as it is a phenomenon to be assisted through external assets like technology and software.” 

Change isn’t for everyone.

Humans are naturally creatures of habit, but businesses can’t afford to remain stagnant and not evolve.

In recent times, the procurement function has been through quite an evolution. Embracing change has been a necessity rather than something optional. Given the backdrop of geopolitical challenges and with the world still reeling from the aftermath of the COVID-19 pandemic, being agile and lean to the latest innovations in digital transformation and ESG has been critical to a CPO. “The reputation of procurement continues to increase year on year,” says Jack Holmes, Procurement and Fleet Director at OCS. “During Covid, procurement moved from a word that nobody outside of business even understood to a headline on the news. Suddenly it’s in everybody’s head and slowly it’s becoming more of a standard word within our vocabulary but also through an organisation and business it’s become more strategic.”

OCS expansion

Having started his career purchasing in New Zealand, upon moving back to the UK in 2007 Holmes set about a career in procurement. After moving from an FMCG organisation to procure valves and fittings, he quickly realised procurement in engineering wasn’t for him. “It was an interesting move because it definitely opened my eyes to strategic sourcing rather than materials requirement planning,” explains Holmes. “After that, I moved to facility services and found my way to OCS where I also completed my CIPS qualification. Since then, it’s been a bit of a whirlwind.”

That it has.

Over the past few years, OCS have been through several mergers and Holmes returned to the UK & Ireland team in 2021 after working in the USA for two years. There he integrated four acquired entities across the states and centralised their procurement function. The pace has been fast but it’s one that Holmes has relished.

“It’s a real area for competitive advantage,” he explains. “This is especially true in facility services. No day is ever the same. Facility services versus other organisations in terms of category spend is extremely vast. You can imagine the number of indirect and direct spends we have, and the number of stakeholders which in procurement is a big challenge. It is larger than any other organisation where you’ve got a factory downstairs where you can see everybody. There is more of a challenge and such an acquisitive organisation does bring challenges, but procurement people should love merges and acquisitions (M&A) activity. It brings new opportunities, new leverage, and also new opportunities for procurement to shine. It’s really exciting to work for a company like OCS.”

Procurement’s transformation

Holmes believes procurement’s challenges don’t seem to decrease but become increasingly prominent. “They just seem to evolve and grow legs, but procurement is growing in strategic importance, and it’s being seen as a differentiator in the industry,” explains Holmes. “We’re now looked upon to find solutions, create value, reduce risk, but increasingly we are also seeing procurement have a seat at the table and part of the core business strategy. It’s a really exciting time to be a procurement professional and I don’t think it’ll get any easier over the next few years, but it will just change and become different.”

As companies race to adopt digitalisation into their processes in a bid to scale efficiency, Holmes explains that within the OCS, it is a time of opportunity where transformation and procurement digitalisation must integrate across other areas of the business. “I think getting that part right is really key and extremely challenging,” he discusses. “A lot of Project Management Office (PMO) support is about making sure that we’re running in conjunction with where the organisation wants to go with our digitalisation which is really important. It’s not just jumping headfirst into new technologies or new advancements. We have to have a technology strategy that we follow that needs to be agile and we need to blend it with any kind of change in the macro environment or any change in the business space.”

Embracing change

However, transformation must deliver value. Companies who leverage and introduce digital processes without a strategy or purpose and do it simply because their competitors are doing it are unlikely to be successful long-term. “Technology is a way of value creation, but we should be seeing it as an opportunity to leverage the benefit of procurement, the business and the industry rather than keeping up with our competitors,” says Holmes. “I think we talk about sustainable procurement and normally that’s through our inputs or our supply chain, but transformation needs to be sustainable too. It doesn’t always need to be overnight or because our rivals are doing it.

“I think it’s important at the outset to understand why we’re trying to implement this new technology and following that throughout the whole process that we are still aligning to those goals and objectives. Then at the end of implementation, as we continue to review the lessons learned from that transformation, it’s about asking if it delivered what we were trying to achieve. If we’re not future-proofing any kind of transformation, then suddenly what you’ve got is old tech a year down the line.”

Procuretech boom

The latest buzz in procurement is generative AI. Chatbots such as ChatGPT are causing quite the stir – promising cost savings and efficiency – music to a procurement practitioner’s ears. On the other side of the coin, there is a fear from some sections of the workforce that robots could one day replace jobs. However, Holmes is adamant about welcoming change with open arms and finding the best ways to leverage technology that works for the end user.

“It’s just another form of change and procurement always needs to be at the forefront of being changemakers and delivering change management to improve efficiency,” says Holmes. “I think we need to understand where it fits into the organisation, what’s suitable from it and what isn’t suitable. It’s not just about utilising every bit of AI and machine learning that we can find, but it should be seen as exciting. It is an opportunity to improve our analytics, reduce processing times, streamline eSourcing, and allow us as procurement professionals time for relationship enhancements. I’m a really strong believer that long-term productive procurement supply relationships are built on relationship building. This is where a procurement leader can really differentiate itself. AI and machine learning can’t go for a coffee with you.”

But change isn’t easy for everyone. There are changemakers like Holmes who like to empower others to take up more efficient ways of working and there are those who like legacy systems and familiar operations. Holmes explains that in order to effectively deliver a change management strategy it is important that all the different stakeholders are considered.

“OCS has a huge number of stakeholders and there are other organisations as large as ours, but perhaps have fewer stakeholders that they have to deal with in terms of that change management,” he reveals. “But I think it is crucial to begin taking people on that journey. And I think that’s the internal team and stakeholders. It all starts at home in terms of the procurement department. You’re never going to deliver change or get buy-in if the department doesn’t believe in it. I really believe in allowing my team members to be that champion of change, ensuring that we are actually developing procurement professionals to know how to deliver change, be it through training or through sharing experiences within the organisation or from outside.”

Future-proof

Looking ahead, Holmes is anticipating continued growth and development of Environmental, Social and Governance (ESG) and digitalisation. In his mind, creating a robust ESG strategy will act as a company’s competitive advantage particularly in today’s disruptive and tumultuous world.

“I think it will continue to become more strategic with a greater influence board level,” he says. “I believe that digitalisation acceleration does support ESG initiatives. It’s about enhancing visibility in our supply chain which is incredibly key in risk reduction. With procurement generally, I think we will continue to be leaders for innovation in our supply chain. We are the main touch point for our suppliers who are the experts in their areas and it is about ensuring that we realise that collaboration with those suppliers is seen as such a significant opportunity. It’s an exciting area for professionals to get into and is gaining in popularity. While we still certainly have a skill shortage in procurement, it’ll be really exciting to bring more people into our world.”

Increasingly, the modern enterprise is looking to procurement to contain costs, increase resilience in the supply chain, meet ESG goals, and be a source of innovation within the business as a whole. It’s also important to remember, however, that the fundamental goal of procurement is to ensure the business has the raw materials, goods, and services it needs when it needs them. If that goal isn’t being satisfied, then all the ESG targets or generative AI deployments in the world are meaningless. Procurement is, at the end of the day, about executing that primary goals as efficiently as possible, so we’ve put together our list of the top 6 ways to improve procurement efficiency in 2024. 

1. Make use of your data 

Procurement departments are often in possession of some of the richest reserves of data in the business, but many procurement teams either still don’t have enough data, can’t trust their data, and/or lack ways to effectively utilise that data, whether that means using it to make informed decisions about suppliers and purchasing, or making recommendations to the rest of the business. 

Understanding and drawing insights from your procurement data can unlock meaningful, easily applied efficiencies for your procurement function, and CPOs should make getting their data in order a top priority. 

2. Evaluate, iterate, reevaluate  

Crafting the perfect procurement process is a fantasy. Crafting a very, very good procurement process is an ongoing process in of itself. Procurement is plugged into not only the business and its changing needs but the entire supplier ecosystem, which is affected by everything from changes in compliance to availability of raw materials. To ensure your procurement function is operating as efficiently as possible, it’s important to regularly evaluate your process, iterate changes, and then reevaluate to ensure you’re headed in the right direction. 

3. Standardise your procurement policy  

Many procurement teams struggle because of a lack of standardisation, which makes replicating successes across multiple buying instances a challenge. Purchasing materials and services to support the business becomes easier, quicker, and less prone to error when the process is standardised. Just make sure to reevaluate your procurement standards regularly, or they could become a source of new pain points. 

4. Develop your workforce

In the midst of a global talent shortage, retaining the skilled procurement team members you have is essential. One of the best ways to retain staff that also benefits the business as a whole is through development—online learning, certifications, industry events, and extra training can all empower your team to use new technologies, adapt to the changing industry, and feel as though they’re getting more out of the job than just a paycheck. 

5. Set up a feedback system 

As highlighted in a recent piece in Vogue Business, there is sometimes a disconnect between the way buyers and suppliers perceive their relationships. If there’s a lack of communication and trust between different parties in the source-to-pay structure, it’s going to be challenging to get an accurate picture of your value chain, which can lead to all manner of inefficiencies and risk. Setting up a feedback mechanism through which suppliers and partners can give thoughtful, constructive feedback can dramatically broaden procurement’s perspective on the often complex landscape of their own ecosystem.  

6. Fight dark purchasing

Unauthorised, invisible spending from outside the procurement department is a huge source of inefficiency in procurement. A recent audit of the UK’s National Health Service (NHS) found that the organisation spends roughly  £3.4 billion a year outside its own approved supply chain, with estimates showing the health service spends around £8 billion a year on products. 

Aligning the buying practices of the organisation as a whole with procurement can help contain cost and reduce risk. However, it’s important that this process be a two-way street. In the case of the NHS, while the products available through the sanctioned procurement channels were cheaper than those purchased by the NHS’ trusts, staff argued they were also of lower quality. 

Procurement has had some catching up to do. 

As a function traditionally kept out of the limelight, the space is almost unrecognisable today given the scale of the transformation it has undergone. 

And Dr Thorsten Makowski has had a good view of the evolution. With more than two decades of experience in procurement, he believes the function has a lot to offer the C-suite. Makowski affirms that while procurement is now an entity that is a key component of boardroom discussions, there is still a legacy perception from some sections of the workforce. “Some people still think procurement is just buying, and relate it to their individual experience of buying such as going into a supermarket and buying beans or something like that,” says Makowski. “They assume it’s simple. But as we know it’s definitely not the case and it can cause a lot of confusion. I would say for people who are starting their careers now, it’s the perfect timing to get involved because people are beginning to realise the potential of procurement.”

In 2024, procurement is a living, breathing organ and an essential component to making an organisation successful. Referred to as the ‘rockstars’ of an organisation by some within the industry, it is a clear indication that change is afoot. Makowski is well aware of this shift and explains that while great progress has been achieved, it’s not without its challenges.

“10 or 20 years ago, procurement was about making small incremental improvements, like reducing cost in projects over 2% for a specific category by a tender or a renegotiation or something like that,” he discusses. “Now, it’s like the storm just hits in your face and you just need to adapt to that. What we are seeing is some people really thrive in this environment and procurement is for people who have kind of a flexible mindset and a more general perspective on things, while people who are more introverted and analytical it is much trickier and they struggle.”

The journey

Makowski reflects on the beginning of his career and his journey to working within procurement. According to him, procurement was a slow burner and didn’t immediately interest him to begin with. However, once hooked he couldn’t leave the space and hasn’t looked back since.

“The joke that everyone in procurement falls into the space by accident is true for me as well,” reveals Makowski. “At the beginning, procurement didn’t really seem super interesting to me. But it just took me a couple of months to find there were some aspects which are really cool. I would say the most interesting one for me is that even at the beginning of your career, you are allowed to optimise the category, and then you’re responsible for millions of dollars or euros and, and where else in your career are you able to be responsible for that amount of money? It’s a cool position to be in.” 

Despite the draws, Makowski is quick to reveal some challenges that come with operating within procurement. “Not everyone understands how important and valuable procurement can be for companies,” he explains. “Sometimes you have to explain to people how you can really make more of procurement and why it is becoming more important. Fortunately, to some extent, the crises that we had in the last few years have made our life in procurement easier because people were just realising how dependent they are on supply chain and procurement.”

Are we living in a VUCA world?

As a world driven by volatility, uncertainty, complexity and ambiguity (VUCA), procurement is an ever-changing space. But Makowski maintains that procurement has always had its challenges and today isn’t necessarily different to the past. “Typically, I’m quite sceptical because sometimes it’s just a fad or new trend,” he explains. “You’ve got to look at a couple of drivers for this volatility. One of the biggest that we’ve seen in the last years has been catastrophes. A flooding in Thailand or a volcano erupting in Iceland. But is this increasing? I would say no. But what we do also have are political changes, wars, conflicts, trade wars. Are we currently in the situation where this is at a peak level? I would say it has increased over the past years.” 

Another key driver is technology given the ever-increasing influence it is having on how procurement lives and breathes. For Makowski, he views technology as a double-edged sword.

“On one hand you can say it gives us so much more opportunities and competitive edge. But if you look at past data, the typical outcome of an investment in technology was negative. Technology investments and mergers and acquisitions are the only two things that on average are destroying value. In today’s world, we are in a very interesting situation where the importance and the potential value gain from technology is increasing, but it’s also very difficult to implement.

“For most companies, there’s an easy strategy to deal with technology, and that’s what I would call the second mover advantage. You consider what technologies might work for you, you look at your peers and when you realise that they tried it and failed, you are lucky because you’re not involved. When you realise they tried it and are successful with it, you try to copy it as fast as possible. For most companies, that’s a great strategy.”

Empowering the talent of tomorrow

Procurement lacks talent. In truth, many other industries probably do too. But procurement’s skills shortage is a well-known priority to many in the industry. A professor at SKEMA Business School in France since March 2021 and having served as a lecturer for much of the past two decades, Makowski is passionate about encouraging the next generation of talent into procurement’s workforce.

“The talent shortage isn’t new, we’ve always had one,” he explains. “When we talk about operational and strategic procurement, I would say operational procurement for most companies hasn’t ever really been a problem from a talent perspective. But strategic procurement typically always has. One of the problems is that a lot of business schools haven’t got the coolest perception. It doesn’t have the sexiest sounding careers like investment banking or consulting. But it’s changing. Secondly, the world of procurement is surprisingly complex. It’s not just about buying. A CPO needs to understand how to deal with suppliers, people and entities from different cultures.”

Makowski reflects on his own day job and recognises the role he can play in getting procurement more visible in business schools. “One of the really shocking things is that a lot of business schools don’t even offer a degree in procurement,” he explains. “It’s only something like five or 10% of good business goods in the world do offer it. That creates a situation where it’s very hard for a young person who wants to learn more details about what a career in procurement would look like. It’s hard to find a university that has a high-quality programme for you. So that’s another real challenge in that area.”

With an eye on the future, Makowski admits the future is unpredictable. But he offers his opinion on the direction of travel the space over the next few years. “I think it’s very difficult to know for certain but sustainability, VUCA world and technology will still be three major trends in procurement,” he discusses. “We’re lucky that these topics will not change and disappear. The interest in volatility, technology and sustainability will increase. But who wins? Which area will have the most focus on it? That’s uncertain. The typical CPO we have today is a male in his mid-40s – this will change. We will see younger CPOs and more females in these positions which is great for the profession. You need to have a strong personality to react quickly, especially to these three focus topics.”

