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1、How trending topics,procurement priorities,technologies and start-ups arereshaping the procurement landscape.Table of ContentsForeword02Introduction03How can carbon footprint be reduced through procurement?Managing the untamable:InflationHow to manage your procurement in the era of global supply cha

2、in decoupling?Why procurement can be a main driver for innovationThe application of generative artificial intelligence in procurement0815222731Section 1-Trending Topics0637445158Optimal procurement risk management to excelUnleashing the power of AI in digital procurement:Opportunities,challenges,and

3、 the path to innovationSustainability as a solution for future generations needsAt your service How to employ technology and data to secure the greatest benefit to the Procurement organizationSection 2 Procurement Priorities36Section 3 Technologies65Section 4 Start-ups74Conclusion/Summary86Authors a

4、nd ContributorsAppendix89Capgemini technology maturity modelBottlenecks and best practices6669Foreword2024 INTELLIGENT PROCUREMENT STUDYThe world is ever-changing,and the past couple of years have brought a series of paradigm-shifting transformations.The COVID-19 global pandemic,Russias attack on Uk

5、raine,and recently,the unstable situation between Israel and Palestine,led to a string of events that undisputedly brought forward multiple additional challenges for all markets and companies across the globe.The disruption of the global supply chains tilted the globalization pendulum to the reverse

6、,with more and more countries turning back to protectionism instead of global trade.On top of this,the scarcity or even non-availability of vital goods such as oil,gas,and certain raw materials also sparked a global economic crisis with declining growth rates and soaring inflation in almost all regi

7、ons across the globe.In addition to the above-mentioned short-term impacts,the increasing awareness of climate change as well as the growing emphasis on social,cultural,and environmental responsibilities are changing the way we purchase goods and services around the globe.There is now more emphasis

8、on what goods and services we buy,how and from where we acquire them,as well as the need for more resilience in the supply chain.On the bright side,we also see a lot of positive transformations and innovations.We are on the edge of another fundamental revolutionary change,perhaps the largest one sin

9、ce the inception of the internet almost 30 years ago.The advances in artificial intelligence,machine learning,and natural language processing are breathtaking and intriguing.These technologies are penetrating various domains,being on the verge of widespread adoption,generating numerous new use-cases

10、 and market ready products.This will again alter every aspect of procurement.Self-evidently,all the above-mentioned topics have a significant impact on the supply chain and procurement world and are changing the agenda and focus of chief procurement officers(CPOs),purchasers,and suppliers globally.I

11、n this context,we have interviewed not only our vast network of clients but also Capgeminis procurement and supply chain community,comprising more than 350 experts globally.We also conducted an interview with Philip Ideson(founder of Art of Procurement)to get his views on the art of Procurement,an u

12、nderstanding of the latest trends,challenges and future plans.We have also covered tested concepts that are delivering value in the market.02Summarizing,we observed that our clients are focusing on four key areas,which we have condensed into four segments within our report:Trending Topics,Procuremen

13、t Priorities,Technologies,and The Start-up Landscape.We hope you will enjoy the insights and findings of this report as much as we have enjoyed writing them.Happy reading!FOREWARDAuthors:Kadir TekinDico van DijkThomas GannonIntroductionINTRODUCTIONThe study delves deep into the dynamic realm of proc

14、urement,with a focused examination of four pivotal elements that are shaping the current landscape of procurement practices:hot trends,client priorities,technologies,and the startup landscape.These elements encapsulate the contemporary challenges and opportunities faced by procurement professionals

15、in their pursuit of delivering value and maintaining competitiveness within an increasingly complex global marketplace.The decision to segment our study into these four elements is rooted in the inherent complexity and multifarious nature of modern procurement practices.Procurement has evolved into

16、a strategic pillar driving value across the entire supply chain.This transformation necessitates a holistic exploration that encompasses the diverse facets of procurements current landscape.By dividing our study,we aim to unravel the multifaceted challenges and opportunities faced by procurement pro

17、fessionals as they navigate the intricacies of todays global marketplace.In an ever-evolving world of procurement,where businesses must adapt to a dynamic global landscape,the traditional role of procurement as a cost-saving department has transformed dramatically.In contemporary times,procurement s

18、tands as a strategic partner capable of driving value enhancement throughout the entire supply chain.This ongoing transformation has been gaining momentum,permeating various industries and organizations worldwide.Our study is grounded in a rigorous and systematic approach that combines qualitative a

19、nd quantitative research methods.To ensure the highest level of accuracy and relevance,global teams from Capgemini,boasting extensive procurement expertise,worked tirelessly on the topics at hand.These teams conducted exhaustive market research,delving into the intricacies of the industry,and engage

20、d in a series of in-depth interviews with a broad spectrum of professionals.Our approach involved collaborating with Procurement prioritiesTrending topicsStart-upsTechnologies Client expectations and challenges How to excel risk management Unleashing the power of AI Sustainability as a solution for

21、future generations needs How to employ data and technology Sustainability and carbon footprint reduction Inflation risk mitigation strategies Supply chain resilience and decoupling Procurements role in driving innovation Application of Gen AI in procurement Innovative startups in procurement areas D

22、isruptive solutions in supplier discovery,sourcing,supplier management,contract management,and spend management&reporting analytics The role of startups in advancing sustainability and Al in procurement Insights from in-depth interviews with startup founders Evolution and maturity of Source-to-Pay(S

23、2P)platforms Challenges and considerations in technology adoption Emerging technologies and their impact on procurement A maturity model for digital procurement initiatives2024 INTELLIGENT PROCUREMENT STUDY03Authors:Daniel FichtlschererNadine ReidenbachChristina KochLukas Grnewaldprocurement leaders

24、 who are at the forefront of innovation,as well as consulting with finance and supply chain experts for a comprehensive view of the entire ecosystem.These interactions not only enriched our understanding of the subject but also allowed us to tap into a wealth of knowledge and experience that spans a

25、cross different regions and sectors.By leveraging the collective insights and expertise of these individuals,we were able to construct a robust foundation for our findings.This extensive research and collaboration ensure that our study is not just based on theoretical concepts but is firmly rooted i

26、n real-world experiences and practical knowledge.As a result,our findings offer a comprehensive and up-to-date perspective on the ever-evolving landscape of procurement and its broader implications for organizations across the globe.In the following sections,we offer a detailed overview of what each

27、 element of our study encompasses:Trending topics in procurementIn todays business environment,sustainability is a key focus.We emphasize how procurement intersects with reducing carbon footprint,providing insights for organizations to contribute to sustainability and meet global climate goals.We al

28、so highlight procurements role in managing inflation risks and strengthening supply chains by equipping buyers with knowledge,skills,and tools.Suggestions to address inflation risks include enhancing category structures,improving category expertise,monitoring inflation-sensitive categories,and colla

29、borating with stakeholders.Additionally,we examine the impact of decoupling global supply chains on procurement,influenced by events like the US-China trade dispute,COVID-19,sustainability concerns,and geopolitical shifts.We explore procurements critical role in driving innovation through identifyin

30、g and sourcing new products,supplier collaborations,and fostering a culture of continuous improvement.By addressing these topics,we aim to equip professionals with the insights needed to navigate challenges and seize opportunities.Finally,we delve into the transformative potential of Gen AI in revol

31、utionizing procurement processes.By harnessing real-time data analytics and leveraging advanced automation,Gen AI empowers procurement managers to make informed decisions,optimize operations,and drive strategic value within their organizations.We explore how Gen AI serves as a supportive virtual ass

32、istant,augmenting the capabilities of procurement professionals and positioning them as pioneers in value-driven procurement practices.Procurement prioritiesUnderstanding the perspectives and priorities of procurement clients is essential for delivering value.Current challenges have been analyzed to

33、 be able to anticipate them,recover from their impacts,and understand how procurement organizations can adapt to these challenges and remain competitive.We present an in-depth analysis of client expectations,challenges,and strategies.By aligning procurement efforts with client priorities,organizatio

34、ns can foster stronger partnerships and drive success.The overall findings yielded valuable insights into the digitization of procurement,the adoption of advanced technology,the increasing importance of risk and sustainability in both operations and supplier management,and the essential skillset nec

35、essary to enhance the effectiveness of the procurement function.Technologies in procurementModern procurement relies heavily on technology to enhance efficiency,compliance,transparency,and simplicity.These factors have become essential for long-term success and scalability,yet the abundance of techn

36、ology options has created complexity for decision-makers.Source-to-pay(S2P)platforms are maturing and offer robust solutions for various businesses.However,many organizations arent entirely satisfied with their choices,as evidenced by recent research showing 82%of CPOs regret their platform decision

37、s.2024 INTELLIGENT PROCUREMENT STUDY04INTRODUCTIONEmerging technologies provide opportunities for further digitization and automation,but successful implementation requires careful planning.In this section,we introduce a maturitymodel that guides digital procurement initiatives by prioritizing sourc

38、e-to-pay fundamentals before integrating new technologies.We also address common challenges and share best practices for success.Our insights help organizations make informed decisions about technology adoption and digital transformation.The start-up landscape in procurementThe procurement startup e

39、cosystem is vibrant and disruptive.This section explores innovative solutions offered by start-ups in key procurement areas like supplier discovery,sourcing,supplier management,contract management,spend management,and reporting analytics.It delves into how these start-ups are reshaping traditional a

40、pproaches and their potential impact on businesses.Additionally,it highlights two major trends in procurement:sustainability and artificial intelligence(AI),and how they enhance ethical,efficient,and intelligent procurement.To offer an in-depth view of the procurement startup landscape,we establishe

41、d clear criteria for identifying start-ups in this sector,creating a comprehensive longlist.After further evaluation,we narrowed this down to a focused shortlist.Deep-dive interviews were then conducted with the most innovative and relevant start-ups,to gather valuable insights into their strategies

42、,innovations,challenges,and future visions.This helped in painting a clearer picture of the overall startup landscape in procurement.This study integrates these four elements into a coherent narrative,offering a panoramic view of the ever-evolving field of procurement.It serves as a valuable resourc

