Top 5 Procurement Trends for 2021 & How To Leverage Them
The year 2020 started like any other year. Business resumed as usual with sky-high predictions and a few disruptions expected to keep everyone on their toes.
And then the new normal came right in and transformed everything as we knew it.
In the first, businesses all over the world ground to a halt, enterprises large and small alike had their supply chains disrupted, and uncertainty became the only certainty (meta, I know).
Essentially, the new normal characterized the year 2020.
Everywhere, on the news, in workplaces, all that everyone could talk about was how the new normal had impacted businesses across the world and how to mitigate its effects.
Now, the storm is slowly coming to an end and we have the aftermath before us. How can we expect 2021 to unfold, especially in the procurement field?
Procurement has changed so much and you need a proactive, current approach to stay on top of developments and ensure your organization can survive and thrive in 2021 and beyond.
In this article, we’ll examine:
- How the new normal has impacted the outlook for 2021
- Trends to expect for the next 12 months
- How to survive and thrive in the coming months
Predictably, a huge part of the figures we’ll present here will tie in to how the new normal has impacted the procurement world.
These procurement trends and insights will offer pointers to the changes you need to make to ensure your organization survives the aftermath and thrives despite the new normal.
1. Digitalization and procurement automation will become need-to-haves
According to research conducted by PwC, procurement digitalization was placed around 21% just four years ago.
Across the board, businesses were employing strategic sourcing, predictive analytics, and supplier collaboration tools to streamline the procurement experience, automate manual tasks, and increase efficiency—albeit at a slower pace.
Fast forward to 2021 and that figure has shot up.
To bring the lesson home, over the past two years Zoom grew over 3,000%, owing to the rise of video conferencing applications designed to replace in-office collaboration. Similarly, businesses across diverse industries are waking up to the call of the hour.
Spreadsheets, paper contracts, and files won’t do any longer.
With the life of the traditional brick and mortar office hanging in the balance, businesses of all sizes have been forced to deepen their dependence on digital procurement automation tools in order to survive the new normal.
With entire companies distributed, organizations large and small alike will now be forced to evaluate and adopt digital procurement automation tools to stay agile and retain market share.
This advent in procurement automation will cut across fields like sourcing, contract management, vendor relationships, payments, etc., as businesses take a more intentional approach towards digitizing what can and freeing work from their outdated processes.
The recovery will be digital and only businesses that pivot accordingly will experience it.
2. An emphasis on flexibility, agility, and resilience
The new normal set in faster than anyone could predict or plan to mitigate it.
A month prior and it was on the news, an issue that didn’t concern you. A month later and businesses across your city were all shut down.
There was little reaction time for businesses to create a strategy to react to the instant downturn.
And the results were catastrophic. Businesses that weren’t designated as essential had to shut down their supply chain entirely, leading to supply chain holdups, lost revenue, and waste of resources.
Just like the pandemic taught us, future emergencies may not allow anyone to prepare on the fly and step up in just days.
It’ll require long-term planning to create alternatives, plan for multiple scenarios, create loopholes, and design strategies to help you react and address challenges as they arise.
In hindsight, your business will need to be more agile to stay on top of future emergencies. And to build that agility, you need to build resilience.
Building resilience is all about designing your supply chain to survive disruptions should unforeseen circumstances arise.
2021 will be the year for taking a long, hard look at your business’s agility, creating a resilient plan, and stress testing it to sustain your operations during future rainy days.
3. Data and analytics will change the game
In 2021, as businesses rebuild, there’s going to be little room for guesswork. Businesses will be looking to make surgical, calculated moves to counteract any losses sustained over the past year.
And data offers the best approach to making winning decisions.
According to insights by consulting giant McKinsey, businesses that embrace data and analytics outperform slow adopters by a factor of 1.6, offering more value to their shareholders.
Data and analytics eliminate the need to base decisions on conventional wisdom and age-long patterns and rather, uncovers trends you can leverage to get outcomes both in the short and long term.
Businesses that’ll win the procurement game in 2021 will be those that give data a center place since they’ll make proven decisions that’ll create better outcomes.
4. Build resilient supplier relationships to secure your supply chain
Even if you weren’t affected directly by the developments from last year, you sure had a hard time because of it.
Everyone, from Airbnb to the IRS had to get into a lower gear to be able to survive the crunch.
And no doubt, the new normal affected several of your suppliers directly and sent some ripples into your internal operations.
Supply shortages, higher supply prices, transportation holdups, etc., plagued suppliers from Asia to Africa, holding up other businesses dependent on them across continents.
Your suppliers are an indispensable asset to your business’s operations—granted they function outside your organization but they’re invaluable to whatever operations you manage in-house.
As the new normal has made obvious, it pays to build resilient supplier relationships that can stand the test of time.
Even if you successfully acquire the best suppliers, it pays to diversify your risk to ensure you can weather any unforeseen circumstances that may hit your supply chain.
In the face of 2021, you need an entirely new strategy. Organizations need to double down on assessing supplier risk and seeking to limit it. To achieve this, you need to:
- Investigate alternative supplies to diversify your risk
- Undertake in-depth supplier risk assessments to determine how reliable a supplier can be before building a relationship with them
- Determine high-risk areas in your supply chain and take proactive steps to secure them and diversify your risk.
Plan and expect disruptions to your supply chain as it’ll help you think far into the future, build for resilience, and stay operational despite emergencies.
5. Corporate social responsibility is coming to the forefront
As the planet heals, everyone’s wondering how to prevent another downturn and build back stronger.
One of the areas coming to light is in the field of corporate social responsibility. Businesses haven’t been doing enough for the planet, for their employees, and the community. And it’s all about to change.
There’s a wave of dissatisfaction sweeping the globe as people demand change. Businesses that adjust in turn will build a stronger and more equitable image. Businesses that don’t will witness declining acceptance from every angle.
As an organization building for the future, corporate social responsibility across your supply chain is a call to take a stance beyond just profit and invest in a more equitable and fair world.
2020 exposed a lot of loopholes we’ve always known were there. But the new normal showed us all how quickly fortunes can change, plus the level of planning and execution required to stay on the bleeding edge of change.
Procurement won’t be business as usual but businesses that plan and adjust accordingly will be able to mitigate risk and leverage the changing environment to their benefit.
To make the most out of the new normal, switch to a unified digital procurement platform like Kissflow Procurement Cloud.