Procurement’s talent shortage isn’t new information.

Demographic shifts, the Great Resignation and strong competition have meant significant gaps in the workforce for not only procurement but industries beyond too. Although the Covid pandemic is now four years old, its effects are still being felt. Despite signs of stability over the past 12-18 months, Forbes reported last year that turnover rates and inflation remains high while large percentages of employees remain disengaged and interested in making a move.

Procurement’s talent shortage story

It all comes back to demographic shifts. You see, the large Baby Boomer generation have nearly all retired in recent years. This has meant the equally large Millennial generation has moved past entry-level roles and is now filling mid-level ranks. But the smaller Generation Z isn’t big enough to meet the number of entry-level roles. Generation X, while also comparatively small to Baby Boomers and Millennials, isn’t large enough either to fill the leadership gap left by the Boomers.

Indeed, a recent survey of over 100 procurement leaders from research and advisory giants Gartner discovered only one in six procurement teams felt they had adequate talent to meet their future needs. It comes as industry demands continue to grow and evolve amid digital transformation’s ever-growing grip on the function. In the report, Fareen Mehrzai, Senior Director Analyst in Gartner’s Supply Chain Practice, said: “Procurement leaders are generally confident in the current state of their talent and the ability to meet their near-term objectives. However, our data shows that chief procurement officers (CPOs) are worried about the future and having sufficient talent to meet transformative goals based around technology, as well as the ability to serve as a strategic advisor to the business.”

So, how does procurement go about solving the problem?

Procurement’s way forward

Anthony Payne, Chief Marketing Officer at HICX, believes that in order to attract talent, procurement must show it has transitioned from being the ‘spend police’. “To attract talent, Procurement must show that it has progressed away from being the ‘spend police’ and towards a more multifaceted role,” explains Payne. “Modern procurement is at the intersection between a company and its suppliers, which requires a broader skillset. The function has an opportunity therefore to attract talent from different roles, in particular technology – today’s function needs people who can combine tech savviness with procurement and commercial acumen, to get the most out of the exploding tech landscape. Supplier marketing – because companies can no longer simply insist that suppliers comply with any request, they need to engage and encourage suppliers to adopt new tools and ways of working. This will require marketing-type skills.”

While Gemma Thompson, Senior Solutions Advisor at Proxima, believes it is more important than ever before to have the right talent in place. Given the nature of today’s challenges in procurement and supply chain, educating tomorrow’s talent of the long-lasting impact they could have could be key. “These are challenges that align more closely to the younger generation entering the workforce,” she explains. “Increasing opportunities to deliver real value, make a lasting impact, and flex their natural upper hand when it comes to adopting technology. So, why the shortage? 

“Once you’re in the procurement world, you understand the strategic direction the profession, progressing from back of house to centre stage. However, it’s lesser known on the outside. Procurement still battles with its flashier counterparts, to cement its position as a true strategic business function and ultimately competes for emerging talent. The solution sits at the cross-section of the procurement capability needed by an organisation, and the career aspirations of those in the field and those considering entering.”

How can procurement become a career of choice?

Thompson adds that there are three ways to empower the workforce of tomorrow into choosing procurement as a career destination. Ultimately, in the modern world, people have greater flexibility around how and where they work while also wanting more from their occupations. 

“Align your talent strategy to your organisational objectives: determine what it is you’re seeking to achieve and therefore the capability that you need, for example, you may be consolidating supply to fewer key players and require strong supplier relationship management skills. Developing your strategy around such goals enables clarity in responsibilities and progression for team members.

“Embed adaptability and flexibility in your talent model: CPOs must embrace the increasing trend towards a hybrid procurement team, comprising in-house talent and additional third-party support, whether through a specific-skilled contractor or surge support. Widening the net enables you to access the right talent, for the right purpose, at the right time.  

“Invest in the external positioning of the function: if you are seeking leading talent, you must provide the space for them to shine. Have an openness to unique and innovative thinkers, emphasise the soft skills needed to partner with the business as well as the technical know-how, and invest in training that elevates the individual as well as the function.  

“Tomorrow’s talent demands more from a job, and it’s up to procurement organisations to offer it.”

Acquiring talent

And Omer Abdullah, Co-Founder and Chief Commercial Officer at The Smart Cube,  believes that acquiring talent away from the function could be the answer. “Procurement could acquire talent externally – which means organisations should implement better, and more diverse, recruitment mechanisms,” he reveals. “This includes bringing in people from other business functions. For instance, IT or marketing professionals can bring credible skills that enable strong category management in their expertise areas.

“A sizable chunk of today’s procurement community is not ready, trained or capable of dealing with the implications of tomorrow’s technology on roles, meaning we’re looking at a potential talent shortage.

“To upskill, training is one option, although this isn’t expected to be the main path to addressing this shortage. But it matters as CPOs assess how many team members can be ‘upskilled’. The key here will be training programmes that emphasise problem solving, relationship management, business acumen, and more.”

Procurement’s future

Procurement is at a sliding doors moment. With transformation rife and more opportunities than ever in 2024, the function has a chance to reinvent itself and become an attractive proposition to tomorrow’s talent. For too long, procurement has been a place where practitioners stumble upon it and end up staying. The objective now is to find a way to establish itself and become a destination of choice rather than an accident or circumstance. Over to you, procurement.

Increasingly Japan is committing public and private sector resources to secure both the resurgence of the country’s semiconductor manufacturing sector and a significant portion of the burgeoning generative artificial intelligence (AI) market. 

On 19th April, Sakura Internet secured around 10,000 next-generation NVIDIA B200 GPUs for roughly 20 billion yen ($130 million). Sakura is one of five Japanese companies receiving government subsidies as it expands its cloud services to support AI workloads. 

Japan invests in domestic AI capabilities 

This investment marks a significant move by the nation to strengthen their position in the field of AI. Sakura, in partnership with the Japanese government, is spearheading this latest initiative to bring the country to the forefront of the rapidly developing market. 

Sakura’s Operating Officer, Yohei Ueno, referenced the difficulties of procuring such a significant number of semiconductors, whilst underpinning its necessity: “We feel a sense of urgency that not many generative AI [products] have materialised in Japan despite the global trend.” 

Beyond Japan’s domestic market

However, the procurement of the highly sought-after chips could likely echo beyond Japan’s domestic market. Not only did Jensen Huang (NVIDIA’s CEO) pledge in December 2023 to “prioritise Japan’s GPU requirements” in talks with Japan’s Prime Minister Fumio Kishida, but also, earlier this month, Kishida engaged in talks with US President Joe Biden to outline ongoing international relationships in light of the investment. 

“We welcome cooperation between US and Japanese companies toward the development of foundation models for generative AI, including contribution of NVIDIA’s GPUs to Japanese computational resources companies such as Sakura Internet,” a White House spokesperson said in an official statement. The statement also referenced contributions of “other computational resources from Google and Microsoft to Japanese AI foundation models development companies.”

Kishida’s state visit coincided with the announcement that Microsoft would invest $2.9 billion over the next two years in efforts to develop its AI and cloud infrastructure in Japan. As it stands, the investment would be the US tech giant’s largest injection of capital into the Japanese market to date. 

In its statement, the Biden administration also stressed the importance of building strategic partnerships between US and Japanese universities and corporations. “The United States and Japan welcome a new $110 million joint Artificial Intelligence partnership with the University of Washington and University of Tsukuba as well as Carnegie Mellon University and Keio University through funding from NVIDIA, Arm, and Amazon, Microsoft, and a consortium of Japanese companies.” Collaboration within the education sector heralds promising developments for both countries’ expanding influence within AI. 

Tension ahead

That said, the journey ahead does not appear smooth as trade relationships between Japan, China and North America remain tense. These geopolitical tensions could potentially jeopardise Japan’s efforts to both scale up semiconductor manufacturing and leverage its close relationship to the US to catalyse the development of its AI sector. 

From August 2023, China began to impose export controls upon rare minerals inextricably connected with the global production of semiconductors. Restrictions deepened as of December 2023 as the country announced further export controls on high-grade graphite. 

Subsequent trade statistics released by Chinese customs authorities showed a 40% quantitative decrease in China’s exports of graphite and related materials to Japan. Historically, Japan has relied upon China for 90% of its graphite imports. The country’s need to diversify is more pressing than ever in light of China’s growing export restrictions.

Furthermore, future US trade agreements will likely hinge on Japan’s ability to divest from Chinese supply chains. Whilst the US is an enthusiastic advocate for Japan expanding its AI capabilities, Japanese overdependence on China in order to procure the necessary materials for AI development could be a critical source of friction in the future. 

The US has already been taking steps to destabilise China’s influence in the chipmaking industry. This is echoed in Japan’s recent trade agreements for the supply of graphite in the EV sector. 

Over the last two months, Panasonic Energy Co., Ltd. announced agreements with NOVONIX Limited (Queensland, Australia) and Nouveau Monde Graphite Inc. (Quebec, Canada) for the supply of synthetic and natural graphite respectively. Previously, it has been noted by Kishida and Canada’s Prime Minister Justin Trudeau during a state visit that China is a “central challenge” for both countries. 

An uncertain future

It is unclear whether Panasonic’s recent trade agreements will relate to the field of semiconductors but it is evident that Japan intends to make its mark upon generative AI. Political and corporate sentiments, within Japan and beyond, show vested interest in reducing Japan’s involvement with China.

It remains unclear whether Japan will be able to circumvent China whilst strengthening its position in artificial intelligence and cutting-edge computing. What is certain is that, regardless of government subsidies, international support or investments in education, without the ability to procure the necessary products and materials, Japan’s efforts will be rendered ineffective. 

Cost containment has always been a top priority for procurement leaders. In recent years, as procurement’s role within the business has become more strategic, expectations that chief procurement officers (CPOs) reduce outgoings while also increasing resilience, championing sustainability, and driving digital transformation have grown. 

As a result, cost containment increasingly feels like a balancing act between multiple competing strategic goals. Finding ways to bring down costs while executing strategic objectives and dealing with an increasingly complex and unforgiving procurement landscape is what separates successful CPOs from those in danger of being left behind. Increasingly, economic anxieties dominate the conversation. Business leaders in 2024 are primarily worried about inflation, interest rates, and the risk of a global recession. Almost half of executives (46%) expect labour and skill shortages to disrupt business during the year ahead. 

As a result, cost containment is once again on top of (but not dominating) CPOs’ priorities lists. Research from the Hackett Group found that cost containment has replaced supply chain continuity as CPOs’ number one goal in early 2024. 

Here are three ways for CPOs to reduce costs without sacrificing their ability to be strategic.   

1. Bundle spend with competitive suppliers 

The benefits of bundling your spending with a select group of competitive suppliers extend beyond mere cost savings. When you consolidate your procurement with fewer suppliers, you streamline the purchasing process. This reduces both complexity and time spent performing routine tasks. 

Consolidating orders also provides the opportunity to negotiate improved terms for your organisations that go beyond price. These can include favourable payment terms or more convenient delivery schedules.

If your organisation works with 10 or more different suppliers, each offering a similar product, your annual spending can be significantly reduced by consolidating your orders with 2-4 suppliers instead. This can significantly cut down on administrative load. Not only this, but reducing your number of suppliers can also reduce purchasing costs and put you in a better position to negotiate lower prices due to ordering in bulk. Be careful, however: overdependence on too few suppliers can leave your organisation open to disruption. As always in procurement, finding the right balance is the key.

2. Evaluate and review uncompetitive suppliers 

As a continuation of the previous point, accurately evaluating which suppliers to keep working with and which ones to replace is a vital step in reducing costs.  

When you benchmark your existing contracts, it can often reveal suppliers in your database that aren’t offering competitive rates, or are otherwise underperforming. You can engage with these suppliers to negotiate better prices in line with market standards. If they’re unwilling to adjust their pricing, you can reallocate your spending to more competitive suppliers.

3. Eliminate dark purchasing 

Maverick spending, or dark purchasing, refers to procurement that takes place outside of existing contracts. If left unchecked, dark purchasing can drive up spending without procurement’s knowledge, or ability to do anything about it. 

By creating a more centralised procure-to-pay process and implementing better oversight and approval procedures, you can eliminate a large amount of dark purchasing. However, maverick spending is often as much a cultural issue as an organisational one, and communicating effectively with other stakeholders is vital. Procurement shouldn’t approach these scenarios as an enforcer, necessarily, but rather as an enabler. If you can figure out why spending is happening outside the procurement function, you can potentially create official mechanisms that remove the impetus for maverick spending.

New digital tools put in place by the European Union Commission are “opening up the European public procurement market,” according to a statement made by the commission. In order to create “a more competitive landscape” for public spending, the Commission has implemented CEF eDelivery, a technology agnostic solution based on AS4. AS4 gateways make it possible to exchange tender information between the different eProcurement systems.  

The implementation will, the Commission hopes, lead to “better quality and better prices for contracting authorities and taxpayers.” 

Public authorities in the EU spend approximately €2 trillion per year on public procurement. This accounts to approximately 14% of the collective member states’ GDP, and almost 30% of government expenditure. 

Over the last five years, there has been a “steady rise” in the level of procurement process digitalisation throughout Europe. 

The goal of this sweeping digital transformation is that federal, regional, and local contracting authorities and businesses have access to multiple online procurement services. Not only this, but the new tools are making sure that procurement departments throughout Europe can manage the tendering process electronically. 

These digitalisation efforts would, the commission hoped, deliver cost savings, shorten and simplify processes, reduce red tape and administrative burdens, increase innovation and provide new business opportunities for SMEs. 

Public procurement in the EU remains fragmented

However, a recent study by the Commission found that despite the fact that public calls for tender from across Europe are aggregated into a single platform, direct cross-border procurement accounted for only 3.5% of the total value of contracts between 2009 and 2015. 

“How can we explain such a low number? Well, if we take a closer look, there are a number of reasons including language, local regulation, knowledge of local markets but also we can see that the digitization of procurement has actually created new barriers for cross-border procurement,” wrote a spokesperson for the Commission in a statement. The Commission’s investigations uncovered a lack of interoperability between different member states’ procurement systems. 

As a result, the implementation of CEF eDelivery has reportedly standardised the way eProcurement systems communicate. As a result, the Commission claims, this has “made life easier for both suppliers and contracting authorities who can now exchange information and messages throughout the procurement process while using their own systems.” The hope is that by creating better links between different countries’ back end systems, the EU Commission’s new tools will make public spending fairer and more competitive throughout the region.

The US and Chinese economies are drifting farther apart than ever before. 

For decades, China’s combination of cheap labour, skilled workers, government incentives, and good infrastructure made it the destination of choice for outsourced manufacturing. Children’s toys, auto parts, iPhones—anything and everything that could be made cheaper across the Pacific than closer to home. 

Now, however, geopolitical tensions surrounding Taiwan, the trade war, and the residual shocks to global supply chains leftover from the COVID-19 pandemic are driving a wedge between the world’s two biggest economies. Last year, goods from China accounted for the smallest percentage of US imports in two decades.

Procurement is driving the shift away from China 

US importers and procurement teams are a big driver of reduced demand for Chinese products. For example, Chinese-made goods accounted for 35.1 % of US clothing and accessories imports in 2022. That figure represents a 37.1% drop year on year. 