43、e for professionals seeking to stay ahead in a rapidly changing landscape,for researchers aiming to deepen their understanding of contemporary procurement dynamics,and for organizations committed to leveraging procurement as a strategic enabler of growth and sustainability.Overall process from sourc

44、ing to accounts payable,also known as Source-to-PayInvoice receiving,processing and paymentOperational activities to place purchase order,including requisition creation,PO creation,goods/services receipt.Also known as Purchase-to-OrderStrategic sourcing,contract management,supplier information and s

45、upplier performance management activitiesOperational purchasing activities onlyOperational purchasing+accounts payable activitiesAccounts payable activities onlyAll sourcing,purchasing and accounts payable activitiesThe selection of a supplier,negotiation,contract creation,contract+supplier performa

46、nce management and supplier information.Also known as Source-to-ContractProcurement:Accounts Payable:Source-to-Contract:Purchase-to-Order:Purchase-to-Pay:Order-to-Pay:Source-to-Pay:Purchasing:Sourcing:DefinitionsTable 1:Definitions used in this reportINTRODUCTION2024 INTELLIGENT PROCUREMENT STUDY05T

47、RENDINGTOPICSSECTION 1SECTION 1-TRENDING TOPICS2024 INTELLIGENT PROCUREMENT STUDY06What are the trending topics that CPOs are dealingwith today?We picked several themes that are high on the agenda of many procurement leaders and have greater long-term relevance to the field.Carbon management is the

48、first area of interest;this aspect is undeniable in procurement,given the growing need to reduce carbon footprint and procurements impact on them.The second issue that was on the radar screenat least for the developed economiesduring the past few decades was inflation.Recently,due to macro-economic

49、and political factors,it grew unexpectedly high and put a lot of pressure on procurement functions to achieve their targets.The third is supplier collaboration.The topic has been around since the turn of the century,but the race for innovation gives the topic a renewed sense of purpose.Lastly,decoup

50、ling of supply chains,which reflected geopolitical tensions and became of significant pertinence during the COVID-19 pandemic after years of globalization.Is it true that there is a growing trend towards decoupling supply chains today?In this section,we will share our perspective with regards to the

51、 current developments on these topics and review the latest trends.SECTION 1-TRENDING TOPICSPhilip Ideson is the Founder and Managing Director of Art of Procurement,a media,and advisory company that helps procurement leaders accelerate transformation.Prior to Art of Procurement,Philip led procuremen

52、t transformation,category management,and sourcing programs for clients of Procurian and Accenture.Previously,Philip was Head of International Procurement,Sourcing&Third Party Risk Management at Ally Financial and has worked across multiple industries,geographies,in both Direct and Indirect procureme

53、nt.07How can carbon footprintbe reduced through procurement?On December 12,2015,the Paris Agreementa legally binding international treaty on climate changewas adopted by a record 196 countries.It established goals more ambitious than its predecessor(the Kyoto Protocol),including the objective of res

54、training the global temperature rise to below 2C and actively pursuing efforts to limit it to 1.5C.Three main institutions revolve around the Paris Agreement,which now provide the overarching goal in terms of climate ambition:To have a better understanding of the origin of carbon emissions,the GHG P

55、rotocol introduced the concept of emission scopes,categorized into three scopes:How does it apply to procurement?Authors:Augustin Le DiberderMaiwenn Gony The GHG Protocol was created in 1998 to respond to the growing need to measure and manage the greenhouse gas(GHG)emissions of businesses,governmen

56、ts,and organizations.This institution provides a practical and standardized tool for achieving the Paris Targets initiative.The Science Based Targets Initiative(SBTi)was created right after the Paris Agreement aiming to incentivize companies to establish emissions reduction targets in alignment with

57、 the latest scientific research on preventing the most severe impacts of climate change.The main mission of the SBTi is to collect and record a companys global carbon reduction commitments.The Carbon Disclosure Project(CDP)was created in 2000 to collect environmental data from businesses(including t

58、heir carbon emissions)and assign grades to companies,allowing them to identify their environmental risks.2024 INTELLIGENT PROCUREMENT STUDY08SECTION 1-TRENDING TOPICSFigure 1:Scopes of Emissions|Source:GHG Protocol standard1 Carbon Disclosure Project(CDP)Technical Note:Relevance of Scope 3 Categorie

59、s by Sector Scope 1 emissions are related to direct greenhouse gas(GHG)emissions from a companys own operations and activities.These are emissions produced by sources owned or controlled by the company,and is a result of its operations Scope 2 emissions are related to indirect greenhouse gas(GHG)emi

60、ssions from the generation of purchased electricity,steam,heating,and cooling consumed by a company.These emissions are produced at power plants and other facilities that generate the energy used by the company but are not directly controlled by the company.Scope 3 emissions are related to indirect

61、greenhouse gas(GHG)emissions that result from activities that are not owned or directly controlled by a company but are related to its operations.These emissions are considered as the value chain emissions and can come from a variety of sources such as the production and transportation of raw materi

62、als,employee commuting,business travel,waste disposal,etc.The Scope 3 emissions are divided in 2 main scopes:Upstream emissions Downstream emissionsFor most companies,goods&services under scope 3 represent around 80%of the total emissions.More specifically,scope 3.01,which refers to procurement of G

63、oods&Services can represent up to 80%of scope 3.This makes the procurement function a key actor of the carbon reduction approach of any company.Chart representing the different emission scopes:SECTION 1-TRENDING TOPICSCO2CO2CO2CO2Scope 2INDIRECTUpstream activitiesDownstream activitiesReporting compa

64、nyScope 3INDIRECTScope 3INDIRECTScope 1DIRECTCO2CO2company facilitiesleased assetsemployee commutingbusiness travelwaste generated in operationstransportation and distributionfuel and energy related activitiescapital goodspurchased goods and servicespurchased electricity,steam,heating&cooling for ow

65、n usetransportationand distributionprocessing of sold productsuse of sold productsend of life treatment of sold productsleased assetsfranchisesinvestmentscompany vehicles2024 INTELLIGENT PROCUREMENT STUDY09How to start your procurement carbon reduction journey?To meet your organizations growing need

66、 to define its procurement carbon reduction trajectory,Capgemini has developed a tailored methodology to measure and reduce carbon emissions together with procurement and carbon experts.It is applicable to any business sector and consists of a 4-step approach:Source:Capgemini InventCalculating your

67、carbon footprint will help you to have a clearer understanding of where your carbon emissions are coming from and will allow you to focus on two to four main categories known as hotspot categories.Before performing any carbon footprint calculation,the baseline year must be defined to have a starting

68、 point for your carbon reduction journey.Capgemini has strong partnerships with many solution providers and start-ups that can help you with your carbon footprint calculation.A carbon footprint calculation results from a two-factor formula:First step:Measuring the carbon footprint1MEASURE FOCUS ACT

69、MONITORMEASUREFOCUSACTMONITORACTIVITYDATAInternal DataExternal DataEMISSIONFACTORX=CARBONEMISSIONKg CO2 equivalent emitted per unitTotal Ton CO2 equivalentSpend(in euro,dollar,etc.),Units of productDaysKilograms,liters,etc.2024 INTELLIGENT PROCUREMENT STUDY10SECTION 1-TRENDING TOPICSCapgemini illust

70、rates the calculation guidance from the GHG Protocol through 5 types of calculation methodologies based on both access to data and accuracy:The accuracy of the calculation will depend on the unit chosen.Generally,a spend-based calculation is less accurate than a quantity-based calculation,and the mo

71、re accessible the information,the less precise it is.Once the company has performed the first calculation,the aim is to update the calculation on a regular basis by using more precise types of calculations.Emission factors can be found on a public and private database or calculated through a life cy

72、cle analysis based on either cradle-to-gate or cradle-to-grave methodology.UNITUNITUNITACCURACYRESULTSXEMISSION FACTOREMISSION FACTORMETHODNAMESpend26 M 0.36 KC02E/=9335 TCO2E169 KC02E/=4077 TCO2E0.29 KC02E/=7540 TCO2E157 KC02E/=3788 TCO2E152 KC02E/=3667 TCO2E24130laptopsMarketaverageSpend-based met

73、hodSupplier spend-based methodAverage data methodSupplier spend-based methodSupplier specific methodMarketaverageMarketaverageSupplier dataSupplier dataXXXXQuantity(units,kg,etc)Of laptoppurchasedRAW MATERIAL EXTRACTIONMATERIAL MANUFACTURECradle-to-gateCradle-to-gateCradle-to-graveCarbon lifecycle a

74、nalysis of a laptop*:124169Example:1212Cradle-to-gravePRODUCT MANUFACTURETRANSPORTATIONPRODUCT USEEND OF LIFESECTION 1-TRENDING TOPICSThe database can be supplemented with information communicated by suppliers.Most companies perform a first spend-based calculation to refine this calculation through

75、a mix of spend-based and quantity-based methods,which provide more accuracy.There are additional options that apply according to specific company needs:supplier quantity-based,activity quantity-based,etc.2024 INTELLIGENT PROCUREMENT STUDY11Measuring your carbon footprint allows you to have transpare

76、ncy on your main sources of emissions(at the product or supplier level).It is interesting to identify the most emissive categories to focus most of your reduction efforts on and to target the potential adjustments to bring to the overall procurement ecosystem.The main approach to doing this is based

77、 on the Pareto approach:20%of your categories represent 80%of the total emissions.To effectively address this challenge,a deep dive into the most emissions-intensive categories is essential.By thoroughly examining these high-impact areas,we can fine-tune our calculations,identify suppliers and produ

78、cts that contribute significantly to our carbon footprint,and prioritize actions accordingly.This approach allows us to not only target the broader issue but also dissect it into actionable components.Through this process,we cancreate a prioritization matrix that guides our efforts towards maximum i

79、mpact reduction.By focusing on the categories,suppliers,and products withthe highest emissions,we can make informed decisions to drive meaningful change in our carbon reduction initiatives.Now that you have a clear vision of your emissions and your hotspot categories,to start acting on your carbon r

