6 Key Procurement Trends to Look Out for in 2023
As we head deeper into 2023 after two years of supply chain chaos, it seems that the only thing that is certain is more uncertainty. Scoutbee has its finger on the pulse.
On February 9, in collaboration with our partner GSES, we hosted a webinar on The Hackett Group’s 2023 CPO Agenda: Procurement Top Priorities and Critical Actions to Succeed, which focuses on significant changes in procurement priorities, what’s new and what’s vanished. Also, we asked if there really is any sense in making predictions anymore.
More than 350 procurement professionals gathered online for the lively, interactive session, moderated by Scoutbee’s senior vice president of global marketing, Roger D. Blumberg, with experts in the field, Chris Sawchuk (The Hackett Group), Kelly Ruigrok (GSES), Jason Busch (Spend Matters) and Michael Cadieux (Procurement Foundry) providing valuable insights. In case you missed it, we’ve compiled six of the key takeaways here.
Investment in Good Technology Is Crucial
Busch predicted that procurement’s tech investment will focus on three main areas in 2023:
Core source-to-pay plumbing. How do you manage demand, procurement intake and spend planning? How do you manage specific categories across source-to-pay, or mega-categories like SaaS?
1) Supplier management. In the long term, procurement will be investing in supplier management technology. This is not just about risk, but also supplier search, onboarding of suppliers and managing supplier data.
2) Direct procurement. This could be an overlay on top of source-to-pay or it could be standalone investments —but so much of the challenge in today’s market is direct spend. Direct is a huge animal you’ve got to lasso.
3) In addition, with higher employee performance expectations but no corresponding increase in headcount — procurement is currently seeing 10-percent additional workload year on year but only 3 percent additional headcount. As Sawchuk emphasized, this gap must be filled with technology.
Jobs in Procurement Are (For the Most Part) Safe
“If you suck, you suck and you’re out!” as Cadieux rather bluntly put it. However, if you’re good at your job, you’re most likely safe. But the pressure to do more with less without being given any additional resources is a critical issue.
There will be a shift away from going out to buy expertise to building it within the organization, so it’s up to companies to make sure they have all the skills they need in-house. Teams need to have the knowledge to digitize, optimize and gain insights into the supply chain.
However, even though a lot of organizations claim to be spending money on talent management, there’s scant evidence of this on the ground, with numbers way down for conferences and certifications.
ESG Is Not Going Away
According to The Hackett Group’s CPO report, environmental, social and governance (ESG) took a nosedive this year, falling from number No. 4 to No. 10 on the list of priorities. Nevertheless, this topic is not just going to go away like it did during previous recessions. As Ruigrok points out, the increasing number of laws and regulations surrounding ESG means that organizations will really have no choice but to prioritize it.
In addition, ESG is the focus of a lot of buyers’ questions and RFPs, creating traction between buyers and suppliers. In 2019, ESG was the focus of procurement directors and teams. In 2023, interest has shifted to board level. If the board makes it a priority, it trickles down into the rest of the organization and procurement contract management. The entire company needs to have ESG knowledge and, that way, it becomes embedded in the way we do things going forward.
Battling Recession and Inflation
CPOs need to “relax and take a breath,” Cadieux said. His advice: Try not to overreact or knee- jerk react to what’s happening in a geopolitical context because some economies are being hit harder than others. You have to be able to prove your value and, if you don’t know what that is, you’re dead in the water already.
His other advice? Maintain good relationships with your suppliers — you’re going to need them when we emerge on the other side of this in around 14 months — and hold onto your good staff. If you don’t, other innovative organizations will snap up your talent and charge you twice what you’re paying in payroll.
Managing Black Swans
We asked Busch if there really is any sense in making predictions anymore. He believes that there’s a difference between making predictions and mapping long-term trends. If you look at the move to electric vehicles, to green energy, to the downstream influence of energy costs — the price of aluminum is up 14.5 percent in the last three months — there are long-term trends that are hard to dispute, and you can factor these into your decisions.
In the short term, it’s about having as much data as possible at your disposal — AI can help here. Put it in context, integrate it with your systems and, most importantly, be able to execute based on that data. Your data should include the local supply market and new suppliers but also keep an eye on those long-term trends.
For our final question, we asked the panelists what procurement leaders can do to defend their teams and maximize procurement value in 2023.
Here’s a quick summary of their answers:
- Be a front-runner, not a follower, when it comes to ESG. Cost discipline will be a core focus area.
- Put your commodity and category strategy in financial terms. Choose your tech wisely — think about sure bets which are going to pay off and about the timeframe for that payoff.
- Stay out of the headlines.
- Leverage your available assets and learn how to evaluate value outside of hard savings.
- Invest in talent.
- Invest in technology.
Rewatch the webinar here and subscribe for the upcoming session on “Balancing ESG in Times of Risk & Inflation” here.