According to an S&P Global Report, major US clothing importers like VF Corporation are “driving the shift out of China.” An AlixPartners survey from December 2023 found that almost three quarters of American companies were starting to reduce their exposure to Chinese imports. Over half said they were planning to reduce exposure in 2024 by over 10%. In total, the report found that US firms were aiming for a 40% reduction in their share of sourcing from China on average to reduce exposure. 

In a climate where supply chain resilience is increasingly high on the agenda for CPOs, nearshoring is increasingly in vogue. 

“What we are seeing from a couple of different perspectives is companies moving away from manufacturing in China,” Georg Roesch, VP of Direct Procurement at Jaggaer, told EPS News. While he notes that political, financial, and environmental factors all play a role in this trend, many US firms are looking to nearshore “simply from a resilience perspective because we are very dependent on China.”

China’s loss is Mexico’s gain  

The US is expected to recapture a sizable portion of the manufacturing relocated away from the Chinese market. So too are other Asian nations with less complicated political relationships to the US. South Korea, Vietnam, and Indonesia are all getting a bite of the US imports market. 

However, for organisations prioritising a balance between resilience and cost containment, Mexico is emerging as a golden opportunity. 

“Mexico has become the greatest attraction in the world for investments,” Mexican Secretary of Economy Raquel Buenrostro said in March, addressing the country’s Business Coordinating Council. “[Nearshoring] is here to stay and that is not going away,” Buenrostro said. “We have to see how we integrate and how we take advantage of these opportunities at this moment.”

The Mexican government has invested heavily over the past decade into infrastructure to support manufacturing and logistics. Cities like Juarez near the Texan border are home to massive industrial park developments. 

The city has a mature manufacturing industry backed by a skilled workforce experienced in assembly lines. Juarez has well-developed industrial infrastructure, including established maquiladoras (export-oriented factories) along with an established supplier ecosystem. Perhaps most importantly for US firms, Juarez offers a competitive cost structure, with lower labour costs than the US and China.

Procurement is the most recent of the supply chain functions to undergo a strategic evolution. Sourcing is increasingly recognised as a driver of value for the business as a whole with the ability to drive technology adoption and sustainable reform. 

Digital transformation is no longer optional in procurement. Technology adoption is a  prerequisite to success over time, especially at scale. Demand for procurement technology platforms and solutions is understandably high. As a result, so is the supply. 

Procurement platforms abound 

The growing importance of technology to the procurement process is driving an explosion of “ technology platforms, data providers, and start-ups,” according to researchers at Capgemini. However, while this bountiful supply of new tools, platforms, and potential partners holds the promise of digital transformation success, the profusion is making it “overwhelming for decisionmakers in and outside procurement,” to make the right selection. 

Another report by Forrester found that, while adoption of digital tools in the procurement sector has been widespread and enthusiastic, “many organisations think they are more advanced than they actually are.” 

Forrester’s report warns that, when selecting source-to-pay (S2P) procurement tools, many procurement leaders are failing to properly evaluate their needs and the potential of the software itself. This is a potentially serious hurdle for the sector, as choosing the right tools is critical, and failing to do so can badly hinder transformation. 

They found that numerous organisations struggle with their technology choices. A staggering  82% of respondents who switched procurement platforms regretted the decision and were considering switching again. 

Capgemini notes that, while these S2P platforms are maturing and “offer robust solutions for various businesses,” many organisations are still struggling to realise the value they offer. 

Ecosystem onboarding issues 

One of the key problems for procurement departments implementing new S2P platforms could lie outside the organisation. According to the Forrester report, the top obstacles leading to changing technologies were supplier onboarding followed closely by user adoption. 

The researchers found that an inability to effectively onboard suppliers to a new S2P platform the most common reason for switching software solutions. 

“It is no longer acceptable for selfish CPOs to impose expensive and/or unwieldy software on their suppliers or force them to incur fees or agree to vendor terms,” argues the report. It adds that, in order for the digital transformation of procurement to be successful, the process must be inclusive of suppliers. Steps such as onboarding and responding to RFXs in addition to transactional processes such as ordering and invoicing cannot be neglected. 

Reliable data is pivotal in the procurement process. Traditionally, high quality data has helped organisations maintain transparency and fairness throughout the supplier selection process. This helps ensure that bias and corruption have no room to flourish, as well as driving efficiency. 

Increasingly, the more strategic and digitally-driven nature of the procurement function is leveraging big data into more valuable insights. Big data analytics powered by artificial intelligence (AI) are vital when it comes to identifying risk. Analaytics also also critical to predicting trends in complex systems, optimising sourcing strategies, and reducing costs through efficiency. 

However, advanced data analytics are heavily reliant on the quality of the data used to fuel decision-making. The same is very much true for AI, machine learning, and automation. Unfortunately, data quality is an area where procurement teams have historically struggled. Obscurity beyond the first tier of suppliers, siloed information, and even having too much irrelevant data can all undermine the quality and usefulness of your company’s data. 

How do we get better procurement data? 

Better data can drive a more strategic, digitally empowered procurement function. In order to get that data, embracing better principles of data collection can be an effective start. 

First, procurement needs to standardise the ways it reports, collects, organises and stores data. This helps ensure data integrity and quality. Standardised data collection also helps define clear processes and classifications across the organisation. Procurement sits between the organisation and the supplier ecosystem. Therefore, it has the potential to be a major repository of valuable data and even more valuable insights. However, procurement needs to organisae that data in a uniform way. Adopting a common taxonomy can facilitate data reuse, eliminating redundancy and promoting consistency across sources for more accurate insights.

Once data has been standardised, uniting internal and external information, ensuring that the information is accessible is vital. Data that is readily available and digestible fosters a culture where information drives decisions. A centralised, transparent repository where trustworthy information can be readily accessed to support decision-making creates a more agile, resilient procurement function. 

Providing access and training for analytics tools empowers employees with data manipulation skills, while central storage enhances information retrieval. Access controls can safeguard sensitive data, and department-wide cybersecurity training (with regular refresher courses) can help identify red flags and prevent vulnerabilities. 

Lastly, choosing the right data is more important than what you do with it. For efficient procurement strategy execution, understanding organisational goals is a vital step to guiding data collection. 

The 2020s represent a decade of newly realised potential for procurement to drive new sources of value creation, reduce costs across the supply chain, and be a leader of sustainable reform. 

However, equally significant pain points and challenges stand in the way. From inflation, rising costs, political turmoil, and an increasingly strict regulatory landscape, to the looming reality of the climate crisis and a widespread skill shortage, procurement leaders have a lot to contend with. 

Much of the digital transformation aimed at creating greater visibility and efficiency in the procurement process is, some argue, targeted more at providing executives with glossy dashboards than meaningful ways to reduce procurement workload. The result is that, while both procurement departments and budgets are increasing in size, it’s nowhere near enough to account for the increase in the amount and complexity of procurement work itself. 

A recent report by the Hackett Group found that “the procurement workload is predicted to increase by 10.6%.” This figure reflects the broadening of priorities with only a little increase in headcount and operating budget. As a result, McKinsey analysts expect the industry to suffer from a productivity gap of 7.4% and an efficiency gap of 7.8%.  

Some argue that CPOs could face the issue by working smarter not harder, leveraging artificial intelligence (AI) to power new technology applications like predictive procurement orchestration in an effort to increase efficiency and circumvent risk before it appears. The Hackett Group’s report argues that procurement is likely to “rely on technology and digital transformation to close the gaps” and “do more with less through better intelligence and increased speed, customer-centricity, and competitive advantage.” 

What is predictive procurement orchestration? 

Using AI and machine learning, predictive procurement orchestration analyses large amounts of data to identify the most successful purchases in an organisation’s history from the companies with the highest quality products and services. 

A predictive procurement orchestration system then uses that historical data to optimise an organisation’s procurement strategy, described by software vendor Arkestro as “a combination of behavioural science, game theory, and machine learning that helps procurement teams predict and win faster value across every category of addressable spend.” 

In short, AI and machine learning combine to predict which outcomes will be better for the business. The technology then uses human behaviour and game theory to create competition among suppliers. The process then encourages these suppliers to engage more closely with the company by means of dynamic feedback. Lastly, an embedded intelligent platform can make resources go farther without increasing the number of employees needed by the business. 

In field trials of its own predictive procurement orchestration system, Arkestro reportedly achieved over $8 million in savings for one company, while another achieved 88% savings on individual purchases.

From an increased public awareness of corporate supply chain behaviour to the widespread adoption of the UN Sustainable Development Goals, as well as regulatory and compliance restrictions intensifying, the presence of good ESG practice in the procurement process is no longer a nice to have, but rather a key differentiator that can alleviate pain points, avoid disruption, and create competitive advantage.  

Heightened awareness of racial, gender, and LGBTQ+ issues in society, especially in the US, in 2020 have translated into a lot of noise around the topic of diversity and inclusion. Three years later, however, there’s a gap emerging between companies that walk the walk and those who just made a lot of noise. 

The supplier diversity gap

In the procurement sector, greater supplier diversity in the sourcing pool can enhance competition for contracts, leading to enhanced quality and reduced costs. 

This expanded range of sourcing options also strengthens the supply chain. It increases its resilience and agility, particularly in times of uncertainty. In case supply routes are disrupted in one region, businesses can swiftly pivot to alternative suppliers. 

Additionally, certain suppliers may adapt more rapidly to changing requirements than others. For instance, as highlighted in a report released by Accenture, during the peak of the pandemic, a minority-owned business in Georgia adeptly shifted from producing hair products to manufacturing hand sanitizer and multi-purpose cleaning products.

Adopting a Supplier Diversity Program that promotes diversity and inclusiveness within the sourcing process is also a proven driver of innovation. If currently cultivated, “not only can diverse suppliers co-innovate with their customers, but they can adapt and ramp up rapidly, helping customers swiftly execute innovations,” write Accenture researchers. The result is that a more diverse supplier network can bring new capabilities to the marketplace faster. 

At its most visible, a diverse supplier network is a positive mark against your organisation’s brand, as public perception can have a direct impact on the bottom line, as well as stock value. Criticism of supplier diversity often stands on shaky logical legs. Critics claim that rewarding work based on ethnic or gender criteria dilutes the supplier selection process.

However, as noted by the Hackett group in a study they conducted in 2017, “Virtually all diversity suppliers meet or exceed expectations, and top corporate performers in supplier diversity experience no loss in efficiency.”

If 2023 was the year of Generative AI hype, 2024 (and probably 2025, 2026 and maybe 2027, if we’re being honest) will be the year(s) where we have to figure out if this shiny, incredibly expensive (and morally dubious) new technology actually has real world applications that are worth the price of admission. 

Where procurement is concerned, given the mixture of factors creating new and interesting pain points for the sector, the benefits of generative AI can’t arrive soon enough. These factors range from the skills shortage to an overall strategic shift in the nature of sourcing and ongoing political (and economic) tensions, all of which have the potential to create profound pain points for industry leaders.

The risks of generative AI investment are not to be taken lightly, despite the allure of greater efficiency and lower costs. Specifically, risks range from AI “hallucinations” and unreliable unreliable outputs, to issues of IP ownership, inherent bias, and cybersecurity threats. However, the benefits are, some would argue, well worth the risk. This is especially true if the nature of generative AI deployment is well suited to the task at hand. 

Here are three levels to which Generative AI can be used throughout the procurement process: 

 1. Shallow deployment 

This is probably the least intrusive and easiest to execute in terms of Generative AI deployments. A shallow deployment might simply provide a superficial gateway to ChatGPT or other external GenAI tools. 

Results mirror those obtained by directly interfacing with ChatGPT outside of the procurement application. Solutions could be used for rephrasing communications, generating early-phase ideas, and other simple, language-related tasks. 

2. Contextualised and optimised deployment

The next level optimises the large language model underpinning a generative AI deployment. It does this by training it using specific data relevant to the procurement function or company as a whole. 

Essentially, a contextualised Generative AI deployment involves furnishing the GenAI model with information derived from data within the solution. This can include sources of information like raw sales data and compliance documents. The solution employs prompt engineering to enhance output quality. User prompts undergo repackaging or reformatting before being forwarded to ChatGPT or another external GenAI tool. A single user request may trigger multiple GenAI prompts managed concurrently. 

3. Tailored deployments

Lastly, a much more in depth deployment involves a solution that utilises its own LLM (a pre-trained language model that has been further refined) to enhance outputs and dramatically reduce the risk of hallucinations. Using AI in this way can also allow for a hybrid approach, in which the solution employs either the internal LLM or an external one depending on the specific use case. 

Overall, tailored generative AI solutions offer a range of benefits, including improved performance, reduced risks, increased efficiency, enhanced contextual understanding, and greater flexibility, making them valuable tools.

What Makes Apple’s Source-to-Pay Procurement Process So Good? 

Apple’s supply chain is lauded for its efficiency and quality, but what makes it so good? 

Electronics giant Apple ships over 400 million products every year, more than half of which are iPhones. 

A symphony in procurement 

Each iPhone is a procurement symphony, bringing together components from all over the world—a display and battery from Samsung and LG in Korea, glass casing from Corning in the US, a LIDAR scanner and camera array built by Sony, a flash unit built by Kioxa in Japan, a Chinese-made battery, a display port interface developed and built by a company in the Netherlands, and custom chips built by the company’s most trusted supplier: Taiwan Semiconductor. 

All these parts (and more) are brought together and assembled in mega factories (Apple supplier Foxconn’s Zhengzhou assembly plant employs more than 300,000 workers), primarily located in China. 

Suppliers are the key 

Churning out more than 250 million smartphones every year is an immensely complex endeavour, and the way that Apple approaches its relationship to suppliers in its ecosystem is a big part of why the company’s procurement process is so successful. 

In 2022, 98% of Apple’s direct spend for materials, manufacturing, and assembly was linked to its top 200 suppliers. The strength of the relationships Apple builds with these suppliers is a huge part of why the company’s procure-to-pay process can deliver huge quantities of complex electronics year after year with consistency. 

Apple’s supply chain generates a significant amount of work due to typically market-leading sales. Not only this, but Apple updates its product line regularly. It adds new devices and accessories to collections along with developments that it phases in and out of existing product lines. As a result, Apple generates enough demand that most of its supplier base can afford to devote their activities primarily to Apple’s business, giving Apple a greater degree of control over their procurement ecosystem. 

Replicating Apple’s success when you aren’t Apple

Of course, this isn’t a competitive advantage that more than a few dozen companies around the world have the necessary scale to leverage, but through collective buying schemes and group purchasing organisations, companies should be aware of the fact they can get more strategic wins out of buying at scale than just a reduction in prices. 

Apple uses its scale and purchasing power to drive strict manufacturing and (increasingly) sustainability standards throughout its procurement ecosystem. 

The company developed the Apple Supplier Code of Conduct and the Supplier Responsibility Standards in 2005, in alignment with international labour and human rights standards, including those from the International Labour Organization (ILO), the United Nations Guiding Principles on Business and Human Rights (UNGPs), the Organisation for Economic Co-operation and Development (OECD), the Responsible Business Alliance (RBA) Code of Conduct, as well as industry-leading health and safety organisations. Apple updates these codes of conduct constantly to reflect changing developments in international law, and mean Apple has a higher degree of assured compliance throughout its procurement process.

From a zero tolerance policy for debt-bonded labour and remediation of working hours violations to promoting more sustainable practices in the sourcing of raw materials, Apple is able to shape not just its own internal practices, but those of organisations throughout its supplier ecosystem. 