80、eduction,you need to identify carbon reduction levers.The Capgemini methodology involves the identification of three types of levers:Second step:Focusing on the hotspot categoriesThird step:Identifying and implementingyour carbon reduction levers23 Volume Product of service Supplier2024 INTELLIGENT

81、PROCUREMENT STUDY12SECTION 1-TRENDING TOPICSThere are multiple sources to identify carbon reduction levers.These sources may involve employing industry benchmarks or conducting interviews with suppliers.Notably,Capgemini has introduced a valuable resource in the form of the Capgemini Low Carbon Navi

82、gator tool.This unique and powerful tool effectively consolidates decarbonization strategies tailored to 25 specific sub-industries,providing a sector-specific approach alongside extensive data aggregation and comprehensive analysis.Following the identification of these strategies,it becomes imperat

83、ive to assess their impact on carbon reduction.While quantifying the precise reduction impact of a carbon lever remains a challenging task,it generally involves making estimations rather than achieving pinpoint accuracy in the calculations.Furthermore,beyond evaluating carbon impact,it proves insigh

84、tful to consider a broader spectrum of consequences,encompassing cost implications,business outcomes,and process transformations,among others.Prior to identifying the levers,it is strongly advised to define cross-functional internal and external stakeholders to be included in your approach.The only

85、way to ensure the efficiency of your carbon reduction journey is to monitor related savings on a regular basis and adjust the action plan accordingly.In that regard,we have identified four key activities to ensure viable monitoring.It is important to identify and implement your monitoring tool from

86、the very start of the journey.This will allow you to monitor carbon reduction with the same rules all along the way.It is also critical to define governance around your reduction plan,pilot it with KPIs and dashboards to ensure your objectives are met,and adjust the trajectory with additional action

87、s if necessary.Another key activity is to initiate your suppliers on an action plan by monitoring the impact of the application of the different levers you identify with them.Levers can include reducing consumption(e.g.,travel policy),increasing the product lifespan,reducing dependence on carbon-bas

88、ed energies,and many others.Fourth step:Monitoring your carbon reduction impactsand adjusting your strategy4TYPE OF LEVERLEVERSPOTENTIAL SAVINGSQUALITY MANAGEMENT1Total laptop volume-39%Per employee-18%Variable23SUPPLIER ENGAGEMENTPRODUCTORSERVICE OPTIMIZATION IT devices restricted to 1 device per p

89、erson Extension of laptop lifetime(5 years instead of 3)Repairing instead of replacing Changing for less carbon-impact laptops Suppliers carbon neutral policy Suppliers recycling or upcycling policySECTION 1-TRENDING TOPICS2024 INTELLIGENT PROCUREMENT STUDY1312345Eventually,you will be able to adjus

90、t your carbon savings strategy over time and track the fulfillment of your commitments with the ultimate goal of achieving carbon neutrality(carbon emissions cut as close to zero as possible),and offset any remaining emissions through compensation initiatives.Remember that your carbon savings manage

91、ment is cyclical and will need constant adaptation.THE WHEEL OFCARBON SAVINGSSTRATEGYTo include this carbon dimension in the procurement function,the procurement operating model needs to evolve over the next few years to ensure it considers not only the companys commitment but also the suppliers com

92、mitment.The procurement operating model requires comprehensive transformation across all dimensions,e.g.,the procurement strategy needs to be aligned to the corporate Environmental,Social and Governance(ESG)strategy,including changes in policies and evaluation criteria,etc.Capgeminis vision on the n

93、ext steps 2023/2024:Capgemini has a proven methodology to support its clients in the implementation of sustainability in the procurement core model.Here are some examples:Modification of the tender process to include sustainability measures as a criterion in the supplier selection process,in additio

94、n to traditional criteria such as cost,quality,and timeline.Modification of procurement policies to sustainable procurement policies:how to implement the sustainable dimension in the tender process,supplier selection,and supplier performance.Modification of the supplier relationship management(SRM):

95、how to onboard suppliers in the carbon reduction journey.Sources:GHG Protocol,CDT,ADEME,Capgemini,SBTi,Paris COP21,APQCBASELINE ANALYSISSAVINGS TRAJECTORYBASELINE UPDATESAVINGS STRATEGYSAVINGS CALCULATION2024 INTELLIGENT PROCUREMENT STUDY14SECTION 1-TRENDING TOPICSManaging theuntamable:InflationUnfo

96、rtunately,there is no silver bullet that can mitigate all inflationary price increases.Rather,it requires a mix of traditional buying strategies and category knowledge,the leveraging of internal and external data and collaboration,digital tools,and robust processes to validate and anticipate price c

97、hanges.The overall maturity of the procurement function,as shown in the following article,is a key differentiator to continue to thrive during periods of high inflation.Inflation hit both Europe and the US significantly in 2022.The devaluation of money is rapidly growing across the globe within all

98、sectors and businesses,which has led to a dramatic rise in prices.Consequently,inflation and how to deal with it became one of the top priorities for CPOs in 2023.The recent inflation we have seen in Europe and the US can mainly be attributed to rising energy costs,COVID-19 incentive programs by the

99、 government and central banks,and general disruption of supply chains,which lead to product shortages.As a result,suppliers were forced to raise prices for their goods and services to pass on costs to the buying companies as they continued to trickle down through the supply chain.Inflation is a lead

100、ing agenda item for many CPOs following the recent rise in prices and eventually,procurement will need to learn to adapt to these escalating costs.Authors:Dominik KnotteOthman El BouchattouiFigure 2:Inflation rate,average consumer prices|Source:IMFSECTION 1-TRENDING TOPICS2001 2002 2003 2004 2005 20

101、06 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Inflation rate,average consumer proces(Annual percent change)1086420North AmericaEuropean Union2024 INTELLIGENT PROCUREMENT STUDY15Many procurement functions are not equipped to deal with these relatively sudden price

102、 increases.There are often no processes,instructions,or governance in place to anticipate,validate,and mitigate inflation-driven price increases.The necessary category insights at the appropriate level of detail(e.g.,cost breakdowns)are rarely available,if at all.Buyers are forced to be reactive as

103、they attempt to keep increases to a minimum by negotiating and settling based on instinct rather than data-driven evidence.An additional challenge is that the current generation of procurement professionals in Europe and the US dont have enough direct experience around how to deal with inflation,as

104、the value of money was relatively stable over the last decade in those regions.Overall,many procurement organizations are hoping that they dont see that type of request from suppliers because they simply arent confident in knowing how to deal with them when they do.However,there is good news.We can

105、see a path through the difficult situation businesses are dealing with today.Procurement functions have a tremendous opportunity to mitigate risks caused by inflation and help create a more resilient supply chain.By equipping buyers with the right knowledge,skills,and tools,they can maintain much be

106、tter control over the overall cost.This article discusses potential solutions on how procurement can best deal with inflation.To achieve this,we will need to answer the following key questions:1.What does the ideal target state look like?2.How can inflation drivers in categories be identified and mo

107、nitored?3.What actions can a procurement function take to tackle inflation?The target stateThe target state is based on the culmination of deep procurement knowledge,robust digital processes,and seamless integration of third-party data.In an ideal world,buyers would have access to a dashboard that c

108、ontains electronic cost breakdown data for each of their categories and subcategories.The cost information,depending on the category linked to external data sources such as market indices and developments in price components,is forecasted in both directionsupwards and downwards.Based on a well-defin

109、ed evaluation process and metrics,inflation-sensitive categories can be mapped and monitored in the buyers dashboard.In cases of a significant(expected)price increase,categories are automatically flagged so that they can be evaluated quickly by procurement.As part of their category strategies,buyers

110、 have discussed tactics and agreements with their suppliers to mitigate inflation risks(e.g.,validation mechanisms for price increase requests from a supplier).The strategies are cross-functionally developed,aligned,and documented.The CPO or category managers can easily pull a report with inflation

111、sensitivity per category to see expected trends and their impact on procurement spend.2024 INTELLIGENT PROCUREMENT STUDY16SECTION 1-TRENDING TOPICSIdentifying and monitoring inflation driversThe second question we would like to answer is how procurement can identify and monitor inflation drivers.To

112、achieve this,a procurement function needs to first ensure that an appropriate category structure is in place.Categories are designed to cluster similar types of demand;hence the cost structures of goods and services in one category are alike.The category view is crucial for the prioritization of inf

113、lation risks.The inflation risks can then be evaluated against each other through a simple two-by-two matrix.One axis shows the impact of a category on procurement(e.g.,based on spend volume),whereas the other axis shows the risk for inflation(e.g.,based on historical price volatility).The matrix he

114、lps to prioritize categories,puts inflation risk into proper context,and helps to derive suitable mitigation strategies.To enable those metrics and evaluation logic,category managers need a detailed understanding of cost structures within categories through the utilization of cost breakdowns,which s

115、hould be captured electronically throughout the requisition(RQ)process.The category managers need to identify and flag cost elements that are volatile for price increases.If we take the category aluminium coils as an example,the two main cost drivers are raw materials and the energy-heavy manufactur

116、ing process.This category is likely to be tagged with high risk for inflation and should be monitored closely.The cost breakdowns need to be further enriched by external data sources(e.g.,links to market indices,where possible).The dashboard is key to equipping procurement for ongoing monitoring of

117、costs,and connecting internal and external dataand based on the underlying data model,it should create automated insights and flag changes to the price forecast.Category managers can become proactive and data-driven in the way they manage costs.Figure 3:Exemplary Inflation risk matrixSECTION 1-TREND

118、ING TOPICSRisk for inflationImpact of a category on procurement LowMediumHighIndirectDirectSteelChemicalsPlasticsFreightFacility ManagementT&EMarketing&Comm.Office supplyProfessional services(consulting.)IT2024 INTELLIGENT PROCUREMENT STUDY17Make the provider make that case to you with data.As much

119、as you can,have a data-based conversation;at least you can have a better understanding if its real or not.PHILIP IDESONOur approach at a glanceActions to tackle inflationIn summary,we recommend the following steps to address inflation risks:If procurement can get insights into areas of inflation imp

120、act,the third question is around capabilities and effective strategies and tactics when dealing with inflation-sensitive categories.All the tactics described are dependent on specific industries,clients,and maturity levels.General considerations are category knowledge and buyers skillsets;this is to

