What if procurement’s future is at the center of power?

in Advisory, 10.10.2016

The procurement function is under intense pressure to transform. Consequently there is a discussion about whether it will exist at all in 20 years, or if its tasks will be performed by algorithms and networked machines. If procurement is to survive, it must be reinvented – future-proofed.

The second article of our four-part series on future-proofing procurement takes a look at another possible scenario. Unlike our previous article which forecasts a bleaker future for a procurement function rendered obsolete by technology, we look at the opposite scenario which sees digitization placing procurement in a pivotal role at the crossroads of strategic information.

On the threshold of a new age

Our series is based on KPMG’s global study “Future-proof procurement”. Aimed at providing tangible orientation and guidance scenarios, the study is the first to purposefully compile the essential criteria for future-proofing procurement and supply chain management. It anticipates four possible future scenarios:

  1. Technology renders procurement as we know it obsolete
  2. Digitization leads to diversified roles and procurement takes center stage
  3. Decentralization reigns as legions of freelancers replace the procurement department
  4. Procurement reinvents itself becoming the central, creative agent for business development

In the second scenario, digitization has not established itself as a job-killer. On the contrary, it’s led to more diversified roles, tasks and responsibilities. All information runs together at one central point – procurement.

Year 2030: a sustainable world for humans and machines

Imagine a world jointly managed by humans and machines, in a cooperative and sustainable effort. Digitization is well advanced and established as a job changer rather than a job-killer. In fact, 60 percent of the jobs did not exist 15 years ago. Sustainability has risen to become a core company focus. Augmented and virtual reality applications have resulted in increasingly blurred borders between the physical and virtual world, leading to a completely new supply chain of virtual factories similar to loosely organized consortiums relocating in the Western World. Who will be left to manage in this complex environment?

Procurement at the center of the power

Procurement is the center of power in companies nowadays, where the whole value chain converges. In this scenario, technology, through data dominance, has strengthened the importance of procurement, empowering it with the ability to make strategic decisions for the entire organization.

Traditional R&D has dwindled, making procurement the main innovation contributor. Those who have all the data at their fingertips and manage a broad network of suppliers and partners are more likely to find innovative patterns in the data cloud. As a result, the former cost-cutting monocracy has been pushed aside for more strategic priorities like cyber security and data management insights.

Not surprisingly, Chief Procurement Officer (CPO) experience has become essential for CEO positions. Procurement’s data sovereignty and comprehensive internal knowledge makes it the decision-maker for all major strategic issues of the future. Data analysis, IT competence, risk and budget management are four future-ready proficiencies, making CPOs the only logical choice for the CEO position.

Is procurement destined to be the center of power or ruled by machines?

This scenario corresponds to a sharp increase in responsibility and skill requirements placed on procurement managers and employees. It’s also a reason for the significant changes in management development: those who take on leading procurement positions in the years 2035+, are not merely intended for procurement, but are selected, qualified and developed for executive positions.

Which of these two scenarios – ‘procurement takes center stage’ or ‘procurement R.I.P’ – are more likely? Technology isn’t the only catalyst for change in these two scenarios. The bottom line is that as procurement professionals, you play a key role in shaping your future. For example, today’s dynamic environment offers great potential if, rather than focusing on costs, you use the right suppliers – those offering innovation and speed – to generate growth for the company. The sky is the limit – but you need to start now or you’ll get left behind.

 

 

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