Criticisms of the Apple procurement process 

It is worth pointing out, however, that while Apple’s structuring of its supplier ecosystem has resulted in record profits and share prices, it has not always successfully protected the workers throughout the company’s procure-to-pay process.

As recently as 2019, undercover investigators working for a Chinese labour watchdog found a factory in Zhengzhou factory was forcing workers over 300,000+ employees to work 100 hours of overtime. Factory managers also ‘punished’ workers for not meeting targets, and paid wages insufficient to support a family living in Zhengzhou. Their social insurance contributions also fell short of the legal requirement.

Developing people 

Elsewhere in its supply chain, Apple also works to develop the skills and knowledge bases of its suppliers to a greater degree than many organisations. 

Over 3.6 million employees throughout Apple’s supplier ecosystem have participated in the company’s Clean Energy Academy since 2008, and early last year, Apple partnered with the International Labour Organization, the International Organization for Migration, and global education experts to launch a $50 million Supplier Employee Development Fund to expand initiatives and develop the skills of the people across its supply chain.  

Getting the balance right with anything in life can be challenging.

But when it comes to profit and doing the right thing for the environment, the stakes are pretty high.

In today’s world of 2024, Chief Procurement Officers have somewhat of a juggling act on their hands. The likes of ESG sit alongside digital transformation, talent management and supply chain risk as key items on the agenda amid a disruptive geo-political world. Procurement is also managing net zero targets, optimised cost and greater resilience with all components being considered as critical priorities to the function.

Marc Munier is the founder of DitchCarbon. He explains that industry leaders are the ones driving environmental sustainability forward. “If someone is publishing their data, it’s quite a good indicator because if you’re optimising for carbon, you’re also optimising for a well-run business that isn’t going to let you down,” he explains. “The cheaper option probably isn’t doing those things and perhaps they’re cutting corners elsewhere in their organisation so it’s a good way of highlighting that you’re dealing with a quality supplier.”

DitchCarbon’s place

The company Munier leads, DitchCarbon, solves the Scope 3 data challenge for enterprises. DitchCarbon uses AI to organise, find and normalise the carbon and climate action data delivering it into software tools that enterprises already use.

Munier reveals that one way to balance requirements as a purchasing function is by setting an internal cost of carbon. This is about implementing an amount of money that a consumer is willing to pay to obtain a slightly lower carbon option. “For example, you might say £100 a ton of carbon, if something is 10% less carbon then you’re going to save £10. You then add that on to the price between those two products that you are comparing.”

Leading global firms in a diverse range of sectors from financial services, consulting to pharma all leverage DitchCarbon’s carbon intelligence to support their Scope 3 emissions measurement, reporting and reduction goals within their preferred carbon accounting, procurement and ERP tools.

Munier explains that his organisation exists to help procurement people get the data they need to take action on their scope. “About 60% of the world’s greenhouse gases come directly from what companies buy which means procurement people are unexpectedly at the forefront of climate action – what an opportunity for them to demonstrate the value of the work they do,” discusses Munier. “If we can help them to be more sustainable in their purchasing, then they can have a really positive impact.”

Procurement’s transformation

The procurement function is changing quickly. While Munier nods to the long-standing joke between many professionals that falling into the space by mistake is a common entry point, procurement is becoming increasingly strategic to business operations. “People used to just think procurement was only about saving costs,” he explains. “But with the action of things like climate change, biodiversity and water use, these are now really important to company stakeholders. It means that procurement has now got a fantastic opportunity to do important things and jobs are incredibly complex compared to how they used to be. You’ve got to consider all these different factors, which is why I think we’ve seen this explosion in procurement tech to help support people on that journey.”

Today, a CPO within a medium to large size organisation can have a considerable impact on both the top and bottom line. Munier reflects on the procurement’s past and explains the function’s transformation has been a significant one. “Now the role of a procurement professional is to consider lots of different factors and be the driving force within your organisation for lots of positive change,” says Munier. “That brings complexity and challenge. I think the ones that are doing it well can stand tall and you can see the leaders in the space doing a great job in those areas.”

Managing the generative AI hype

Over the past 18 months, the buzz and chatter surrounding generative AI has been evident. The offer of efficiency and cost savings are always going to be an attractive proposition to procurement and it certainly caught the function’s interest. While gen AI’s full potential has yet to be realised, Munier explains that progress is already underway to harness the technology effectively.

“We’ve actually got the top-ranked custom GPT in the OpenAI store for reducing emissions called Maria,” he explains. “You can ask her any questions that you like about how to reduce your emissions, and she’ll give you some fantastic answers. She’s trained on Science Based Targets initiative (SBTi), greenhouse gas protocol, and lots of internal case studies. I believe chatbots have their place, but I don’t necessarily think that’s the bit that will help procurement people. We use AI a lot for data normalisation and data extraction which has helped power our business. One of the biggest challenges that we still see is not having a good supplier list where there’s lots of mess. By using a very simple prompt, you can clean up names and categorise things. It’s those sorts of tools via AI that are helping procurement people today and will continue to help in the future.”

Targeting a bright future

And Munier affirms he has a lot to thank the latest cutting-edge innovations for as without which DitchCarbon simply wouldn’t exist. “What we do is we automatically examine all your suppliers to find which ones have disclosed and which ones have signed up to the various initiatives. If they have disclosed, we go into the documents that they’ve disclosed and extract their carbon emission data,” explains Munier. “We then decide whether it’s verifiable based on who’s assured the data. We do nearly all of that fully automatically using our own proprietary trained models. That just wouldn’t be possible without new technology. This gives procurement people all the information they need to be sustainable.”

Having built its tech stack up over the past 18 months and integrated into the likes of SAP, Munier is excited and driven about what the future of DitchCarbon could look like. “By integrating with these platforms, we can work directly with procurement people where they need us to be,” he explains. “There’s no point having a separate sustainability platform where you go, ‘Oh, I need to think about carbon today.’ You need to be thinking about carbon in every decision that you make.”

Later this summer, DitchCarbon plans to launch a new forecasting model which examines a user’s entire supply chain via AI. “It will take into account all of their disclosures, initiatives and industries, as well as the locations that they’re in,” says Munier “We then combine all of that data into a model that can predict the rate of decarbonisation of your entire supply chain. That gives the sorts of data that large organisations need as they can’t just change overnight. We’re really excited about this.”

Procurement is increasingly being asked to exist at the intersection of multiple contradictory trends. 

At a time when procurement leaders are searching for ways to deliver strategic wins and new forms of innovation for the business, the traditional yardsticks for success—reliability and cost containment—have never been more important. Procurement teams are consistently being asked to do more (and more complex) work. Simultaneously, procurement headcounts aren’t rising in step with workloads. 

CPOs are increasingly turning to automation as a way to support existing staff while increasing efficiency, streamlining processes, and managing internal spend. For procurement leaders exploring the potential for automation to alleviate pain points and unlock new strategic wins, we’ve put together the top X use cases for automation in procurement. 

1. Payments 

Manual payment processing, including invoice management, is a common cause of bottlenecks, delays, and data entry errors. The risk of human error and lack of visibility also raise the risk of vendor fraud. 

Robotic process automation can automate payments based on specific triggers. These RPA bots can improve supplier relationship management and maintain a positive business reputation by reducing processing time and errors. By automating the payment process, accounts payable can efficiently and accurately handle payments, record transactions, and store data for subsequent reporting activities such as month-end close and financial reporting.

2. Contract management 

Contract management is another time consuming element of procurement. The ability for RPA tools to automate some of the more time consuming elements of the contract management process can be a huge source of efficiency for procurement teams. 

Contract management automation tools can draft new contracts by automatically extracting vendor information from other sources. They can flag imminent or incipient compliance breaches or contracts that are about to expire. Automating the contract management process can even improve customer satisfaction, as the number of errors and time to delivery go down. 

3. Pricing negotiation 

A large part of the procurement process is cost negotiation between procurement representatives. While the process seems, on the face of it, to be very human-centric, pricing negotiations are actually a prime candidate for automation. Once a procurement department receives a vendor quote, they can use an RPA bot to automatically negotiate prices based on a rules-based framework. Certain pre-programmed criteria determine whether the bot approves, rejects, or negotiates a quote.

4. Repeat orders 

Traditionally, procurement teams would be required to either manually monitor inventory levels across the organisation or wait to be told to reorder stock by other stakeholders. With RPA tools, bots can automatically monitor inventory levels and create purchase orders for the products that are about to be depleted. 

5. Inventory management 

Much like repeat ordering, inventory management automation takes a highly manual and error-prone process and streamlines it. 

Combining RPA tools with IoT devices makes it possible to monitor inventory levels in real time. This then enables automated reporting and inventory audits. For businesses like grocery stores that rely on fresh inventory and need to avoid overloading on perishable produce, having an up-to-date inventory report is crucial. Automated inventory management identifies products lingering in the warehouse, reducing the chances of overstocking perishable items.

6. Supplier onboarding 

Supplier onboarding is a long and necessary process that can consume a lot of valuable time for procurement teams. By using RPA tools, CPOs can automate multiple aspects of the onboarding process. Bots can, for example, scrape supplier information from the web like references and prices, and compile it into a report. 

RPA also has the capacity to conduct a basic evaluation of suppliers based on rule-based decisions. For instance, if a company needs a logistics company with experience moving fragile or unstable materials, and can’t find relevant case studies on the vendor’s website or profile, the vendor may be ranked lower. When done manually, these initial assessments can be time-intensive. By delegating these tasks to RPA bots, procurement teams can focus on more valuable work.

7. Sourcing 

Sourcing is the process of identifying and selecting suppliers to meet the organisation’s needs. Traditionally, sourcing is a highly manual, time-consuming process prone to delays and communication errors. 

A procurement automation platform streamlines this process by providing a centralised portal for supplier communication, bid comparison, and document storage. It also offers insights on price and delivery to ensure procurement teams are able to select the best supplier based on criteria  including, but not limited to, price, reliability, sustainability credentials, and more. Increasingly, automation is allowing AI-enabled solutions to buy and sell products with minimal human intervention and oversight.

Forced labour is a major problem plaguing modern value chains. Today, an estimated 28 million people work for little or no pay, in a state of forced labour, either by a company or government. Over 3 million of them are children. 

Products manufactured under these conditions make their way into multiple global supply chains. Watchdogs and regulators report that forced labour is particularly widespread in the textiles, mining, agriculture and service sectors. 

Increasingly, researchers and journalists are typing forced labour to supply chains that are critical to the green energy transition. The metals and chemicals used to build electric vehicle components and solar panels are a magnet for modern slavery. 

EU bill addresses forced labour in supply chains 

This week, the EU Parliament passed final approvals for new regulations targeting forced labour in supply chains. The bill would allow the EU to ban the sale, importation, and exportation of goods made using forced labour. 

Member state authorities and the European Commission will have the power to investigate “suspicious goods, supply chains, and manufacturers.” Once the law comes into effect, the EU says it will prevent the sale of any product found to have been made using forced labour.

Manufacturers of banned goods will have to withdraw their products from the EU single market. Any existing stocks will be donates, recycled or destroyed. EU member state border agents will then intercept shipments of goods made using forced labour.

“Europe cannot export its values while importing products made with forced labour,” commented MEP Maria-Manuel Leitão-Marques. She hailed the ban as a major victory for “progressive forces” within the European Union.

The EU parliament adopted the regulation with 555 votes in favour, 6 votes against and 45 abstentions. The text now has to get a final formal approval from the EU Council. EU countries will have to start applying it in 3 years.

Focus on supply chains in areas with “high risk of state-imposed forced labour” 

Forced labour is a global phenomenon. However, the implementation of the EU’s new bill (which mirrors similar legislation passed by the United States in 2021) is likely to have been primarily driven by concerns over human rights abuses in the Chinese region of Xinjiang. Sources including US president Joe Biden have accused the Chinese government of conducting an ongoing genocide against the region’s Uyghur Muslim minority. 

Currently, manufactuirng infrastructure in Xinjiang produces about 10% of the global aluminium supply. Of course, aluminium is just one of many materials essential to the production of electric vehicles with emerging ties to forced labour. Cobalt, nickel, and lithium are all critical components of electric vehicle batteries. These materials are all associated with involuntary labour. Many mining operations employ children.

According to Human Rights Watch, the Chinese government’s “labour transfer programs” coerce ethnic Uyghurs and other Turkic Muslims into jobs away from their homes. There may be as many as 1 million people currently being forced to work agains their will by the Chinese government in the region. Multiple investigations have tied the Chinese textile, agriculture, and electric vehicle manufacturing sectors to the practice.  

“It is simply unacceptable for our Union, which should be a global champion in promoting values, to continue importing and selling in our shops products that were made with blood and tears at some step along their supply chain,” Marques commented in a press conference. 

After three years of component shortages, the global manufacturing sector is experiencing a glut. According to new data gathered by GEP, the tide has turned from too little to too much. 

The world spent the last four years reeling from the impact of the COVID-19 pandemic on global supply chains. 2021 and 2022 were defined by component shortages and disruption. As a result, 2023 saw a shift in the contemporary procurement ethos from “just-in-time” to “just-in-case”. The COVID-19 pandemic hasn’t been the only thing fueling these pain points. Geopolitical tensions, like anti-Chinese legislation targeting the electric vehicle and smartphone markets, also created shortages and delays. Delays in the Panama and Suez Canals have extended shipping times and raised prices.

For the past two years, US and European organisations have fought to restructure procurement processes and manufacturing capabilities to bring complex, necessary components closer to home. 

Slump and spike 

Now, it appears as though the scramble to create supply—twinned with other economic pressures like inflation—has resulted in a glut of high-end tech components. The global slump in demand for manufactured goods has been accompanied by a spike in supply chain spare capacity across Europe, Asia and North America in December. This is the largest amount of slack on global supply chians since July 2023. According to GEP, “a manufacturing recovery is still some way off.” Their report adds that “recessionary conditions persist in Europe.” As a result, purchasers at the region’s manufacturers are cutting back at a pace “rarely surpassed in two decades.” 

Procurement professionals will, according to David Doran, vice president, consulting, GEP, have “greater leverage to drive down prices in 2024” on behalf of their companies, as slowing orders throughout the value chain point to “stronger headwinds ahead.” 

The current state of affairs was predicted last year in a piece written for the Harvard Business Review. PS Subramaniam noted that, when pandemic drove remote work to spike in early 2020, the same demand-oversupply cycle played out with tablets and laptops. 

“Three-plus years later, we’re seeing the stark aftereffects of that spike in demand. After the race to order key components and manufacture products, suppliers are left with mountains of excess inventory as growth has slowed to normal levels. In the tech industry, it’s common for warehouses to be full of now-outdated semiconductors and other technology components,” he writes. “Beyond the obvious environmental cost, an inventory glut of high-end electronics components is an expensive problem. Excess inventory is a $250+ billion problem in the U.S. alone.” 

The transition of our linear, single use economy to a circular one is an increasingly necessary step on the road to averting (no, too late—better say mitigating) the climate crisis. Not only that, it’s an intelligent business strategy, and it begins with procurement.  

Achieving net zero is not simply a matter of restructuring and regulating our energy industry. (Believe me, it would be a long overdue start and current levels of action to curtail fossil fuel usage. Or to mitigate the impact of lithium and cobalt mining for EV batteries are laughably, woefully inadequate. That’s not what we’re here to talk about today, however). 