121、 ensure that proper category strategies are developed and the whole suite of countermeasures to inflationary categories are leveraged.A structured approach to category strategy development and the creation of category knowledge packs should be enforced and actively trained.It is the simplest way to

122、organize category knowledge and potential levers that can be used across categories.Unfortunately,it is often underestimated and doesnt get the time and attention that it requires to drive successful category management.1.Enhance your category structure,upskill buyers,and improve the category strate

123、gy process for the demand and supply site2.Build category knowledge with a focus on cost structures and capture cost data electronically throughout the sourcing process3.Determine inflation-sensitive categories and establish strong governance around them to measure increases,decreases,and trends4.Co

124、nnect category-cost data with external data where possible and establish buyer dashboards and automated flagging of changes5.Collaborate with internal and external stakeholders to improve demand,consumption,material,and process cost1.Enhance operating model to be able to identify and monitor inflati

125、on2.Build category knowledge and cost knowledge3.Determine inflation sensitive categories and establish governance4.Connect internal and external data5.Collaborate with internal and external stakeholders2024 INTELLIGENT PROCUREMENT STUDY18SECTION 1-TRENDING TOPICSLets begin examining the various tra

126、ditional procurement levers on both the supply and the demand sides.Collaboration with external stakeholdersSupplier contractsIf we think about the supply side,a big lever is the right contractual agreement with the supplier.This can be as simple as closing a long-term agreement or extending a contr

127、act if rising inflation is expected.Another strategy for long-term contracts could be the linking of certain categories(or cost drivers in categories)to market-price indices to adjust the price of a good on a regular basis(e.g.,once a year).There is a fair increase or decrease based on the actual ma

128、rket price of a good.This can help the buyer focus on other cost elements of the piece price,such as other materials,components,overhead,and scrap.Leveraging data for negotiationThe whole supplier management approach needs to become more data-driven.Category managers are overall in a much better pos

129、ition if they prepare for a negotiation using data and statistics rather than instinct or supplier proposals.The dashboard and cost breakdowns dont just help them in the context of inflationbut also make a positive impact on how they perform overall.Enhance collaborationEnhanced collaboration with s

130、trategic suppliers can be the key to jointly improving material or process costs.If suppliers are treated as partners and there are structures in place so that the benefits of initiatives are shared,it can be fruitful to engage with suppliers and tackle inflation together.The ease of collaboration w

131、ith suppliers is dependent on the overall maturity of the operating model.Some of our clients have collaboration platforms in place to enable internal and external stakeholders to work seamlessly together,exchange data and documents,and plan and monitor countermeasures.Leverage supply baseBroadening

132、 the supply base and increasing competition among suppliers is another effective strategy to counteract inflation,depending on the specific cost driver of a category.Looking for alternative sources in other regions could help to seek out alternatives with supply chains that are not exposed to the sa

133、me level of inflation,which could lead to a potential cost advantage.Establish new metricsOften,cost savings alone determine the value created within and outside of procurement.In inflationary times,it is very unlikely for procurement to achieve cost savings(depending on the calculation method).It i

134、s demotivating for category managers to be measured against targets that cannot be achieved.A simple solution for that is to extend the metrics and KPIs and measure the cost that procurement has repelled or the risk or revenue that has been protected.This can showcase the tremendous value procuremen

135、t can bring during inflationary times.The other challenge that I have seen,while speaking to CPOs,is psychological.Because the psyche of a buyer in a lot of organizations is that their worth,their value,their performance and how they are measuredeverything is based on cost savings.PHILIP IDESONSECTI

136、ON 1-TRENDING TOPICS2024 INTELLIGENT PROCUREMENT STUDY19Collaborating with internal stakeholdersReduce or shift demandWhen discussing demand,collaboration with internal stakeholders is the key.It could be as simple as reducing the demand for inflationary categories(e.g.,by challenging the demand,sub

137、stitution,or rescheduling consumption).This is applicable for categories where inflation is driven by certain events,such as disrupted supply chains and where prices tend to normalize after the event is over.Collaboration with supply chain,manufacturing,and other requisitioners is the key to analyzi

138、ng possibilities such as reshuffling a production program or shifting demands further into the future,if possible.Those mechanisms are in place in some industries,such as automotive,where manufacturing programs are adjusted based on material or component shortages.The same mechanism can work in the

139、context of inflation,depending on whether a price increase is expected to be short-or mid-to long-term.Increase process efficienciesFinance plays a crucial role when dealing with business models that lean towards project-based work.The method of calculating projects can be a potential lever if the c

140、alculation is based on historical price data rather than the actual or spot purchase cost.In this regard,the process-cycle time to calculate offers is crucial and can often be improved.If there is a time lag between the calculation of an offer and the actual project confirmation,costs could be calcu

141、lated based on outdated cost assumptions and the margins of the final product.A shorter process-cycle time mitigates this risk.Improve the product and manufacturing processCollaborating with key internal stakeholders,such as R&D and manufacturing,is the next crucial option to addressing inflation th

142、rough material or manufacturing process enhancements.If there is transparency around the cost drivers of certain materials,it empowers procurement to work alongside R&D and manufacturing to optimize specific cost elements.For example,they can substitute or reduce materials through optimized design,n

143、ew materials,or optimized manufacturing processes.From our experience,those initiatives can quickly lead to collaboration with suppliers,where ideas are shared and validated.Improve working capitalThere is another area that is indirectly linked to inflation that has gotten more and more attention fr

144、om procurement and finance in recent years:working capital.The reason for that is the fact that central banks use the increase in interest rates to reduce inflation and keep it within their inflation targets,e.g.,2%at the European Central Bank.There is a positive correlation between interest rates a

145、nd working capital;hence,the importance of actively managing payment terms by procurement and finance depending on the financial situation of a companys increases.Improving working capital is back on the agenda and should be considered as a lever to reduce finance costs.Pass on the cost to the custo

146、merProcurement usually doesnt work a lot with sales,and there is little focus on the sales price of a good.The focus has been mainly on cost rather than the sales price a company can achieve for a product.In the context of inflation,there might be a fair increase in costs in the value chain.This inc

147、rease might simply be passed on to the end customer.The job of procurement is to validate if a cost increase is fair and then share the results with sales and finance.They would further analyze the possibility and impact of passing on costs to the customer.Demand management is another key area to lo

148、ok at.How much of these goods are actually used?Are they using too many of them?More the traditional procurement and sourcing,greater the emphasis on expense management strategies.PHILIP IDESON2024 INTELLIGENT PROCUREMENT STUDY20SECTION 1-TRENDING TOPICSThe frequency of events that disrupt supply ch

149、ains throughout the last few years has increased dramatically due to things like increased political tension or environmental influences.This leads to significant supply chain disruptions and continues to add to inflation.In the near term,we dont expect to see a meaningful change,and it is likely th

150、at the frequency of those events may increase.The encouraging aspect is that technology and data availability have also evolved,which helps procurement organizations to be better equipped and prepared to mitigate these inflation risks.The inflation countermeasures pointed out in this section are not

151、 new to procurement but rather emphasize that overall procurement maturity can be a game changer.Better utilization of tools and data,ensuring that your people are upskilled to match,and procurement can play a huge part in helping to mitigate inflation costs and making your supply chain overall more

152、 resilient.Key takeawaysSECTION 1-TRENDING TOPICS2024 INTELLIGENT PROCUREMENT STUDY21How to manage your procurement in the era of global supply chain decoupling?In the last couple of decades,the trend towards trade globalization seemed to be unstoppable and irreversible.According to the World Trade

153、Organization(WTO),the value of world trade has grown from$62 billion in 1950 to$21678 billion in 2021,which is a growth of 347 times in just about 70 years.This trend accelerated after China announced its open-door policy in 1978,moving away from Mao Zedongs isolationist policy and,with the end of t

154、he Cold War era,bringing hopes for the democratization of the former communist regimes.Since then,many global trade barriers have been lifted or softened,which has encouraged businesses to invest in new geographies in quest for new markets,cost reduction,and access to scarce resources.The global sup

155、ply chains have not only become much more efficient and effective but have also grown in complexity and incurred higher risks.The risks and downsides connected with this successful path became apparent in the last couple of years,whenafter decades of booming developmentthe global political and econo

156、mic landscape underwent significant changes,exposing international supply chains to serious disruptions.The USA-China trade war,COVID-19,sustainability agenda,or the recent Russian invasion of Ukraine,to name a few,increased reflection and emphasis on risk management.Is decoupling of global supply c

157、hains a long-term trend or just a hiccup on the pathto globalization?Author:Maciej ebrokFigure 4:Evolution of trade worldwideEvolution of World Trade,1950-2021Values,Billion USD050001950196019701980199020002010202010000150002000025000Average of valuesYear2024 INTELLIGENT PROCUREMENT STUDY22SECTION 1

158、-TRENDING TOPICSReplacing suppliers in some areas will be easier than others.In general,for simple goods,for example,clothing,such a change is relatively straightforward and can be executed,although it may carry some cost disadvantages.On the other hand,it will prove difficult or even impossible for

159、 some high-tech industries,where the machinery sophistication and know-how are difficult to replicate.Even with government support and heavy investment,it may take 10 or 20 years to build an alternative.Lets not forget that its not only about the know-how or manufacturing capabilities but also the i

160、nfrastructure that will enable efficient transportation of produced goods from a supplier to a buyer.Starting from roads and rail,through warehouses to seaports with enough capacity to store,carry,load,and transport the produced goods.And its not enough to have them but they must work as a system to

161、 be efficient and competitive.Given the above constraints,total decoupling is very unlikely because the supply chain cross-dependencies have been brought to the point where its simply impossible to cut the ties from one day to another.Even adversary political blocks will,like it or not,continue coll

162、aboration at least in some areas,where they cant substitute current suppliers easily.However,we are likely going to experience gradual de-coupling,which will continue with the polarization of the geopolitical landscape.We can already witness such a trend,with governments investing in their domestic,

163、underdeveloped regions,or various forms of friend-shoring or ally-shoring.The example could be a series of government policies in the United Statesspecifically,the American Rescue Plan Act,the Infrastructure Investment and Jobs Act,the CHIPS and Science Act,and the Inflation Reduction Act(IRA)that p

164、rovide enormous amount of money for domestic investments,including green economy or attractive tax breaks.The European Union,while criticizing the US administration for protectionism,is also proposing its own programs,like the Green Deal Industrial Plan and individual countries follow the trendsee t

165、he German Supply Chain Act Lieferkettensorgfaltspflichtengesetz.Eventually,because such policies favor their own businesses over others,there will be tensions between the allied blocks,and we can expect a period of collaboration that will be rough at times.However,we can expect stabilization at some

166、 point in time and the industrial countries in the western hemisphere are likely to keep the collaboration growing inside their geopolitical arena.The other competing block is led by China.Its very apparent that Russia is more and more becoming a junior partner of China,especially after being sancti

167、oned by many Western countries.Besides,while being protectionist and restricting free trade for a long time,China created strong bonds with many less-developed countries,especially in Africa or Asia,which had a high economic dependency on China.While this block is even less consolidated than the Wes

168、tern one,we can expect it to grow more and increase intra-collaboration over time.There will certainly be countries that will try to balance the competing blocks,while taking benefits of collaboration with them and potentially serving as a connector between them.Summarizing our opinion,full decoupli

169、ng is impossible and unlikely,but we can expect a shift towards competing blocks of supply chains,which will be closely connected with the global geopolitical landscape.Although we cant predict with full certainty the direction of global trade development,from todays perspective it seems that there

170、is no return to business as usual soon.So,what can we expect?SECTION 1-TRENDING TOPICS2024 INTELLIGENT PROCUREMENT STUDY23While the future of global trade development is not yet known,supply chain managers should be prepared to deal with any possibility.Proper planning and preparation,as well as org

171、anizational agility,will be the distinguishing factors between those who will win and those who will lose.No doubt,changes like decoupling of supply chains can be painful,but they also bring opportunities.For example,every setup of a new production line is an opportunity for major process improvemen

172、ts and the introduction of state-of-the-art technology.In addition,this may result in a network of smaller production facilities,which would prove more resilient in case of disruptions.So,what strategies should be applied in response to the changing supply chain landscape?In our opinion,strategies t

173、o deal with the decoupling trend can be divided into technological approaches and strategic changes in procurementsee Figure 2.Lets take a closer look at them.How can companies respond to the challenges arising from supply chain decoupling?For me this should be a huge area for procurement to play a

174、role.Its an opportunityto really step up and be proactive in de-risking your global supply chain.Becausewere supposed,as procurement,to have a purview of all the providers within the supply chain.PHILIP IDESONFigure 5:Overview of possible measures to tackle decoupling as a companyTECHNOLOGICAL APPRO

175、ACHESSTRATEGIC CHANGES Increase supply chain visibility to detect decoupling effects early Consider re-engineering of products to shorten the supply chain(e.g.-use of 3D-printing)Focus automation to make onshoring of production economically viable Make technological developments that foster circular

176、 economyEFFECTIVE MANAGEMENT OF SUPPLY CHAIN DECOUPLING Diversify your supply base to mitigate the risks of decoupling Friendshoring Revise product variations to cut unnecessary suppliers Vertical integration of operations Implement circular economy principles2024 INTELLIGENT PROCUREMENT STUDY24SECT

177、ION 1-TRENDING TOPICSIncrease supply chain visibilityTo identify and address risks,buyers must understand their supply chain in detailnot only the direct suppliers,but also the tier-n suppliers,as well as the larger geopolitical dynamics that may impact their deliveries.With such deep and broad visi

178、bility into their supply chain,the buyers can effectively detect potential disruptions and start working on corrective actions early.While it is not a common market practice yet,there are providers who help companies gain visibility and analysis of their tier-n supply chains.The technological advanc

179、ements,including system integrations or the Internet of Things(IoT),enable real-time tracking of deliveries from the place of departure to the destination.If the disruption is identified early enough,the buying company can take corrective measures to avoid or at least minimize the impact of the supp

180、ly shortage.Re-engineering of productsChallenging times often birth innovative solutions.The risks connected with supply chain disruptions may prompt companies to look deeper into potential re-engineering of their products with the objective of reducing dependency on the supply base or enabling the

181、shift of suppliers to less-sensitive locations.While its not a short-term fix,it offers big potential long-term benefits and may stimulate innovation.More focus on automationAs one of the key drivers for offshoring production was labor costs,to tackle this issue,companies may look for more automatio

182、n of the production lines,thereby reducing the impact of the labor element on the product cost.This in turn may enable bringing production back to the country or nearshore,reducing dependencies on far-shore locations,and reducing supply chain complexity.Expand the supplier portfolioFor years,one of

183、the procurement mantras was the reduction of supplier bases,often called supplier optimization.Obviously,the thought behind this strategy was volume consolidation with fewer suppliers,expecting lower prices in return.However,with recent challenges to supply continuity and a heightened focus on suppl

184、y risk management,this traditional strategy should be revisited.Companies may consider building a larger supplier portfolio to enable purchasing from sources located in various geographies,and limit risks.This is already happening with the China plus one strategy adopted by some companies as a respo

185、nse to raised tensions between the USA and China.Friend-shoringFriend-shoring is not a new concept,but its getting traction with political tensions between the USA and China.In simple terms it means buying from suppliers or putting the production lines in allied countries,usually closer to the home

186、market,for example Mexico for the US companies.Beyond reducing political risks,it may also support the sustainability agenda and reduce complexity of the supply chain.Revisit product variationsProduct variations are meant to increase the customer base,by better meeting their needs or tastes,which di

187、ffer from each other.Consequently,the complexity of manufacturing and supply chain operations usually grows.SECTION 1-TRENDING TOPICS“I think that the most obvious strategy is just multiple sources of supply.Ten years ago,we had to rationalize our supply bases,so we only had,say,five suppliers to do

188、 everything.From a procurement perspective,what I see is just more suppliers,more options,being less reliant on a single source,as well as not having the geographic concentration.For example,you can have the same supplier,but youre buying goods from two or three of their locations,which are all base

189、d around the world,as opposed to everything being manufactured on the same line.PHILIP IDESON2024 INTELLIGENT PROCUREMENT STUDY25In response to supply chain challenges,the companies may review their product portfolio and related supply base and delist those that are more prone to supply chain risks,

190、while not being the core offerings.Of course,it requires thorough analysis performed at the company level,not just a supply chain decision.Vertical integrationAnother way to tackle the risks coming from the decoupling trend is vertical integration.Instead of sourcing components from risky geographie

191、s or suppliers,manufacturers can start producing them in their own facilities.Such strategies are already being applied by some manufacturers,like those who invested in battery production.Whilst such a move requires heavy investment and a longer planning horizon,it may pay off in the long-run,by mak

192、ing your own production less susceptible to external factors.Circular economyTo handle decoupling of supplies of natural resources,the principle of circular economy provides the potential to source raw materials domestically,even in the absence of local natural sources.Achieving this will require bo

193、th technological developments in recycling and product design and the strategic establishment of a circular economy.SummaryAs mentioned earlier,the decoupling of global supply chains is currently underway,albeit with varying effects on different industries.It is unlikely that this trend will reverse

194、 quickly;therefore,buyers must take proactive measures to mitigate the associated supply risks.Fortunately,there are numerous strategies to mitigate the adverse effects of this trend.In most cases,there is no single solution to this problem.However,the positive aspect is that buyers have a variety o

195、f levers at their disposal to address this challenge.Moreover,it is not purely a procurement problem.Procurement managers should work even more closely with the business to develop and implement optimal strategies for their company.While we can expect negative effects soon,especially in terms of cos

196、t and availability,the situation offers opportunities for long-term progress at both the technological and business strategy levels.Buyers who can adapt quickly to this new situation will be able to give their companies a competitive advantage.2024 INTELLIGENT PROCUREMENT STUDY26SECTION 1-TRENDING T

197、OPICSWhy procurement can be a main driver for innovationThe strategic potential of procurement can be realized through the prioritization of innovative dimensions,including procurement strategy,operational model enablement,procurement of goods and services,and supplier incentivization.The ability to

198、 innovate is crucial for procurement to become a key strategic department for the business.Innovation plays a crucial role in driving progress,growth,and success in the modern world.The ability to constantly evolve and improve products,services,and processes is what sets successful organizations apa

199、rt from their competitors.Innovation enables companies to stay ahead of the competition,meet the needs of their customers,foster creativity,handle disruptions,and drive economic growth.Organizations that embrace innovation as a core value will be better positioned for success in the future.The Procu

200、rement department plays a key role in driving innovation in a company.Procurement teams can gain a strategic advantage by assuming responsibility for the supply chain relationship or forging a close collaboration with the supplier.This enables them to discover novel and inventive products,services,a

201、nd technologies that can bolster the organizations competitive edge.Additionally,procurement can help facilitate partnerships and collaborations with suppliers leading to the development of new and innovative solutions.One of the leading logistics companies,thanks to joint sessions with suppliers,de

202、veloped customized packaging,which reduced waste and improved efficiency in the supply chain.Hence,procurement has the potential to be in the driver seat for innovation.Procurement is not only looking to find innovations outside the organization.It can also support innovation by promoting a culture

203、of continuous improvement within it.By encouraging employees to identify areas for improvement and to find new and innovative solutions,procurement can help foster a culture of innovation that drives progress and growth.In todays fast-paced and competitive world,innovation is essential for organizat

204、ions to stay ahead of the competition,meet customer needs,foster creativity,handle disruptions,and drive economic growth.Procurement has a significant role to play in driving innovation within a company,by identifying and sourcing new and innovative products,services,and technologies,facilitating pa

205、rtnerships and collaborations with suppliers,and promoting a culture of continuous improvement within the organization.Authors:Marcin SztafrowskChristopher BrendtnerInnovation as a strategic enablerProcurement departments are the focus of the business right now.In these uncertain times,its their res