In addition to fossil fuel consumption, the way in which our global supply chain extracts, consumes, and then (most importantly) disgards our planet’s resources is in desperate need of reform.

A 2019 report from the Ellen MacArthur Foundation found that, while a transition to renewable energy sources could alleviate 55% of our global greenhouse gas emissions, the remaining 45% stem from the linearity of global economic structures.

The authors highlighted the need to shift to close-loop value chains. They also emphasise steps like diet shift at a population level, and methods like carbon capture. Nevertheless, if a circular economic structure could be adopted across key industries—sources of “overlooked emissions”—like steel, plastic, aluminium, cement and food manufacturing, it could reduce emissions in each sector significantly. On average, each sector could realise a 40% emissions reduction by going circular. 

Take, make, and dispose 

A further report by Edie Insight in partnership with Reconomy notes that current systems have a long way to go. “Corporates are, by and large, still operating on a linear basis of ‘take, make, dispose’. This mindset is usually baked into their own plans and budgets,” the report observes. As a result, a more “holistic shift is required to move to closed-loop practices.” 

The report also notes that, when attempting to take a more sustainable approach in procurement, there is often a “contract gap” or disconnect between the sustainable messaging of a tender and the fact cost is still the number one indicator of success. They note this “could be because the rhetoric around sustainability has not been defined by both parties.” Another explanation could be because “sustainability and social currency has a poor exchange rate compared to costs.” 

One major issue is that a lot of the terminology surrounding sustainability measures isn’t legally protected. If it is, the truth can often be obscured. Methods like carbon credits, or the selling of “recycled” waste to countries in the global south to be burned or buried in a landfill are common tactics. Organisations looking to promote a more circular economy should take pains to define terms and interrogate the veracity of sustainability claims within their supplier ecosystem. 

Implementing a circular economy 

There is no single solution to the question of how to implement a circular economy. 

However, there are ways that organisations can use procurement to drive circular economic practices. One step involves pushing for more sustainable practice throughout their own supplier ecosystems. Next, not considering all matters other than cost to be secondary in the tender process can be hugely impactful. Modernising existing processes to be more efficient in their consumption of raw materials, and exploring the use of materials with higher upfront manufacturing costs but longer lifespans and potential to be reused multiple times (like glass over single use plastic in the food and beverage sector) are all vital steps. 

Internal synergy is also vital. A great deal of linearity occurs because of materials being transferred from one department to another throughout the manufacturing process. 

The Edie report notes that “in retail, for example, goods and packaging is commonly purchased by commodity buyers.” The problem, however, is that another department will be tasked with procuring the services to deal with the resource once it is considered ‘waste’. Then, another department might handle compliance and another will oversee recycling. This not only creates logistical siloes, but also means the process falls into a separate budget aside from procurement.

The report stresses that all these moving parts should be in the same resource cycle. The ongoing problem that needs to be solved, however, is that they commonly conflict with one another internally.

The procurement sector entered 2024 facing both unprecedented opportunity and new challenges. While avenues have opened up through which procurement has greater say in the boardroom, more encouragement to adopt new technology, and a mandate to create new areas of value for the business, internal and external pressures threaten to push many procurement teams into a more reactive pattern. 

One of the factors threatening to push procurement onto the back foot, limiting capacity for strategic and digital transformation, is a global rise in overseas shipping costs. 

Shipping costs skyrocket 

Shipping between Asia and the West Coast of the US rose in price by 94% year-on-year, with runs to the US East Coast increasing by almost 40%. Overall, as of mid-January 2024, ocean freight

costs have increased 59% compared with the same period last year. 

“Drought affecting the Panama Canal and conflict around the Red Sea and Suez Canal have more shipping companies taking longer routes or putting their freight on rails upon arrival at nearer ports,” said Tim Jed, supply chain leader at US technical builder DPR Construction. “This can add weeks to material delivery schedules. Given that our industry favours just-in-time delivery, customers should head off these challenges early in their planning.”

The Panama Canal drought has reduced ship crossings by 36%, and anti-Israeli action by the Houthis (in response to Israel’s ongoing genocide in Gaza) threatens to disrupt the nearly  one third of global container traffic and around 12% of global goods trade that passes through the Red Sea. 

Many supply chains in the US—not just in the construction industry—favour the just in time delivery method that keeps inventory low, cash liquid, and revenues high. Retail, fast moving consumer goods, and agriculture are where the methodology was honed to a fine point in the 2010s. 

Resilience over speed

However, the increasing frequency and severity of logistical disruptions is pushing many sourcing departments to explore approaches that favour resilience over pure profit and speed. 

DPR’s latest report on the Q1 2024 market conditions for procurement in manufacturing notes that project owners can optimise their operations by implementing appropriate warehousing and storage solutions, whether on- or off-site, enabling them to capitalise on competitive pricing and mitigate worries regarding timely delivery. Large contractors can enhance their procurement strategies by leveraging their comprehensive contractor sourcing data, allowing them to make informed decisions about the optimal timing for purchases. 

Fostering strong supplier relationships can also offer significant advantages, affording flexibility and facilitating tailored solutions tailored to the unique requirements of each project.

Welcome to an exciting new dawn at CPOstrategy as we introduce you to our very first Sustainability in Procurement Playbook. 

Over the past few months, we’ve worked with true leaders and visionaries from some of the world’s biggest companies and hosted conversations all centred on exploring the importance of sustainable procurement practices in today’s landscape. 

The Playbook follows on from the Sustainable Procurement Champions Index, published in late 2023 in association with ProcureTech, which celebrates the individuals who are challenging the status quo and making an impact in sustainable procurement.   

Our purpose was to create an engaging and easily consumable guide to a procurement practitioner’s journey to implementing sustainability within the procurement function.  

With this in mind, our Sustainability Playbook has been produced entirely through the narrative of 12 leaders. These leaders have been working in the trenches and have combined to provide real-life insight into sustainable procurement. It also draws from the multitude of challenges they face. However, inside these pages, there is real, actionable guidance that can help readers navigate sustainability within procurement. 

The stories are honest, transparent, and revealing. It is a ‘warts and all’ walkthrough with expert advice on how to achieve sustainability in procurement. 

This is your story. This is our story.

Enjoy!

Check it out here.

Tonkean has announced the unveiling of Collaborative Intake offering new capabilities for enterprise procurement teams.

The company confirmed the news on Wednesday (April 17th) which will see the introduction of a new suite of capabilities in its ProcurementWorks solution.

Collaborative Intake enables cross-functional, in-workflow collaboration and engagement across every step of the entire intake lifecycle, from intent through resolution.

Tonkean is a first-of-its-kind process orchestration platform that helps enterprise internal service teams. Via Tonkean, users can build processes that are personalised for each requester and that use AI to automate the intake, triage, and resolution of every request.

“Without a proper venue for real-time collaboration, the quality of work suffers,” said Sagi Eliyahu, co-founder and CEO at Tonkean. “Tonkean’s Collaborative Intake ensures procurement is present, responsive, and effective from intent to resolution—transforming a transactional silo into a strategic nexus.”

There are several core new capabilities including contextual, real-time collaboration, dynamic workflow adjustments and omnichannel communication.

Tonkean Collaborative Intake builds on ProcurementWorks, a lifecycle orchestration tool for enterprise procurement teams that Tonkean released last year. ProcurementWorks allows procurement teams to intelligently automate the purchasing process end-to-end. This is also to create guided buying journeys for strategic spending personalisable to end users.

Collaborative Intake empowers procurement teams to provide buying experiences that are even more seamless and effective. The main benefits include proactive engagement, reduce human error and higher quality work.

Read more here.

Procurement sustainability efforts are plagued by traditionally long and opaque value chains, which can be traced all the way back to unregulated raw material extraction or agriculture in overexploited countries, which have always been vulnerable to corruption. 

According to the United Nations’ Convention Against Corruption (UNCAC), “A procurement system that lacks transparency and competition is the ideal breeding ground for corrupt behaviour and thus most important international codes on anti-corruption and public procurement rest heavily upon these fundamental principles, in order to discourage corruption.” 

There are many different places throughout the procurement process that corruption can occur, and just as many different types of corruption, from suppliers comping a purchasing executive for a meal to bribing officials to ignore regulatory and compliance breaches. 

Weeding out corruption in procurement

Throughout the procurement function and the business beyond, it is vital to remain alert for corruption red flags like the following… 

Organised criminal associations historically develop connections to access private information and exert influence over decision making processes. Individuals with criminal affiliations might attempt to infiltrate organisations or their supply chains, posing a threat across all levels of the organisation.

Misuse of Information, including the unauthorised disclosure of public or private sector information can result in severe consequences, particularly if it involves classified or sensitive data. Such breaches may facilitate bid rigging or price fixing, undermining fair market practices.

In times when recruitment and retention are increasingly challenging, organisations may face vulnerabilities due to inadequate recruitment and post-employment practices. Hiring individuals tainted by corruption or criminal activity can erode the organisation’s financial integrity. In the public sector, employees accused of corruption may resign before investigations conclude, escaping accountability and potentially re-entering public service roles.

Individuals in positions of authority may solicit bribes to sway decisions regarding project bids, licensing approvals, or project reviews. Such roles are susceptible to conflicts of interest, particularly when individuals transition from the private sector to regulatory agencies overseeing their respective industries. Likewise, identifying conflicts of interest can prove challenging, as they stem from relationships or interactions that yield benefits for one or both parties involved. Such conflicts encompass actions like accepting gifts or perks, maintaining prior business or personal connections, or pursuing employment before or after serving in a governmental capacity.

SourceDay has announced a strategic partnership with industry cloud company Infor.

It is expected that the alliance will bridge the gap between ERPs and supplier networks. This will also be while enhancing the efficiency of direct spend purchase order lifecycle management.

Delivering supply chain visibility

As part of the partnership, SourceDay is now an Infor Certified Solution Partner. It will deliver deep, bi-directional technology integration across Infor’s Discrete Manufacturing ERPs. Shared customers can now manage direct material POs proactively and comprehensively from creation to receipt.

SourceDay is a supply chain collaboration platform that integrates with any ERP system to overcome the risks and costs inherent in manual PO lifecycle management processes. It helps manufacturers and distributors achieve supplier on-time delivery rates as high as 96%. This is through providing unmatched visibility and control over inbound supply.

Further, Infor is an official reseller of the SourceDay platform, which validates the SourceDay solution while significantly expanding customer reach.

Strategic partnership

“I’m thrilled to partner with Infor as the supplier collaboration platform of choice for their customers and prospects. This is the culmination of a rigorous process where Infor selected SourceDay based on the quality of our technology and shared commitment to our customers’ success,” said Clint McRee, co-founder of SourceDay. “SourceDay will continue to focus on proactive supplier engagement and data accuracy that today’s supply chain teams require to mitigate risk and unlock next-level business outcomes.”

Mark Humphlett, Industry and Solution Strategy Director at Infor, added: “Infor is focused on creating and sustaining collaborative relationships with partners, such as SourceDay, that have considerable vertical market expertise and are well aligned with our solutions and CloudSuites. This new partnership demonstrates Infor’s continued focus on quality and commitment to its customers.”

Read more about the new partnership here.

The procurement sector is facing a meaningful skills shortage. The crisis threatens to undermine procurement’s ability to deliver on key strategic objectives like driving ESG goals, and creating new strategic opportunities for the business as a whole. Could procurement-as-a-service solutions be the answer? 

A report by the Hackett Group found that 46% of procurement leaders expect labour and skill shortages to continue disrupting business during the coming year. Similarly Amazon Business’ 2024 State of Procurement report found that “retaining and developing existing talent” and “attracting or hiring top new talent” were top priorities for 86% and 84% of CPOs, respectively over the next one to two years.  

The skills shortage 

This shortage has arisen due to several factors. The nature of the procurement process creates demand for skilled professionals with a  skill set that includes negotiation, strategic thinking, data analysis, and supplier management. 

The increasing complexity of global supply chains and the widespread adoption of digital technologies require procurement professionals to adapt quickly and acquire new competencies, further exacerbating the shortage.  Not only is procurement becoming less transactional and more strategic—increasing the complexity of the discipline—but increasing integration of artificial intelligence (AI), machine learning, and other cutting edge technologies is exacerbating the skills gaps in existing workforces as well. 

Finding individuals with a blend of these skills is challenging, and has led to a sizable talent gap that is only expected to grow.  This is time sensitive, as the ageing workforce in procurement, coupled with a lack of investment in training and development programs, has contributed to a dwindling pool of qualified professionals entering the field, exacerbating the skills shortage even further. 

Addressing the procurement skills shortage will require proactive measures from both corporate organisations and educational institutions to attract, train, and retain talent in the procurement sector. 

In the meantime, many procurement organisations are looking to automation as a stopgap, but applying technology to solve a problem that stems in part from a lack of tech-savvy talent has obvious flaws, and there are many elements of procurement that rely on more strategic thinking and social soft skills than automation can compensate for. 

Demand for Procurement-as-a-Service

In February 2024, global consulting firm Accenture made the latest in a string of procurement and sourcing-related acquisitions with the purchase of Insight Sourcing. 

Insight New Sourcing is a strategic sourcing and procurement services provider which specialises in helping its clients reduce costs when managing spend and negotiating contracts for direct materials like metals, electronics, food ingredients, chemicals, clinical services; indirect materials like logistics, packaging, IT, marketing; services related to capital expenditures like construction, and facility equipment; and energy procurement management. 

Accenture plans on adding around 220 consultants to its staff, along with a suite of digital tools, through the acquisition process. The companies, according to Rob Fuhrmann, global lead for sourcing and procurement at Accenture, will “combine expertise across direct, indirect and capital expense cost reduction with complementary data and technology capabilities to drive efficiency and resilience across [their] clients’ supply chains.” 

What is Procurement as a Service?

Procurement as a Service operates on a similar premise to the Software as a Service (SaaS) model. 

Rather than depending solely on internal teams or conventional procurement methods, businesses can opt to delegate a portion or all of their procurement requirements to a specialised provider equipped with technology, personnel, and specialised knowledge to manage sourcing tasks. Theoretically, the model enhances organisations’ spending control and could provide a more strategic pool of procurement skill and labour for relatively low short-term investment. 

In 2022, the global procurement as a service market was valued at $6.15 billion, with an estimated growth of 11.1% from 2023 to 2030. Accenture’s investments point towards a clear rise in demand for procurement and sourcing consultation, as organisations turn outside their own walls to tackle the increasing complexity of managing the procurement process. 

Supplier management is a critical element of any procurement function. It creates a bridge between the needs of the business and the capabilities of the supplier. At the same time, supplier management helps CPOs meet spend reduction targets and strategic objectives like reducing Scope 3 emissions. 

The current procurement climate is one of sustained uncertainty. Economic pressures, climate instability and political turmoil can disrupt global supply chains at the drop of a hat. As a result, managing vendor relationships has grown more intricate and demanding. Not only this, but managing a supplier ecosystem effectively has never been more critical. 

With the introduction of advanced technologies, businesses now have new tools at their disposal. As a result, many CPOs hope that AI and automation will allow them to streamline vendor management processes, mitigate risks, and cut costs. However, the success or failure of these technology applications is often directly linked to the quality of the data underpinning it. Many supplier ecosystems are obscure places, and gathering useful, trustworthy data more than a few steps away from the organisation’s own walls has typically been seen as more trouble than it’s worth. 

Bad supplier data causes “substantial challenges” for procurement

In a 2020 survey by TealBook, insights emerged regarding the substantial challenges organisations face due to inadequate supplier data. Notably, they found that 93% of procurement professionals claimed to have experienced adverse consequences as a result of bad data regarding their suppliers. Approximately half of the respondents reported experiencing these effects regularly.

If data can be used effectively, however, it can not only create better outcomes for the organisation. Better data means increased procurement efficiencies, strategic wins, and more sustainable practice. It can also strengthen supplier-buyer relationships, making them more mutually beneficial, agile, and resilient. 

Good supplier data can be used to predict supplier punctuality, identify recurring issues in supplier lead times, and reduce costs. Not only this, but (trustworthy) data can be used to reliably benchmark supplier performance—and incentivise improvement. Tracking supplier successes and failures can not only expose when suppliers aren’t meeting expectations, but also when they exceed them.

Additionally, better data can lead to better predictions of when suppliers fall short (something that a lot of organisations struggle to see about themselves, but that can be identified from an outside perspective), which can allow organisations to step in and work with the supplier to solve or avoid the problems causing the disruption in the first place. 

Data should not just flow one way, however. Organisations that share relevant information with their suppliers can give a more fleshed out picture of their demand cycles and other critical elements of the business which can help suppliers work with them more strategically. 

Cost containment and supply chain resilience are imperative for procurement teams in 2024. Geopolitical tension, economic downturn, and worsening environmental circumstances all threaten to derail value chains and disrupt the movement of critical goods and services. McKinsey analysts idenified economic volatility, supply chain disruption, and labour market challenges as being among the biggest trends affecting the procurement landscape in 2024.

Goods but not services

Procurement teams have become increasingly strategic in their approach to acquiring goods and materials over the past several years. However these same teams have paid less attention to services procurement. 

“Businesses have always relied on third-party services to help them get things done. Today’s business environment makes procuring the right services at the right price from the right provider crucial for success,” argues a recent blog post from SAP’s Gordon Donovan. 

However, Donovan (a man whose LinkedIn bio claims that “procurement can save the world,” so you know he’s serious) highlights the fact that “many organisations lack a mature approach to sourcing and managing services.” 

This fact exposes organisations to higher levels of risk, is more likely to cost them money, and prevents them from gaining necessary visibility into their procurement process. 

Services procurement struggles to be efficient 

According to a recent paper on “Benchmarking Services Procurement: A Global Study,” the way many companies approach services procurement is “long overdue for digital transformation.” 

The paper found that half of CPOs still rely on manual methods like phone calls, emails, and spreadsheets for buying services. Fewer than 30% use a specialised purchasing management platform. In some ways, this makes sense. Engaging a service provider is, on the face of it, a much more human process than buying physical things. However, CPOs are supposedly missing out on vital benefits they could be experiencing by taking an approach to procuring services that mirrors the one they take to buying physical and digital goods.

Three key opportunities unlocked by a more technologically integrated approach included: better data governance allowing teams to manage large volumes of data safely; AI-assistants increasing productivity by automating manual tasks and synthesising complicated, unstructured datasets; and the potential for more specialised technology platforms that outperform generalised solutions by providing more robust support when managing services spend. 

The size of professional services spend in an organisation is such that businesses that fail to digitally transform their services procurement process are potentially missing out on serious savings. Professional services spending accounts for between 45% and 65% of an organisation’s total non-employee spending,” according to a report from 2023. 

Donovan reflects that, while “technology can help accelerate” the digital transformation of procurement, procurement teams “must do more to assert themselves within the business” if they are to drive genuine change, contain service procurement costs, and avoid disruption.

The procurement landscape is undergoing a period of radical change. Pressure is growing for procurement teams to operate more efficiently and strategically. However, this trend is also growing in tandem with the complexity of procurement teams’ workloads. At the same time, the severity and variety of pain points faced by procurement functions have never been more disruptive. 

At the heart of this sector-wide transformation is technology. This trend is reflected in a recent report by Deloitte. Researchers note that the rapid advancement of technologies like automation, AI, and machine learning is remaking business supply chains. Their implementation is “poised to transform how the procurement function delivers value.” For many organisations, “the application of these disruptive technologies to procurement is already fundamentally altering the impact of this function.” 

One pivotal way that procurement is being altered by the changing technology landscape relates to the emergence of “machine customers.” 

What are machine customers? 

The concept of machine customers has been around for several years. Now, however, the technology is hitting an inflection point where its impact on the procurement sector has become undeniable. 

Machine customers are nonhuman economic actors capable of selling or purchasing goods or services autonomously. Examples of machine customers are varied. They can include IoT devices capable of placing independent orders, intelligent replenishment algorithms maintaining product availability, and automated assistants suggesting new deals to consumers. 

Machines can conduct procurement functions from both sides of the table, and the increasingly capable automation of sourcing and procurement could have a dramatic impact on the procurement sector. 

Some industry experts argue that machine customers could account for trillions of dollars in revenue by 2030. Automating the process of buying and selling could completely change the nature of the procurement process. CEOs believe that by the end of the decade machine customers will account for 20% of their companies’ revenues. 

The risks and rewards of machine customers 

The study projects that, by 2026, more than 15 billion connected products will have the potential to behave as customers. These machine customers will be able to buy and sell goods and services autonomously.

These machine customers would, theoretically, have significant advantages over a human. Machine customers are unaffected by the cultural, emotional and sensory triggers that are used to manipulate humans into buying one product over another. Of course, cyber attacks that could influence the behavioural parameters of a machine customer could result in far greater misappropriation of spend. 

Machine customers are also supposedly more efficient and methodical, with the ability to weigh up much larger sets of data to make more informed decisions in real time. The obvious criticism of this is that decision-making AI is limited by the scope of its programming and directives. The ethical concerns that could arise over the procurement practices taken by an AI told to prioritise low costs without sufficient guardrails are obvious. Machine customers will need to be increasingly regulated the more autonomy and agency they are given.

In short, machine customers are undeniably on track to have a meaningful impact on the procurement process. However, while automating sourcing in this way carries obvious advantages, widespread implementation of machine customers also creates new threats to the integrity of the supply chain.

Procurement functions are increasingly being recognised for their potential to create value for the business at large. From cost containment and efficiency improvements to resilience, ESG reform, and relationship management, CPOs and their teams are balancing a seemingly ever-increasing number of plates. As a result, many procurement teams struggle to gain the necessary visibility and insights into the value chain needed to drive genuine transformation. 

This is why data analytics are so essential to modern procurement. Data analytics can create the necessary granular insight into the procurement process and supplier ecosystem to achieve procurement’s growing array of goals. However, all types of data analytics are not created equal. Finding the right analytical tools and methods and applying them to the right problems is essential for procurement leaders. 

Here are four types of procurement data analytics and the situations in which they are (and aren’t) applicable. 

1. Descriptive Analytics 

Descriptive analytics examine past procurement data to understand what happened in the past based on the data gathered at the time. 

This is the simplest type of analytics to apply to procurement, but descriptive analytics are vital when analysing spending patterns, evaluating supplier performance, and incorporating purchasing behaviour into a broader procurement strategy. 

Descriptive analytical tools are powered by data like historical purchases, requisitions, purchase orders, invoices, GRN, and tax receipts. They serve to help procurement teams understand historical data so that trends, patterns, and risks can be effectively identified.

2. Diagnostic Analytics 

Diagnostic analysis is a slightly more complex process. Descriptive analysis focuses on the “what” of past procurement data. Diagnostic analytics go deeper to understand the “why”. They get at the root cause of a problem or situation that occurred in the past. 

Diagnostic analytics are especially useful at investigating the causes of disruptions in the supply chain. By examining past and present data, diagnostic analytics tools can examine a supplier delay, for example, and provide insight into whether the event was an isolated incident or a recurring problem that might necessitate switching suppliers. 

3. Predictive Analytics 

As the name suggests, predictive analytics tools are used to predict future events based on past and present data. These tools, by necessity, tend to be much more sophisticated than descriptive and diagnostic analytics. They often employ artificial intelligence and machine learning to process vast amounts of data. 

Used correctly, predictive analytics can identify future spikes (or drops) in demand based on past trends. This can allow procurement teams to adjust stock volumes accordingly and take other actions to avoid disruption. Predictive analytics are also capable of looking at broader data sets, including publicly available information like weather patterns, to identify potential disruptions to supply chains that could harm procurement.  

4. Prescriptive Analytics  

Lastly, prescriptive analytics harness the potential of cutting edge AI and machine learning. Prescriptive analytics can not only analyse data and make predictions, but recommend courses of action based on its findings. 

As noted by Gartner, the “combination of predictive and prescriptive capabilities enables organisations to respond rapidly to changing requirements and constraints.” 

There are a wide array of use cases that merge predictive forecasting and simulation with prescriptive approaches. These can include predicting infection risks during surgery and instituting rules to mitigate these risks. They can also extend to forecasting product orders to optimise responses to fluctuating supply chain demands, circumventing the use of potentially flawed historical data.

Some things change quicker than others.

In procurement’s case, it is speed so fast that the function’s own rulebook is almost being rewritten.

Truthfully, procurement has had to think on its feet. A rough Covid pandemic mixed with navigating the complexity of wars and inflation has been a cumbersome combination. But procurement has not been without help. The acceleration of digital has stepped up to the fore with many functions embracing tech-driven processes in ways previously alien to increase efficiency and decrease costs. Add last year’s buzzword, generative AI, into the mix and procurement is almost unrecognisable. The function isn’t tucked away out of sight anymore, it stands as an important cog in an organisation’s machine.

And having witnessed procurement’s trials and tribulations first-hand is Simon Geale. Having served as Executive Vice President, Procurement, at Proxima since June 2021, he has been involved with the organisation for almost 14 years overall. Geale has worked in procurement for more than two decades and has spent the majority of his career in solutioning roles designing procurement organisations and programmes. 

His company Proxima provides expert procurement services to a comprehensive client list featuring some of the world’s largest organisations. As a part of Bain & Company, Proxima helps its customers spend their money wisely through an extensive suite of procurement consultancy services focused on cost transformation, supply chain sustainability and decarbonisation. “My role is not like a traditional Chief Procurement Officer (CPO), I’m more market-facing,” discusses Geale. “I’m there to communicate what we think, what we say and the services that we build. I essentially keep in touch with our communities and calibrate what we do as business accordingly.”

Sense and Simplicity

Indeed, the procurement world of 2024 is in a vastly different place than it was when Geale first joined. 20 years of digital transformation and evolution have taken place since then. But interestingly, in 2005, in a previous role at Philips Electronics he attended an internal conference where he heard the launch of the tagline ‘Sense and Simplicity’. Given the trajectory procurement has been on since then, how curious is it that ‘Simplicity’ is one of Geale’s key themes of 2024? “I suppose it’s something that’s always stuck with me, that concept of let’s make things that make sense to our customers and are easy to use. We have to think about the value to the customer in everything that we do.

“For example, five or six years ago we had built a supplier management platform and I was trying to sell it within the procurement community. I can remember having many meetings with procurement teams and very few, if any, walked out of that meeting saying this was a bad idea. There was universal enthusiasm for the concept and the feedback was great. But the adoption was low, contingent of driving quite a big organisational and operating change. It was too hard at the wrong time.”

Looking back to move forward

One can learn a lot from the past. Famous scientist Albert Einstein once said the definition of insanity was to do the same thing over and over again while expecting different results. Indeed, Geale believes that what went before can act as a powerful reminder of how far procurement has come. The general perception of what procurement is and what it does has also shifted over the years and despite clear evolution, Geale affirms the core human elements remain the same. 

“I remember doing a speech on supply collaboration once, and actually some of the best lessons were from the 1990s in automotive,” he explains. “I think topics like relationships, talent, capabilities, skills and digital, they don’t go away. They keep coming back round but the business environment, and our capabilities have moved on. The questions are slightly different, but the theme is the same. It’s easy to dismiss something from 10 years ago and think it’s old news. But it all comes back around and actually, a new innovation could be a learning from the past or a fresh take on something.”

Procurement’s new dawn

Every year, Proxima consults leading CPOs to get their take on the opportunities and challenges in the year ahead in Proxima’s CPO Report. This year’s entry had reflections from the likes of Thomas Udesen, CPO at Bayer, Sandra Brummit, CPO at NiSource and Laura Cook, Director of Procurement at Primark. Having spoken to dozens of CPOs as part of the report over the years, Geale believes a common theme is that the average CPO is juggling having to do more with less resource than five years ago. 

“CPOs might have grown their function, but it’s in response to a much bigger to-do list,” he explains. “They’ve virtually all got big cost targets, a resilience agenda, data and transparency agenda and digital initiatives which means more tech investments within the businesses that they serve. Yes there is more sophisticated tech available to them to help them but they are unlikely to have unlimited budgets.

“They probably need to shift around some skills, balance some external insights to help challenge their thinking, and pick and choose where they need external support. On the positive side procurement is more relevant and better understood than in past times. They’ve likely got an organisation that has a better understanding of who they are and why they partner with them which means they can backtrack on some of the historic processes and red tape and allow for more flexibility and self service. The CPOs that we interviewed are really focusing on trying to get people to spend time and efforts on what really matters.”

Procurement future-focused

In the report, Udesen discussed three core areas that procurement leaders should focus on. Eliminate time consuming tasks, sustainability and learning from mistakes. “Firstly, it’s time to eliminate practices that are consuming too much time and not adding value: think tedious, time-consuming processes that can be eliminated and replaced with more pragmatic and practical measures,” he reveals in the report. “We must continue to adapt and evolve our profession, learning from mistakes of the past, to stay current and applicable to future generations of business challenges.”

As technology’s influence in procurement continues to soar, Geale is in no uncertain terms that the landscape is moving towards a more transparent and connected model for value chains. However, he acknowledges that while a defined movement is underway, change this seismic won’t happen overnight. “The themes that we’re currently looking at around resilience, cost, sustainability and growth are going to be the same because they always have been,” says Geale. “It’s the world that’s changing and themes are staying very similar so it’s how we react to those. Things are going to change around the planet, and we are going to have to react to them. We don’t quite know how much or how yet, but I think it’s going to be fascinating.”

Although it has long been a key tool in the hands of public sector procurement, the private sector has traditionally failed to take full advantage of the power of collective purchasing. 

In the Indian healthcare sector, for example, public procurement has been harnessing the power of buying groups since the mid-90s. By pooling their resources buying groups have been able to secure lower costs for life-saving medication and critical medical supplies.

However, it’s taken until this year for a private company to replicate the method. As reported by The Hindu, the National Cancer Grid has been able to replicate the public procurement model. The organisation has been able to reduce the cost of “high-value, high-volume cancer and supportive care medicines through a pilot pooled procurement programme.”

The program has been an immediate success, according to Dr. C. S. Pramesh, Director of the Tata Memorial Hospital in Mumbai. He added that his team has already “received requests from more than 40 centres and several state governments for bulk procurement for their state hospitals.” 