206、ponsibility to find new solutions and drive innovation,and there are several possibilities to do so within the business,but also together with suppliers.This is a huge opportunity to position SECTION 1-TRENDING TOPICS2024 INTELLIGENT PROCUREMENT STUDY27the procurement department as one of the most s

207、trategic departments in the business.There is a need to shift away from the traditional role of optimal product or service identification to finding more creative,explorative,and inquisitive approaches to solving problems or meeting business needs.Thus,to become strategic and accelerate inventive ch

208、ange,procurement departments must focus on the following dimensions of innovation:Procurement strategyWhen it comes to procurement strategy,the focus is on integrating new and creative ideas into the procurement processes.Spend analytics and supplier relationship management are used to drive better

209、results and achieve procurement goals that align with the organizations overall strategy and objectives.The adoption of new technologies and a more collaborative approach with suppliers is the key to success in this area.To achieve this,procurement leaders need to step away from their focus on spend

210、 and instead look at their business margins to facilitate a more proactive and flexible approach and nurture innovation.To operationalize innovation in procurement,one effective method is to establish innovation awards for suppliers.These awards can recognize and reward suppliers who demonstrate inn

211、ovation in their products,services,and processes.The criteria for the awards can be based on specific innovation metrics such as the number of patents filed or new product development,cost reduction or quality improvement.For example,an automotive company can award suppliers who will develop more ef

212、ficient batteries for electric cars.The enablement of the operating modelThe enablement of the operating model for internal and external collaboration and execution should include,for example,data analytics to improve efficiency,effectiveness,and cost-savings.This entails the implementation and util

213、ization of scalable automation solutions,such as guided buying with intelligent recommendations,which can reduce both requesters and buyers operational tasks,allowing them to concentrate on more strategic subject areas.For example,a procurement platform,which helps to identify potential suppliers by

214、 categories and the text provided by the requestor.On this platform,the supplier would see the progress of the case he has been invited to,can check the order,and send the invoice.On the other hand,the buyer can see the progress of the delivery and goods receipt.The Accounts Payable team could see t

215、he invoice attached to the order and the goods receipt all in one place,streamlining the process.All in one place,streamlining the process.Procurement of goods and servicesProcurement of innovative goods and services involves identifying the need for such products by consulting stakeholders,conducti

216、ng market research,and analyzing trends and best practices.Procurement should on one hand develop partnerships and collaborations with suppliers,and on the other hand,with internal stakeholders like R&D or quality departments to bring these innovative products and services into the organization.This

217、 can potentially save time and money on research and development.Using a trend radar can help you identify new technologies like biometric sensors,or AI-powered coaching algorithms if a company is a producer of wearable fitness technology.This could help in the production of innovative products.Supp

218、lier engagementFinally,supplier engagement is the key to fostering an environment of innovation.Procurement should create an environment where suppliers feel encouraged to bring forward new ideas and solutions.This could be done through regular supplier innovation workshops,sharing best practices an

219、d success stories,and encouraging collaborations between suppliers.The resultant opportunities to work closely together,co-create solutions,and share knowledge and expertise are likely to be of great interest to suppliers.For example,in the food and beverage industry,many companies have partnered wi

220、th suppliers to develop plant-based meat alternatives,which have gained popularity among health-conscious consumers,leading to the development of new and innovative solutions for the industry.Procurement can also promote innovation within the organization by encouraging employees to identify areas f

221、or improvement and find new and innovative 2024 INTELLIGENT PROCUREMENT STUDY28SECTION 1-TRENDING TOPICSsolutions.By fostering a culture of continuous improvement,procurement can help drive progress and growth.For instance,a major retailer has implemented a system where employees can submit ideas fo

222、r new products or ways to improve existing processes.The procurement team evaluates these ideas and works with the relevant departments to implement the best ones.This has led to a steady stream of new and innovative products,and it has also helped to keep the employees engaged and motivated.This sy

223、stem can also be connected to a pitch portal,where the ideas of the employees are visible to suppliers,who can react to them and analyze the potential benefits together with the R&D department.The suppliers could also add their own ideas on how to make sure the components stay a step ahead of the ma

224、rket.Another example is the case of IBM and Cisco having successfully collaborated to generate collective innovation through their global partnership.Together,they aim to bring business insights to the edge of the network for IoT solutions.IBMs Watson leverages analytics and cognitive computing capa

225、bilities to process IoT data and contextual inputs,which helps to uncover new patterns and insights.On the other hand,Cisco provides edge and fog processing that connects specific business use cases to data at the edge of the network.By working together,IBM and Cisco can access leading technologies,

226、which they leverage to develop a marketplace offering.Recently,a Canadian telecom company used this solution to improve performance reporting and reduce the frequency of service interruptions by transmitting only important data from remote locations over mobile networks for analytics.In an interview

227、 with successful international procurement professional and podcast host Philip Ideson we discussed the role of procurement in driving innovation.Ideson believes that procurement can be the main driver for innovation,since the R&D capability of the supply base is many times greater than that of an i

228、ndividual company.However,the main challenge faced by procurement is the perception surrounding its engagement later in the process.Ideson suggests that to be considered a partner,procurement needs to do several things,such as keep an eye on the supply markets,find interesting things among suppliers

229、,and develop players early in the process.He also notes that early supplier development is important for developing alternatives and increasing competition in the market.However,he thinks that scaling this kind of capability in the team is hard and,historically,has depended on individuals rather tha

230、n processes or tools.The future of procurement innovationIn such disruptive and uncertain times,the need for innovation in the ways of working(supply chain disruptions),as well as finding advantages in the market and possibilities for improvement,is more important than ever.Yet,these times have brou

231、ght more change to procurement than the last 30 years combined and has given the procurement department the possibility to be visible as a strategic partner for the business.Recent trends show that the procurement organization also must learn to be agile and flexible to react to sudden changes and f

232、oster innovation by taking calculated risks,encouraging decision-making,and simplifying processes.Facilitating a certain level of agility allows people in the organization to come up with new ideas without being stopped by tedious processes or a management that is too afraid to take a leap.Automatio

233、n and technology have a profound impact on business.Procurement technologies must become more consumerlike and intuitive.This will help improve adoption,raise cooperation between stakeholders,and make the process more streamlined.If the role of procurement can be transformed from that of a business

234、partner to that of leadership,the procurement department will move from a service function to a high-visibility functiona function that not only identifies opportunities but also challenges in the supply chain in general.SECTION 1-TRENDING TOPICS2024 INTELLIGENT PROCUREMENT STUDY29In these times,the

235、 ability to access data and knowledge will decide success or failure for businesses.Sustainability will continue to be a key focus for many companies,and procurement will play a critical role in identifying and sourcing sustainable products and services.In future,procurement will rise in prestige an

236、d drive innovation within and outside the business,fostering a culture of continuous improvement by,and exploring new technologies and trends in the market.Key takeawaysIn summary,what you should take away from this chapter are the following five points:2024 INTELLIGENT PROCUREMENT STUDY30SECTION 1-

237、TRENDING TOPICS1.Innovation is a driving force behind progress,growth,and success in todays competitive world.2.Procurement has a key role to play in driving innovation within a company by owning the relationship with the supply base,identifying and sourcing new and innovative products and services,

238、and promoting a culture of continuous improvement within the organization.3.To become strategic and accelerate inventive change,procurement departments must focus on innovation in procurement strategy,enablement of the operating model,and supplier encouragement.4.Supplier encouragement is key to fos

239、tering an environment of innovation and can be achieved by creating opportunities for suppliers to work together,regularly holding supplier innovation workshops,and encouraging collaboration between suppliers.5.Procurement can also promote innovation within the organization by encouraging employees

240、to identify areas for improvement and by evaluating and implementing their ideas.The application of Generative Artificial Intelligence in ProcurementThe development and utilization possibilities of Generative Artificial Intelligence(Gen AI)are now rapidly gaining interest in private as well as profe

241、ssional lives,despite being in existence for some years now.Various AI-based tools are unfolding their potential in the field of procurement,revolutionizing procurement processes and the professional lives of procurement managers.Without requiring a drastic change in business models,the targeted int

242、roduction of Gen AI to specific inefficiencies in the procurement process enhances capabilities,frees up resources,and unlocks new opportunities for development.These potentials qualify Gen AI to be the hot topic of discussion in 96%of organizations boardrooms(Capgemini Research Institute,Harnessing

243、 the value of Generative AI,2023).Gen AI is one facet of the broader field of Artificial Intelligence(AI).AI encompasses the development of computer systems capable of performing tasks that typically require human intelligence,including,for example,problem-solving,learning and perception tasks,and l

244、anguage understanding.Potential AI use cases are the analysis of historical supplier performance,delivery time tracking,and prediction of supply chain disruption.Gen AI,however,generates entirely new content in various forms,like audio,video,or text,that has never existed before.It can learn from ex

245、isting content and apply this knowledge to a new situation.For example,Gen AI supports the procurement manager in preparing a supplier negotiation by creating a negotiation protocol incorporating historic supplier data and current market situations.What are the possible key application fields of Gen

246、 AI in procurement?This chapter presents a selection of use cases,focusing on three main activities conducted by procurement managers daily,which involve managing contracts,conducting tenders,and identifying cost-saving opportunities.Gen AI supports in managing legal documentsThe challenge in workin

247、g with contracts and legal texts consists of quickly capturing information,understanding the complex structures,and changing legal requirements to the extent of being able to interpret the information and employ it in a valuable way for the individual situation at hand.Authors:Pia SteffesSarah Wozny

248、Thorben RiskeSECTION 1-TRENDING TOPICS Advice and explanationGen AI is used to analyze,generate,and extract information from legal documents and review them at the same time,supporting the procurement manager in risk assessment.By understanding specific clauses and terms,it comprehends and processes

249、 text in documents,enabling semantic search and analysis,thereby explaining the document to the user.It answers basic questions about contracts or legal provisions by automatically scanning the text.Templates and customizationGen AI automatically generates a suitable contract template based on pre-d

250、efined requirements.As an output,Gen AI provides the contract template in the appropriate corporate design and ensures that the contract is compliant.Based on chat interactions,it helps customize or modify contracts.Users can communicate change requests,and Gen AI makes appropriate suggestions to ad