Group purchasing in private sector organisations that closely mirror their public sector industries (like healthcare and education) is a fairly straightforward source of easy wins. These benefits also compound on one another as the buying group grows in size and popularity. However, private sector buying groups have yet to take off in many markets. In the US, for example, the group-buying market is only valued at around $5 billion. It begs the question: why isn’t collective buying more widespread? 

Collective buying to streamline procurement 

More than simply using the power of group purchasing to drive down cost, entering into a collective buying group can meaningfully streamline the procurement process. This is an especially appealing benefit in a market where procurement is facing a known skills shortage.

The benefits of a buying group extend beyond simple cost containment. Many procurement teams in the US and Europe are facing skills shortages. The procurement sector is becoming increasingly strategic. As a result, more organisations are finding themselves overworked and underskilled. Buying groups can take on (for a fee) the workload associated with compliance, a major source of procurement pain points. These groups will also organise shipping and handling, and ensure a greater degree of security in the supply chain.

Membership fees are a meaningful cost as well. But the lower costs generated by membership in a buying group can usually offset these overheads. 

More than in the past, a group purchasing organisation (GPO) is a strategic partner to its members. The group provides expertise, networking opportunities, and even legal assistance. For many SMEs, the benefits of collective buying are too large to ignore.

One of the world’s biggest and most influential tech events in the procurement and supply chain space has announced a new CEO.

DPW has revealed that Herman Knevel has stepped up to take on a more strategic role while Founder Matthias Gutzmann focuses on continuing to grow the events.

“It’s a great brand and a fantastic company. The energy in the room in Amsterdam is contagious and the people and teams that come to DPW are at the core of what we do,” explains Knevel. “We’re building a strong strategy and team now and continue to deliver a great value and experiences to our customers and community at scale.” 

DPW Boom

Being the initiator of DPW LABS, the corporate innovation programme, Knevel is already involved with DPW. He has long-standing career in global outsourcing, corporate innovation, and corporate start-up collaborations. “Throughout my career I have always been passionate about making connections meaningful and been driven by people, innovation, and collaboration opportunities,” he reveals. “That’s what LABS still is today as we thrive by the procure tech ecosystem, and that’s what I continue to do at scale as CEO of DPW. I am grateful and excited to make DPW the global number one super connector of our ecosystem and to create more value for our stakeholders year-round, an ambition that is shared and supported by the founder and team behind DPW.”

Since the launch of DPW in 2019, the conference has grown from strength to strength. In its October 2023 edition, DPW welcomed 1,250 procurement professionals with more than 2,500 virtual attendees watching along at home. Held at the former stock exchange building, the Beurs van Berlage, last year’s theme was “Make Tech Work” which focused on turning digital aspirations into a reality. The event encompassed a deep dive into discussions surrounding AI and machine learning in procurement, digital transformation strategies, sustainable procurement, supplier collaboration, risk management as well as innovation and disruption. 

Innovation drive

DPW’s topic focus for 2024 has already been determined as 10x. Knevel explains the process of deciding a conference’s theme is relatively straightforward. “If you look at make tech work, that was a really good theme last year and that resonated well with many who came to DPW, not only in Amsterdam but also online on our livestream,” he explains. “But also, what we learned from the market, and especially from the side of the startups and scale-ups, is that the technology is there and ready to solve the problem. Making tech work was an obvious thing last year, as the adoption rate is still fairly low and a pain point in the industry. The 10x mindset is something we think we should need in the industry to accelerate the base of innovation and to increase the speed of value for many.”

One of DPW’s newest innovations for 2024 is tech safaris which are guided group tours throughout the expo halls. With 25,000 ft² of exhibition space and over 120 technologies to explore, it can sometimes be hard to navigate. Based on areas of interest such as ESG or intake and orchestration management, tech buyers and investors are taken directly to exhibitors to watch live product demos, ask questions, and get insights into key trends in specific tech domains. “It all comes from feedback and listening to customers,” he explains. “Right before I joined as CEO, Matthias and I went to San Francisco and the Valley and also visited New York. Being able to listen to different customers and founders was key and meant we could listen, learn and then implement that innovation.”

Coming to America

And continuous improvement is very much part of DPW’s mantra. The organisation is gearing up for its inaugural United States event which will be held in New York on 12^th June, 2024. Although it will be a scaled-down one-day event, the aim is to spread awareness of DPW’s presence in a new market together with launching partners and start the process of expanding out of solely operating in Amsterdam. “We want to engage with the community in the ecosystem on the East Coast and the Americas,” explains Knevel. “It’s also not the same format as Amsterdam as we bring people and the ecosystem together for a day with some great solutions and customers. It’s about understanding the ecosystem there a bit better and we plan to grow over the years to come.”

DPW is passionate about bringing procurement to the top of the c-suite and making the function cool and relevant. This year, the organisation has plans to introduce a Padel tournament as a different way of connecting. “Networking through sports is a great way of getting together,” says Knevel. “It’s an informal way to connect and also lowers the bar. We know this works from experience and we wanted to bring this to DPW so it’s very exciting.”

DPW’s pull

But the main draw of DPW Amsterdam has always been the high-level speakers it attracts. Last year saw the likes of visionaries such as Dr. Elouise Epstein, Partner at Kearney, Yossi Sheffi, Director of Massachusetts Institute of Technology and author David Rogers deliver keynote sessions. Knevel recognises the importance of bringing in great speakers and also sees the value in outside perspectives too. “We want to bring in more CEOs for a different perspective with the right leadership experience,” he explains. “We had Guenther Steiner (former Haas Formula One team principal) who provided an interesting perspective from a different industry. This year, we’re bringing in the former CEO at Unilever Paul Polman. We’re always on the lookout for fresh speakers and they don’t just have to CPOs for them to be considered.”

With an eye on the future, Knevel is looking forward to procurement’s next few years and how DPW fits within that. “Some say we are at the beginning of a replacement cycle in digital procurement,” explains Knevel. “There’s so much happening in the coming years. Of course, it will not only be driven by technology and AI, but foremost by the people, founders and leaders. It’s people that bring innovation and make the connection. If you look through the lens of opportunity from a digital and sustainable procurement angle, there’s so much to be excited about over the coming years.”

Procurement leaders are increasingly held up as the drivers of all things new, strategic, and sustainable within their organisations. 

Sourcing and procurement is no longer just a way to cut costs. It’s almost become part of the necessary preamble to any article about procurement strategy. Every article glibly notes that the discipline is evolving, and therefore take a more strategic, considered view that looks beyond simple cost containment. Box: ticked.

“Sourcing is getting smarter. To start, many organisations have already pivoted from a tactical to a strategic sourcing mindset—which can make all the difference when it comes to gaining and retaining a competitive advantage,” writes Alexandra Jonker for the official IBM blog. She adds that “organisations with strategic sourcing mindsets look beyond price and cost savings-centred supplier selection initiatives. They instead focus on continuous improvement. They consider factors—like supplier performance or sustainability—that support long-term partnerships, advance business needs and increase purchasing power.” 

However, new data gathered by sustainability software provider Sedex has uncovered a worrying gap between rhetoric and reality. 

Sustainability? In procurement? Never heard of it 

The Sedex report surveyed 250 senior procurement leaders at North American companies at the end of last year. Polling procurement leaders at some of the US’ largest companies led to some troubling results. 

According to Sedex, 40% of procurement leaders in North America are “ignoring sustainability” when operating their procurement functions. Half of all procurement leaders “acknowledged that sustainability remains an afterthought, or isn’t considered at all, for business decisions generally.”

Maurizio Capuzzo, Sedex CMO, called the findings “a wake-up call for any business that is serious about its social and environmental performance,” adding that the report “underscores the urgent need for executive teams to realign ESG commitments and operational goals, to truly embed sustainable practices in their organisations.”

Why the discrepancy between rhetoric and action? 

The alarmingly widespread inaction on procurement sustainability is likely down to a combination of trends. These include a slow global economy, as well as other disruptive events. Ironically, one of the biggest drivers of increased logistical costs and shipping disruptions has been extreme weather: a glaring symptom of the climate crisis. 

However, the fact companies are choosing to prioritise cost over meaningful sustainable reform shouldn’t be surprising. By design, companies beholden to their shareholders require extraordinary pressure to prioritise anything but profit maximising behaviour. It’s why there are laws saying you can’t put lead in the paint and asbestos in the ceilings. Earnest corporate rhetoric has proven time and again to be insufficient. As soon as cost comes into the equation, concrete steps towards progress are set aside. Unless, of course, there is adequate regulatory motivation. Regulation is a necessary step in curtailing corporate irresponsibility, and the procurement sector is, it turns out, in much more dire need of regulation than it seemed. 

The Sedex report supports this assertion: 37% of procurement leaders surveyed said they were “unaware of sustainability-related legislation that impacts their businesses.” A worrying 34% of respondents didn’t also said they couldn’t identify any benefits to behaving sustainably when measured against short-term procurement goals such as supply continuity and competitive pricing. The report’s authors added that their findings “highlight the gulf between company commitments and the day-to-day realities of business operations.”

Some of the best innovation is born through frustration with existing offerings.

Having built their careers in manufacturing, SourceDay’s founders grew tired of unnecessary costs, increased risk, and wasted time and productivity caused by ineffective supplier communication and incorrect ERP data. This led them to create a solution that would prevent direct materials inventory surprises and unnecessary costs and also rebuild trust between manufacturers, distributors, and their suppliers.

Today, SourceDay is a bi-directionally integrated platform for any ERP where the purchase order (PO) demand is generated. The company delivers 100% of purchase order demand to suppliers through the lifecycle of a PO. This is to ensure that suppliers have no surprises and always have the most real-time, accurate source of truth. An ERP streamlines many of a company’s internal processes, but when it comes to keeping track of critical PO changes in a timely manner, procurement teams are still stuck in manual work, such as spreadsheets, emails, and post-it notes.

By digitising and creating configurable smart rules for PO change management, SourceDay removes up to 80% of the manual procurement work. This is while eliminating the persistent question marks around end-product delivery times and costs. Through seamless integration with a customer’s ERP, SourceDay ensures that every purchase order is delivered to suppliers without fail and allows for true 100% supplier collaboration through a portal, email, or EDI.

With the transformative addition of complete PO visibility, SourceDay doesn’t just enhance existing ERP capabilities. It sets a new bar for PO accuracy and on-time delivery for direct materials procurement. In today’s digital age, embracing such clarity and intelligent use of technology isn’t a luxury; it’s the key to ensuring a business remains agile, robust, and ahead of the curve.

Since its inception, SourceDay has been on a mission to eliminate manual work, production delays, and inbound supply inaccuracies from the procurement lifecycle. In just under a decade, SourceDay went from an idea on a whiteboard in a small office to nearly 300 customers and more than 80,000 suppliers globally who interact through the solution daily.

People are a huge difference-maker

As CEO, Tom Kieley is used to making tough decisions. However, he explains that hiring the best people for the right stage of the journey is the most challenging aspect of the role. Without great team members, a business can’t be successful long-term. While the organisation’s requirements dictate part of the job criteria, finding people who are already equipped with knowledge of the industry and the customer set plays a crucial role in the hiring process.

“We want to deliver value to the customers efficiently and effectively,” he explains. “We’re fortunate we have executives who are visionaries in their fields. They can help carry the business to be the industry-leading solution while disrupting the supply chain technology space.”

Experience across the company

“Hiring people with highly relevant industry experience has been very important. For example, we have former buyers on our sales team. They’ve walked in our customers’ shoes and had to live with the pain that SourceDay solves,” explains Kieley. “We have team members who were manufacturing operators, so they understand the challenges of manufacturing first hand.”

The impact that relying on external suppliers can have on a manufacturer when things aren’t going according to plan is often significant and costly. “A minute, an hour, a day of downtime from a missing part or component drastically impacts the bottom line of manufacturing, which is already a low-margin, highly cash-sensitive organisation.”

Removing the Buyer/Supplier Communication Gap with Unified Supplier Collaboration

A major frustration (and point of risk) in procurement, especially for manufacturers and distributors, is the constant PO line changes impacting production scheduling. Buyers are caught in a nearly no-win situation. They can waste hours they really don’t have manually chasing down and staying on top of changes (hoping they or their supplier didn’t miss something critical) or they can wait until the ERP updates (often the next day) and be behind on time-sensitive decisions.

“There isn’t a manufacturer or distributor who hasn’t felt the painful ripple effect of missing a critical PO change,” says Kieley. “It impacts inventory costs, expedite fees, production and labour schedules, and end-product delivery dates.”

The historical challenge has been the absence of a closed-loop supplier collaboration platform that accounts for supplier workflows as much as buyer workflows. SourceDay has solved this issue with Unified Supplier Collaboration (USC), a simple, yet powerful workflow tool that allows buyers and suppliers to communicate and collaborate through their preferred channel. That can be the SourceDay portal (even without a login or training), an EDI connection, or through normal email communications. The SourceDay solution captures and updates critical PO line changes–in real time–directly into the ERP, retaining a single, accurate source of truth for shipment, demand planning and production scheduling. “With USC, there’s no more supplier surprises, no more guesswork, no more inaccurate ERP procurement data, no more “where’s my part?” and no more ripple effect across the organisation,” Kieley adds.

SourceDay: How everyone benefits

• Receive and manage timely PO confirmations and changes from suppliers.
• Find MRP inaccuracies with accurate PO data.
• Build strong, performance-driven supplier relationships with supplier scorecards.
• Robust US-based training, onboarding, and support.

Buyers

• Accurate lead time and MRP data to significantly improve on-time delivery.
• Increased visibility into KPIs for data-driven decision making: OTD, move-ins/move-out, price changes and more.
• Streamlined integration and onboarding for speedy time to value.
• Robust implementation and ongoing support.

IT

• Quick integration ensures speedy time to value and return on investment.
• Lightweight IT integration with any ERP.
• Training done by SourceDay’s team to take pressure off IT teams.

Executives

• Reduce business risk caused by external suppliers.
• Decrease customer SLA penalties.
• Lower average inventory on hand to increase inventory turns.
• Increase ERP data accuracy for key business decisions.
• Increase visibility into repeatable and accurate revenue forecasts through improved demand and scheduling data.

COVID-19 drive

The COVID-19 pandemic in early 2020 highlighted many inefficiencies in supply chains. Pre-pandemic, the supply chain technology space was limited and there wasn’t much innovation beyond traditional ERPs. Kieley explains that boardrooms were not yet at the stage to buy technology as a “differentiator” and were instead throwing people at the problem. “When the pandemic hit, it really highlighted challenges that had always just been overcome through brute force and people,” reveals Kieley. “You were forced to send everyone home other than essential workers in the warehouse and shop floor. This significantly impacted visibility and communication with critical suppliers.”

The pandemic exposed the gaps that manufacturers and distributors had in their business model, which created a great deal of risk in operations. Kieley illustrates the stark paradox manufacturers were experiencing with and without SourceDay to help keep the lights on. “We had several hundred customers we were able to get data from that showed their buyers never skipped a beat because of SourceDay,” he reveals. “Many customers were able to tell us they were getting 90, 95% on-time delivery even through Covid. In contrast, companies that weren’t using SourceDay ground to a screeching halt for six to 12 months while many of them were trying to get visibility and communication back with their suppliers. Outside of email, everyone was back at home, lost.”

Choosing the best emerging technology

Indeed, technological transformation is a big part of most organisations’ puzzle. With new technology causing significant waves of interest in procurement and supply chain, there is a rush by technology providers to quickly bring technology advances to market, often before actual value delivery has been vetted out. SourceDay has taken a different approach. The company has bypassed some hotly discussed emerging technologies because of the low impact to customer success.

One area of tech SourceDay has researched and tested extensively is artificial intelligence (AI). Properly utilised, AI has the potential to drive millions of unnecessary manual hours out of the procurement process. “We’ve added strategic experts from supply chain and data science backgrounds to deliver more solution value to customers. This is more proactive visibility, change tracking, and analytics; information that used to live in error-prone spreadsheets and email or was otherwise unusable,” explains Kieley.

Gen AI drive

One of the biggest crazes of the past few years has been generative AI. Since the rise of OpenAI’s ChatGPT model, leaders have been rushing to find ways to leverage chatbots into their processes. But, it comes with risks attached because large language models are not always reliable and often incorporate made-up data.

In contrast, Kieley explains that SourceDay’s data set solves the accuracy problem with AI. “The problem is that gen AI models are often opinions and points of view that are not always factual,” reveals Kieley. “Our dataset is factual and action-derived. It reflects what has happened in the past on a supplier’s ability to hit on-time delivery, price changes, quality, responsiveness, ability to ship on time in full, and all of the components that happen through those transactions that again, otherwise existed in email or voice that were uncaptured. As a result, our AI is able to use fact-positive historical data to provide insights and recommendations to customers.”

Customer case study: Chatsworth Products (CPI)

Chatsworth was facing a number of supplier-related challenges with their Epicor ERP, all of which centred around how they were managing the process of acquiring parts and raw materials. They predominantly relied upon email, phone calls, faxes, and spreadsheets to manage supplier communication, none of which facilitated visibility or easy tracking.

As a result, before working with SourceDay, Chatsworth’s suppliers were chronically late delivering materials. The manufacturer had to amass significant buffer stock to keep production going. After watching a demo of the SourceDay platform at an Epicor user group, Chatsworth immediately knew they needed this solution to resolve supplier issues.

SourceDay enabled Chatsworth to improve supplier collaboration to such an extent that on time delivery (OTD) went up to 90%. In doing so, the company was able to shift to a just-in-time model and reduce on-hand WIP inventory needs by 66%. This allowed 90% of warehouse space to be freed up and converted to a manufacturing floor.

Chatsworths’ Products Senior Director of Materials and Logistics said: “Three years ago, we were living in chaos. Now, with our hyper-growth and with the new tool, I can’t remember the last time we were short a part.”

Not only did SourceDay help minimise risk impacting Chatsworth’s business, but the benefits allowed them to optimise factory operations to drive more revenue through production.

Eye on the future

Looking ahead, Kieley is optimistic about the upcoming years at SourceDay. Having achieved considerable success in a relatively short time, he is showing no signs of slowing down amid an exciting time for procurement and supply chain. “Our future is bright. We have built strategic partnerships with organisations that are additive to our platform and/or we are additive to their platform,” he says. “It’s vital in helping SourceDay reach a bigger market and start going more global. Today, most of our customers are in North America.

“There’s truly nobody doing this in the way we do it. And explicitly, I think groundbreaking, transformational technology for manufacturers and distribution companies enables them to succeed in otherwise challenging environments. Global conflicts are becoming an increasing challenge to supply chains. If you’re shipping into parts of Europe today, you’re having to spend 25% or 30% more. Technology is here to stay in this space, and there’s not enough awareness of our platform. We’re about the specific supply chain procurement market we’ve created and solved. For us now, it’s about building awareness in the manufacturing and distribution verticals and helping organisations to thrive.”

Public procurement of medical equipment has, in the last few years especially, emerged as a complex, vital, and controversial topic. Now, small nations are experimenting with collective procurement in order to redress the inequalities that defined the COVID-19 pandemic response. 

COVID-19 vaccine procurement highlighted medical procurement inequality

The vaccines developed to inoculate against the coronavirus were the fastest-developed vaccines in history. In many ways, the speed and scale at which theCOVID-19 vaccine was carried out was a triumph. The effort was the “largest and most complex vaccine rollout in history,” according to WHO Regional Director For Africa, Dr Matshidiso Moeti. Today, healthcare organisations around the world have administered more than 13.5 billion doses to patients. 

However, from the earliest days of the vaccine rollout, distribution efforts faced criticism for highlighting the unequal access to medical supplies that persists between ex-coloniser states in the Global North and their former colonies in the developing world. In September 2021, WHO Director General, Dr Tedros Adhanom Ghebreyesus, pointed out the inequality in vaccine administration. While “more than 5.7 billion doses have been administered globally … only 2% of those have been administered in Africa,” he noted.

Three years later, more than 70% of people around the world have received at least one dose of the vaccine. However, the vaccinated portion of the population in low-income countries is just 32.7%. 

COVID-19 vaccines were the rule, not the exception  

COVID-19 vaccines are a unique (one hopes) case in many ways. But the glaring disparity between the ability for low-income countries in Africa and Latin America to procure doses of the vaccine and wealthy nations in Europe and North America is not unique to Pfizer and Moderna. 

In a 2023 article by researchers at Debre Markos University in Ethiopia, authors Anderaw Yanet et al argue that “the availability and affordability of safe, effective, accessible, and high-quality essential medicines” represents a “critical benchmark” in measuring population health. Their conclusion: that in Africa, the availability and affordability of essential medicines face numerous challenges. Chief among them, they highlight “unaffordable prices and non-availability of medicines” for many people throughout the continent.  

Larger nations like Ethiopia, Uganda, and Ghana experience systemic struggles when it comes to procuring medical supplies from overseas. For smaller nations with significantly less buying power, the problem is even worse. Many countries, especially small, ex-colonial islands in the Carribean and around the coast of Africa, struggle with medical procurement. The barriers to this are both logistical and financial, as public procurement teams lack the funds and organisational impact to compete with larger nations for materiel.  

Collective buying for small African islands states

Last month, a pooled procurement program comprising Cabo Verde, Comoros, Guinea-Bissau, Mauritius, Sao Tome & Principe and Seychelles, that form the Small Island Developing States (SIDS) from Africa elected Mauritius as host. The decision, reports the WHO, is a critical step towards launching “joint operations for increased access to affordable, quality-assured and safe medicines and medical supplies.”

The program aims to coordinate the purchase of selected medicines and medical products affordably, harmonise medicines management systems, improve supplier performance and reduce procurement workload.

“As a collective we have come together to explore different ways of working so we can make our voices heard in all the important global arenas. Even if we don’t always have the capacity on our own, through SIDS we can do it. We may be small, but we can be big in our actions,” said Hon Peggy Vidot, Minister of Health of the Seychelles. If the program is a success, it could see more small nations group together to collectively improve their purchasing power.

Procurement leaders are increasingly trapped between concurrent pain points. Factors like inflation, economic uncertainty, geopolitical conflict, and the climate crisis all conspire to create an increasingly challenging landscape. At the same time, the demands placed upon procurement to cut costs and mitigate risk are increasing. Not only that, but CPOs are also expected to be drivers of digital transformation, ESG reform, and strategic innovation within the business.  

The answer to this juggling act may be the adoption of strategic sourcing. 

What is strategic sourcing? 

Strategic sourcing is the practice of marrying digital tools with the procurement process—especially when it comes to selecting and managing suppliers. Procurement functions that engage in strategic sourcing engage in finding, evaluating, and choosing suppliers which meet the company’s needs. It takes a longer view than traditional sourcing, which focuses on reducing the cost of products or services. Instead, strategic sourcing focuses on driving efficiency within the supply chain over the long term.

That doesn’t mean that strategic sourcing will result in a reduction of revenue or increased costs. The strategy takes a longer view, and can lead to more significant cost reductions over time, especially—as noted by Gartner analysts—when supplier agreements result in “mutually beneficial outcomes.” 

A more collaborative approach to supplier relationship management

This collaborative approach to supplier relationships leads to new opportunities for value creation for both parties. Not only this, but a more strategic relationship is more able to mitigate risks than a more transactional relationship. 

Organisations can more effectively collect and analyse data by concentrating supplier information in a single repository. As a result, organisations can more precisely track expenditures, creating the opportunity to optimise and potentially streamline vendor relationships. 

Supplier discovery can be enhanced by accessing supplier data through a digital business network. Deployed correctly, this empowers organisations to request proposals more easily and foster competition among suppliers. Utilising automation to accelerate workflows, simplifying the process of collecting digital signatures, and establishing an electronic contract repository with renewal alerts can all streamline the strategic sourcing model.

Lastly, the automation and digitisation of sourcing processes allows organisations to operate more swiftly. This then helps create feedback loops for continuous improvement, and allows CPOs to consistently assess suppliers to ensure the most favourable sourcing agreements. The benefits only compound over time.

US-based agricultural goods trader Archer-Daniels-Midland (ADM) has introduced a new level of digitally driven transparency into its procurement process. The company loaded and shipped the first vessels of verified, fully traceable soybeans from the US to Europe in January.

Regulatory pressure to increase transparency  

ADM initiated the pilot program in order to adhere to new EU regulations. Introduced in 2023, the regulations prohibit contact with deforestation in organisations’ supply chains. ADM reports the program traced the passage of 2.4 million bushels (64,000 tonnes) of verified soybeans to Europe. 

“While there are still issues—including how full compliance will be defined, measured and enforced—to work through in advance of the EU’s deforestation regulations, we are confident in our ability to continue to deliver to customers in Europe,” said Jon Turney, ADM’s vice president, EMEA Crush. The tracing program utilises a mixture of digital technology, according to ADM. They revealed that this includes FBN’s Gradable digital platform. Next, ADM applies the digital stack to its origination and transportation capabilities. The result is an allegedly successful attempt to verify, trace and segregate participating beans from farms to their final destination.

“At ADM, our future and success depend on the farmers we work with and for, which is why we’re committed to helping support their businesses and their legacies by ensuring that global markets remain open to U.S. agricultural products,” said Matt Hopkins, ADM’s vice president of North America River and Export.

100% transparency from bean to customer

ADM representatives say that the company intends to deliver a 100% deforestation-free supply chain by 2025. The company claimed in 2022 that it can trace 100% of its soybean suppliers in Argentina, Brazil, and Paraguay. 

Scope 3 emissions are coming under closer scrutiny throughout multiple industries. This is especially true in the agricultural sector. Soybean producers in particular are widely scrutinised for their role in deforestation across Latin America. ESG targets are becoming more difficult to hit, and organisations need to strive for greater transparency within their procure-to-pay cycle. 

According to a blog post by GEP, there are several steps that drive traceability in the supply chain. Embedding ESG into the supplier assessment process, collaborating more closely with those suppliers to foster their ESG-focused cultures, and embracing technology driven solutions are all effective steps in increasing traceability as a way to drive ESG goals in the procurement process.

They note: “As the world moves towards standardised reporting and regulatory requirements for ESG, companies that prioritise visibility and traceability across their supply chains will not only meet compliance obligations but also gain a competitive advantage. They will forge alliances with suppliers and consumers, driving positive change and contributing meaningfully to sustainability goals.”

The need to maintain supply chain continuity dominated sourcing and procurement teams’ agendas at the outset of 2023. Slowing global economic growth and increased geopolitical conflict at the outset of 2024, however, are readjusting CPOs’ priorities. 

New research from the Hackett Group has found that cost containment has replaced supply chain continuity as the number one goal of CPOs in early 2024.  

Hackett researchers note that “it is not surprising” that cost containment has retaken the top spot on the list of CPO priorities for 2024. They predict that enterprises looking to address this need will look to boost “process efficiency, process automation, working capital optimisation, and consolidation to shared services.” 

Nevertheless, the challenges posed by the worsening economic landscape threaten to derail many businesses’ plans for growth. 

Economic anxieties dominate the conversation, with business leaders increasingly worried about inflation, interest rates, and the risk of a global recession. Almost half of executives (46%) said they expect labour and skill shortages to disrupt business during the year ahead. Over 60% said they expect inflation to curtail their ability to invest in new business. Over a third (38%) of executives surveyed expected to slow their spending or delay projects if the economic outlook deteriorates in the coming months.

Procurement technology investment will remain strong 

However, the Hackett researchers note that “one area that won’t be in the crosshairs for spending cuts is technology.” 

As predicted by several other reports, procurement teams this year are expecting to have to do more with less. The Hackett survey found that procurement teams expect their workloads to increase by about 8% this year. However, their budgets are only expected to rise by about 1.6%. To make up the difference, spending on technology is expected to increase by about 4.6% across the board.

Emerging technologies like generative artificial intelligence (AI) and machine learning are still finding their applications in the industry. Nonetheless, their potential to automate repetitive tasks in the face of skill shortages is attracting significant interest. 

The Hackett Group’s data suggests that business functions are in the early stages of exploring generative AI. However, leaders said they expect mid-level enterprise funding for generative AI to increase in 2024. A “small but notable” proportion of CPOs ( 21%) said that business transformation through generative AI would be a high or critical priority for 2024.

Generative artificial intelligence (AI) is being explored for its potential applications throughout the sourcing and procurement sector. Potential uses for the technology range from improved compliance to threat modelling and supplier relationship management. 

However, the most impactful application of generative AI—not to mention the one with a good deal of potential to be applied now, not in some indeterminate amount of time when the technology matures—could be to the request for proposal (RFP) process. 

What is an RFP? 

An RFP is a formal document than procurement teams issue to potential vendors. The issuer details the product or service they are looking to acquire and vendors place bids in order to secure a contract. 

An RFP takes the form of a questionnaire-style form requiring potential vendors to enter data about the product or service they can provide. This allows procurement teams to more effectively gather and analyse data from multiple potential vendors in order to make an informed decision. 

RFP pain points 

In both the public and private procurement sector, RFPs are a central element of the procurement process. As such, the manual RFP creation process consumes significant time and resources for procurement departments. 

Delays can derail sourcing cycles and disrupt supply chains. As with any repetitive manual process, RFP writing is also an error-prone process. The consequences can range from an improperly sourced service to a dangerous and expensive breach in compliance. 

Also, the quality of the RFP can affect the quality of vendors who respond to it. As a data gathering tool, a poorly constructed RFP will also produce poor quality data, which can lead to hiring a poor quality vendor. 

Generative AI and the RFP process

The ability for generative AI to rapidly analyse and synthesise information could not only automate and standardise the RFP creation process, but qualitatively improve the design of the RFPs themselves. 

According to McKinsey, generative AI can serve as an invaluable tool when prioritising categories and suppliers based on market development, spend analysis, and supplier leverage. “This analysis prioritises spending with the highest potential to drive value for the organisation, while deprioritizing categories or suppliers where value will be more challenging to obtain,” their analysts note. 

The client team behind the report developed this generative AI powered “RFP engine” to use anonymised and sanitised RFP templates and cost drivers from “more than 10,000 RFPs and their responses” in order to identify and replicate the “best of best” analyses in a fraction of the time. “It also learned what drove winning bids and redesigned future RFPs for optimal bid structure and cost granularity. Finally, it predicted, and prevented, omissions and mistakes in the bids,” note Aasheesh Mittal and Jennifer Spaulding Schmidt, McKinsey analysts.

By intaking vast amounts of data in the form of successful and unsuccessful RFPs, generative AI could potentially allow procurement teams to both automate and enrich their RFP generation processes.