251、apt the contract in a legally compliant way.2024 INTELLIGENT PROCUREMENT STUDY31 Contract analysis and renewalGen AI performs an analysis to highlight potential risks,emphasize important clauses,or point out possible inconsistencies in the provided contracts or legal agreements.It can manage contrac

252、ts by providing reminders for renewals or terminations and assembling metrics on contract performance.Market researchGen AI supports the procurement manager in collecting real-time information on specific supplier markets,their capabilities,and current pricing information,as well as relevant price i

253、ndices.This provides the procurement manager with a solid basis for later evaluation and benchmarking of supplier answers as well as leveraging for more effective negotiation strategies.Compliance monitoringGen AI monitors procurement processes to ensure compliant operations.Especially when it comes

254、 to developing complex EU tenders with legal requirements,the use of Gen AI is highly efficient in reducing the risk of legal and regulatory issues.Automating tasksAutomated generation of RFPs and RFQs based on predefined criteria ensures not only a stable quality of tenders but also a low effort of

255、 creation and is the basis for further automated evaluation of supplier answers due to standardization.Customized reports,documents,and summaries can be created automatically,making it easier to review and assess tenders.Data analysisAutomated analysis of bid answers ensures an objective and equal e

256、valuation of data and Efficient supply chain managementLeveraging Gen AI in supplier management facilitates the identification and monitoring of reliable partners,detecting positive reviews and cost-effective offerings and ensuring a streamlined and resilient supply chain while reducing transportati

257、on cost and costly delays by route optimization.Transparency and predictive insightsGen AI enables organizations to gain a comprehensive view of their spending patterns,and by combining them with predictive insights into future trends,it empowers procurement professionals to proactively adjust cost-

258、saving strategies and resource allocation to respond to market conditions and mitigate risk in the most efficient way.The process of budgeting and cash flow forecasting is substantially supported by the functionalities of Gen AI.Process optimization and automationBy assisting in streamlining process

259、es through automation,e.g.,by reducing mainly manual and repetitive work,Gen AI enhances operational efficiency,process lead time,and output accuracy.facilitates the comparison and,subsequently,the selection of suppliers.Additionally,Gen AI identifies trends and patterns by analyzing market data or

260、historical supplier data,enriching the supplier picture,and enabling a more profound awarding decision.Gen AI accelerates the tender processDuring the tendering process a lot of data points from different suppliers are acquired,oftentimes in various formats,that need to be structured,analyzed,and co

261、mpared by the procurement manager,which is predominantly a manual and time-consuming task.Gen AI supports cost saving goalsIn the dynamic procurement landscape,companies face a variety of challenges in their search for cost savings.To remain at a competitive level in the market,corporate goals are f

262、irmly associated with cost reduction measures and the continuous establishment of a cost-efficient strategy.Besides having transparency in their spending,organizations are challenged to proactively manage cost savings via strategic decision and resource optimization while remaining at operational ef

263、ficiency and maintaining quality standards.2024 INTELLIGENT PROCUREMENT STUDY32SECTION 1-TRENDING TOPICSSECTION 1-TRENDING TOPICSWhile these three use cases only give a brief insight,Gen AI has the potential to transform knowledge worker roles and reduce their workload,as recognized by 70%of organiz

264、ations(Capgemini Research Institute,Harnessing the value of generative AI,2023),this involves a shift from traditional creation activities to reviewing and refinement.Consequently,Gen AI can not only revolutionize but also accelerate the ways of working across departments and industries.Four in ten

265、organizations have already formed dedicated teams and budgets for Gen AI,while the other half is actively taking this step within the next twelve months(Capgemini Research Institute,Harnessing the value of generative AI,2023).By leveraging its power,companies are not only at the forefront of innovat

266、ion but are simply keeping up with the standard to not fall behind.Figure 6:Gen AI Use CasesApparent Use CasesPotential Use CasesInvoice processingSpendanalysisSustainabilityRisk mgmt.Finding alternative suppliersSupplier relationship mgmt.Supplier certificationSupplier selectionQuality ControlTrans

267、lateFileWrite EmailsSupplier developmentSupplier OnboardingContract mgmt.POprocessingLogistical issuesAdministrationInventory controlNegotiation prep.Contract disputes2024 INTELLIGENT PROCUREMENT STUDY33The most difficult step is always the first one.Start with a gap analysis and then deep dive into

268、 the technical functionalities and requirements.The right time to act is now how to startIdeas dont come out fully formed,they only become clearer as you work on them.You just must get started.MARK ZUCKERBERG,founder,chairman and CEO of Meta1.Assessment of use cases:Leveraging Gen AI in supplier man

269、agement facilitates the identification and monitoring of reliable partners,detecting positive reviews and cost-effective offerings and ensuring a streamlined and resilient supply chain while reducing transportation cost and costly delays by route optimization.2.Data readiness:The organizations data

270、infrastructure must be prepared for the integration.This involves assessing the status quo of master data management,data quality,and data cleaning techniques,building data flows from different sources to databases,and practicing active data stewardship.Establishing security measures suitable for th

271、e later employed technology is a must.3.Skill development:No matter how seamlessly Gen AI integrates into processes,training is essential for applicants to effectively use it.This could mean employing a team with AI expertise and data science knowledge or collaborating with a knowledgeable external

272、partner.4.Technology selection:The choice for the right technology is based on your defined goals and field of application.Factors like complexity of tasks,data volume to manage and level of customizations must be considered.5.Scaling pilot projects:Conducting pilot projects to test the feasibility

273、and effectiveness of the technology on a smaller scale offers the opportunity to revise the approach before scaling it to a broader level in the organization.6.Ethical considerationsCompliance and governance regulations should always be the basis for any actions.Establishing trust among users in AI

274、systems is crucial.Strengthening user acceptance can be achieved by creating transparent guidelines for AI use,e.g.,by addressing data privacy or bias mitigation.2024 INTELLIGENT PROCUREMENT STUDY34SECTION 1-TRENDING TOPICSSECTION 1-TRENDING TOPICSKeytakeawaysThe key impact Gen AI has on the procure

275、ment processes and managers can be summarized as follows:Gen AI supports the procurement manager in collecting real-time information on specific supplier markets,their capabilities,and current pricing information,as well as relevant price indices.This will provide the procurement manager with a soli

276、d basis for later evaluation and benchmarking of supplier answers as well as leveraging for more effective negotiation strategies.The applications of Gen AI in procurement are diverse.Build SMART use cases to set a clear and measurable scope of implementation.Also,fast and seemingly small automation

277、 improvements have big impact on the procurement managers daily operations.Gen AI is not replacing the role of the procurement manager but rather enhances and streamlines the activities,like a supporting virtual assistant.The transformational power of Gen AI is unmatched by that of traditional metho

278、ds,without disrupting well-functioning operational models.By leveraging Gen AI,the procurement function can strategically position itself as a pioneer within the company,contributing significantly to or redefining substantial value.2024 INTELLIGENT PROCUREMENT STUDY35PROCUREMENT PRIORITIESSECTION 2S

279、ECTION 2-PROCUREMENT PRIORITIES2024 INTELLIGENT PROCUREMENT STUDY36We tapped into our vast network of client contacts in leadership positions at companies all around the world to gather survey responses.Most of our contacts polled are within our clients procurement organizations,however,we also cont

280、acted some finance and supply chain leaders to provide additional perspective.Also represented in our sample set were clients from all over the globe,including the Americas,Europe,and Asia.We shared a survey with these contacts that consisted of a wide range of questions ranging from procurement ope

281、rations to strategy,basic technology support to advanced AI/ML applications,and supplier performance monitoring to intentional supplier risk and sustainability management.The overall results pointed to some interesting takeaways as they relate to digitization and the use of advanced technology in pr

282、ocurement applications,the importance of risk and sustainability(both in operations and supplier management),and the skillset required to enable the procurement function.We conducted a survey to highlight our clients perspective on key challenges and trends.Through this study,we analyze these challe

283、nges to:Author:Nimish SarrafOptimal procurement risk management to excelAuthors:Jan Piet HoekstraShiva PrasannaRobin JaspersFor the last three decades,the geopolitical development and globalization have led to increased global commerce and steady economic growth.Even with some major disruptions like

284、 9/11 or the financial crisis in 2008,it seemed that the global economy would continue to grow and goods and services would flow around the world with few interruptions.Most companies,therefore,neglected or at least underestimated the need for thorough risk management,which led to severe problems an

285、d high losses in the recent crisis situations following the pandemic,wars,conflicts,and inflation.For this reason,we believe that it is worth taking a closer look at the supply chain and procurement risk management.Every time a business decides to make a purchase,there are inherent internal and exte

286、rnal risks that 1.Be prepared for them and recognize them when they arise3.Understand how procurement organizations can adapt to these challenges and remain competitive2.Recover from the impacts associated with these challenges and trends4.Ensure a solid understanding of the importance of procuremen

287、t and the role it plays within the companySECTION 2-PROCUREMENT PRIORITIES2024 INTELLIGENT PROCUREMENT STUDY37come along with the decision.Internal risks stem from the organizations operations,employees,and processes,while external risks enter through the supply chain in the form of global events,po

288、litical events,supplier relationships,or outside actors.By proactively addressing these risks and implementing effective risk management strategies,an organization can minimize the impact of potential disruptions and maintain the stability of its procurement function.Procurement risk management invo

289、lves identifying,analyzing,mitigating,planning,and monitoring potential risks to the supply chain to ensure that the organization can remain operational and can react swiftly in the event of a disruption(see also Section 1,How to manage your procurement in the era of global supply chain decoupling).

290、Therefore,it is critical tounderstand how risks affect the organization,what types of risks exist,and what opportunities exist to mitigate them.It is important to note that risk management is not a one-time event but rather a continuous process that requires regular risk assessments to ensure that t

291、he organization is prepared for any potential disruptions.The risks we face today may not be the same as tomorrow.We,therefore,asked several procurement experts to explain the risks they face today.In our survey,we polled participants to identify their biggest perceived risks.The three biggest risk

292、areas are external risks,legislation,and lack of available resources,as we will elaborate in the following section.External supply chain risk refers to the potential disruption that can occur in a companys supply chain.A supply chain is a complex network of suppliers,manufacturers,distributors,and r

293、etailers,all working together to produce and deliver products or services to customers.Any disruption or breakdown at any point in the chain can have serious consequences for the entire operation.There are many potential sources of supply chain risk.On the one hand,there are natural disasters such a

294、s earthquakes,hurricanes,or floods that can disrupt transport routes or damage production facilities,leading to delays or even complete shutdowns.On the other hand,there is political instability,trade wars,or changes in regulations that can disrupt the cross-border flow of goods or make the procurem

295、ent of raw materials and components more difficult or expensive.The COVID-19 pandemic highlighted the importance of supply chain risk management.Lockdowns and travel restrictions disrupted transportation routes and caused delays in the delivery of goods,while closures of manufacturing facilities and

296、 warehouses disrupted production and distribution.Companies that had diversified their supply chains or had backup plans in place were better equipped to weather these disruptions,while those that relied heavily on a single source or location were more vulnerable.To manage supply chain risk,companie

297、s can take several steps.First,they can identify potential sources of risk and assess the likelihood and potential External risksLack of available resourcesLegislationExternal risk factorsOthers22%17%53%8%2024 INTELLIGENT PROCUREMENT STUDY38SECTION 2-PROCUREMENT PRIORITIESimpact of each one.This can

298、 involve analyzing the supply chain at every level,from raw materials to finished products,and identifying the critical components and suppliers that are most vulnerable to disruption.Second,they can develop contingency plans for each source of risk,such as alternative suppliers or transportation ro

299、utes.Third,they can implement monitoring and tracking systems to quickly identify any disruptions and take action to minimize their impact.In conclusion,supply chain risk is a significant concern for companies that rely on complex global networks to produce and deliver their products or services.By

300、identifying potential sources of risk,developing contingency plans,and implementing monitoring and tracking systems,companies can better prepare themselves to withstand disruptions and minimize the impact of any potential disruptions.Below are the common external factors that are the main cause of s

301、upply-chain disruption and risk,along with associated mitigation strategies for each.Price instabilityHave an additional budget to cover any unexpected price increases and additional expenses.Be ready to negotiate any increased prices with your supplier directly.Try to lock in low fixed rates.During

302、 transactions if there is a change in price,that would impact the timeline of releasing the final purchase order as per the latest pricing of suppliers and that would cause delay in the approval process as well.Increased lead timeRegular contacts with suppliers will help to analyze market trends and

303、 raise necessary questions on the process map to validate and eradicate non-value-added steps or reduce waste in the production lifecycle.The increase in lead time will impact the delivery of the raw materials,which would ultimately result in a delay in shipping the finished good(FG)to customers.Sup

304、ply chain disruption due to natural and man-made DisastersGlobal supply chain disruptions could happen due to natural disasters like earthquakes,volcanic activity,landslides,drought,wildfires,and storms,as well as man-made disasters such as the pandemic,the Russia-Ukraine war,and even a cargo ship g

305、etting stuck in the Suez Canal.The best way to avoid disruption of the supply chain is by having a diversified supplier set up where the dependency on a particular supplier can be minimized and secondary suppliers can be utilized to have the demand fulfilled.Complicated/complex projectsTo have clear

306、 communication and understanding of the project and its procurement demand.Dynamic demand would create a lot of challenges between buyer and supplier;its better to have a clear and clean demand and set expectations.The more complicated the demand,the more challenges are expected to arise.The high cr

307、iticality and complexity of the project may cause more challenges for both the parties.Corruption/fraudHave a strict policy for all aspects of business so that everything is automated through a system and there is no manual intervention.This will help to have a transparent procurement process and re

308、duce blind spots.Ensure that the right compliance controls are in place throughout the process.Having non-disclosure agreements(NDAs)and effective conflict management in the workplace can reduce the risk of fraudulent activities.Multiple work environments/toolsUsage of limited channels and common to

309、ols would ease the workflow and enable more collaboration for business transactions.The best case would be the transmitting of Purchase Orders(POs)through Electronic Data Interchange(EDI),where two ERPs are integrated into a single channel,but in most cases,the order needs to be printed and then ema

310、iled to the supplier;hence,multiple tools are being used.Supplier governance and performance are the key areas that need to be focused on,and using limited and effective tools would improve the overall performance.SECTION 2-PROCUREMENT PRIORITIES2024 INTELLIGENT PROCUREMENT STUDY39 Effective alert m

311、echanism with regards to supply chain disruptions Usage of predictive analysis and classical due diligence methodologies Implied lessons learned from past experiences.To be aware and adopt best practices across the globe.Have an effective network of channels to gather information on a proactive basi

312、s.As organizations approach supplier and supply chain risk management,it is evident that there is a need for a better governance model to mitigate risks pertaining to suppliers.It can be achieved by:Lets look at the response with regards to the question whether organizations are able to deal with su

313、dden supply disruptions.From the responses received,more than 60%of the respondents confirmed that they were able to manage sudden supply disruptions.This is possible in the following ways:Somewhat WellExtremely not WellExtremely WellNeutralSomewhat not Well11%57%22%8%2%2024 INTELLIGENT PROCUREMENT

314、STUDY40SECTION 2-PROCUREMENT PRIORITIESLike any other business function,procurement is not immune to internal risks that can significantly impact an organizations success.Internal risks are those factors that cause disruptions in internal operations or processes.These can vary from machine break dow

315、ns or production problems to IT failures.Only 20%of the respondents claimed that they were able to meet the needs of their business very well.Within procurement organizations,data needs to be accurate and visible due to the important role it plays in the processes of forecasting and spend analysis.D

316、ata can provide insights into supplier costs,trends,and capabilities.This information can be used to negotiate better prices,identify cost-savings opportunities,and select the most qualified suppliers.The risk of not having accurate data can have several effects.A spend analysis may lead to unclear

317、categorization or invalid amounts and affect the decision-making process in defining opportunities to improve spend.Our respondents replied that they face challenges in meeting their organizational needs and we found that those challenges involved data,people,and strategy.Internal risksData quality

318、plays an important role in enabling businesses to meet their needsFigure 7:We asked respondents:How well do you think your procurement organization is currently meeting the needs of the business?SECTION 2-PROCUREMENT PRIORITIESExtremely WellNeutralSomewhat WellSomewhat Well62%Extremely Well17%Neutra

319、l21%2024 INTELLIGENT PROCUREMENT STUDY41Procurement requires a high level of expertise and specialized knowledge.If the procurement function does not have the necessary expertise,it can lead to poor decision-making,inadequate contract negotiation,and suboptimal supplier selection.Non-compliance with

320、 policies and procedures is one of the internal risks faced by the procurement function.Procurement policies and procedures are put in place to ensure that procurement activities are conducted ethically,transparently,and in compliance with relevant laws and regulations.Failure to comply with these p

321、olicies and procedures can lead to reputational damage,legal penalties,and financial loss.Inefficient procurement processes are a big threat to procurement departments,as they can lead to delays,poor decision-making,and unnecessary costs.This can be a result of poor communication between procurement

322、 teams,a lack of standardization in procurement processes,and the use of outdated technology.To effectively mitigate these internal risks and bolster the resilience of the procurement function,organizations can adopt several proactive measures:Finding people with suitable procurement profiles is a c

323、hallengeDetermining procurement strategy and needsHow to mitigate risksRobust procurement policies and procedures:Implement and uphold clear and comprehensive procurement policies and procedures.These guidelines should outline ethical standards,compliance requirements,and best practices to ensure th

324、at procurement activities are conducted transparently and in accordance with relevant laws and regulations.Effective supplier management:Develop a robust supplier management framework that includes rigorous supplier evaluation,monitoring,and performance assessment.Establishing strong supplier relati

325、onships and holding suppliers accountable for their commitments can help mitigate risks stemming from supplier-related issues.Leveraging modern technology:Embrace cutting-edge technology and procurement tools to streamline processes and enhance data accuracy.Modern procurement software and data anal

326、ytics can provide valuable insights into supplier performance,market trends,and cost-saving opportunities,enabling more informed decision-making.Investing in expertise:Ensure that procurement teams possess the necessary expertise and skills to navigate complex sourcing decisions,negotiate contracts,

327、and manage supplier relationships effectively.Regular training and professional development can enhance the capabilities of procurement professionals.2024 INTELLIGENT PROCUREMENT STUDY42SECTION 2-PROCUREMENT PRIORITIESGlobalization and geopolitical development:The past three decades have seen signif

328、icant globalization and economic growth,but this has also led to increased risks,making thorough procurement and supply chain risk management crucial.Proactive risk management:Organizations must proactively identify,analyze,and mitigate both internal and external risks associated with procurement de

329、cisions.Continuous process:Risk management is not a one-time event;its an ongoing process that requires regular risk assessments to adapt to changing circumstances.External risks:External risks in the supply chain include natural disasters,political instability,trade wars,and regulatory changes.The

330、COVID-19 pandemic highlighted the importance of diversifying suppliers and having contingency plans.Mitigation strategies:To mitigate external risks,organizations should budget for price instability,manage lead times,diversify suppliers,and adopt common tools for collaboration.Internal risks:Interna

331、l risks can stem from issues like data quality,talent shortages,non-compliance of policies,and inefficient processes within the procurement function.Mitigating internal risks:Mitigating internal risks involves implementing robust procurement policies,effective supplier management,modern technology,a

332、nd expert procurement teams.Governance and alert mechanisms:Organizations need better governance models and alert mechanisms for supply chain disruptions,predictive analysis,and due diligence methodologies to manage risks effectively.Lessons learned:Organizations that have successfully managed suppl

333、y disruptions have learned from past experiences,adopted best practices,and maintained effective networks for proactive information gathering.Success through risk management:Effective procurement and supply chain risk management contribute positively to an organizations overall success.These takeaways emphasize the importance of proactive and continuous risk management in procurement and supply ch