10 Trends That Will Shape Procurement in 2022 and Beyond

This is your ultimate guide to trends for 2022 and beyond! Find out how procurement leaders can get a seat at the table, and what you can do to transform your organisation for the future.

While the pandemic has left enormous disruption in its wake, procurement teams have experienced some truly positive developments and professional growth. The spotlight turned to procurement as responsible for sourcing everything, from masks and gloves, to jet fuel and microprocessors.

As the global economy continues to recover, and prepares for future supply chain disruptions, the hard-won lessons of the past couple of years will shape the procurement profession for years to come. As wise people have said, the pace of change has never been this fast, yet it will never be this slow again.

As your procurement organisation positions for life into 2022 and beyond, consider these trends in developing your strategies and resource investments.

1. Sustainability 

From lithium mining for electric vehicle batteries, to burning of the rainforest for palm oil, your company may have a negative impact on the environment without you even knowing it. If you don’t have visibility over sustainable procurement practices, it’s high time you do. Stakeholders expect organisations to proactively collaborate with suppliers to improve their mutual environmental and economic performance. 

It’s becoming the responsibility of the procurement team to understand that impact and do everything in your power to improve it. Ignorance is no longer a defence in the court of public opinion or the actual courts. Your customers and stakeholders expect nothing less.

2. Ethical sourcing

Ethical sourcing is the means by which procurement can achieve its socially sustainable goals. What’s more, it’s an area where technology can play a significant role in managing procurement processes and improving global supply chain operations. A digital transformation can help procurement departments become the corporate social responsibility hub for an organisation at large. For example, some components of corporate social responsibility, such as monitoring certifications and labelling, can be automated.

3. Transparency and visibility

Consumers, investors, regulators, and other stakeholders expect organisations to be open and honest about their business relationships. Your organisation must have visibility over the clients with whom it is doing business, as deep into the supply chain as possible – after all, second- and third-tier suppliers might be involved in unethical sourcing practices that could lead to bad public exposure for your organisation. Procurement must also understand the risk of disruption in deep-tier suppliers.

During pandemic shutdowns, single sources of failure became all too apparent. Tier 1 companies are turning to efforts like deep-tier supply chain financing to stabilise cash flow for smaller suppliers. One in six organisations surveyed in the Procurious & Compleat ‘What Next?’ research report financed or funded vital suppliers to ensure they did not go out of business.

4. Digitisation & Automation

The unprecedented remote working conditions spurred on by the pandemic revealed how outdated some of our deeply entrenched habits were – did we ever really need an in-person ink signature to accept a delivery? Digitising processes removes paper, spreadsheets, and manual handling from the procurement chain. Without a digital transformation, procurement leaders are limited in their ability to derive strategic insights from the data they collect. But dumping data into a pivot chart won’t solve the problem.

Organisations generate too much information for manual analysis, so sophisticated analysis tools are necessary to drive agile decision-making. Procurement organisations are well-positioned to leverage data for reports, spend analysis, supplier assessments and compliance checks.

Leading companies are already using AI to automatically manage online reverse auctions and large volume orders, and additionally to update inventory lists and purchase orders. Smart contracts and blockchain capabilities will validate transactions and authorise automated payments.

In 2021, supplier and contract management, risk, and analytics tools were the most common tools being implemented, according to the respondents in the ‘What’s Next’ report.

Artificial intelligence and machine learning, RPA and predictive analytics show the most promise to mitigate future supply chain disruption. Forward-thinking CPOs can use digital transformation to build a competitive advantage.

5. Cybersecurity

It can be hard to imagine, but a cyberattack could lead to ransom demands, theft of intellectual property, and other risks that result in lost business, possible fines, and damage to your company’s reputation. Indeed, hackers have discovered proprietary information to disrupt the bidding process for significant contracts.

Company personnel tend to be the weakest link in the line of defence against cyberattacks, so it is highly recommended that your organisation institutes regular training for staff on recognising attacks like phishing emails. Intruders just need to gain access to one person’s email to spread like wildfire through an organisation. Spoofed emails asking for money or access could cripple relationships with customers and suppliers. 

Organisations have to get it right every day; the bad guys only have to be right once in a while.

6. Supply Chain Resilience

A large number of What Next? Report respondents said that their supply chains were significantly impacted by transportation slowdowns and lack of available supply due to production downtime and shutdowns. Are you building a resilient supply chain for the future?

Think of your supply chain like an elastic band – it can stretch and flex, but it shouldn’t break. Lean supply chain design has its place, but it may not be adaptable enough to accommodate disruption. Just-in-time inventories and manufacturing don’t tolerate delays well. A resilient supply chain is ready with alternative resources so that it can pivot in response to an unforeseen situation. Disruptions may be short-term, like severe weather events, or longer-term, like a shift to e-commerce during the pandemic. Although you can’t prepare for every eventuality, you can have plans in place to guide your response.

7. Risk Management

Your supply chain is vulnerable to multiple disruptions, but as we’ve seen recently, traditional measures such as long-term contracts won’t fully protect your organisation from unexpected pressures. In 2021, one third of organisations surveyed in the research report had suppliers declare Force Majeure on contract obligations – a 50% increase over 2020.

It is important to identify and analyse risks that flow from external sources, such as regulatory changes or economic trends, and those that are more within your control, such as the customer experience and attracting and retaining top talent. It’s easy to focus on external issues like tariffs and sourcing interruptions, but this is not a one-and-done process.

New risks may arise as previous risks fade away. Develop an ongoing process to re-prioritise threats and mitigation efforts. Be on the lookout for leading indicators that provide warning of a change to avoid surprises. For example, contracts with ocean carriers could guarantee space on vessels as volumes increase. Your organisation can respond with informed decisions, rather than scrambling to find high-cost spot market alternatives.

Pattern recognition software can capture and analyse unstructured data, for example, documents, payments and receivables, travel expenses, email, social media mentions, and other signal sources. By monitoring these signals, organisations can anticipate customer issues, and manage risks in real-time.

8. Supplier Relationships

Disruptive technologies help procurement moderate the desire for competitive pricing, establishing the goal to develop collaborative relationships that support innovation from suppliers. With the security of stable relationships, suppliers are more likely to invest in technology and development for their own capabilities.

Although traditional bidding may not wholly disappear, transactional relationships will be supplemented by collaborative engagements with key vendors. Both buyers and suppliers will access information in the cloud to measure, analyse, and manage performance. Cooperative sessions will help identify process improvement opportunities as well as uncover supplier risks.

9. Strategic Sourcing

Success in traditional, non-strategic sourcing is based on contracting for products and services at the lowest cost. It’s up to procurement to eke out a few percentage points of improvement, resulting in little loyalty when times get tough. 

Strategic sourcing considers the total cost of ownership, built on fact-based decisions, and business intelligence. The procurement team that selects vendors should be part of the ongoing supplier relationship team. This approach moves from the low-bid process to deliver a higher level of value that exceeds the costs.  Supplier diversity also plays a role in identifying locally based suppliers and shrinking the global supply chain.

10. Organisational Transformation

The automation trend supports the ongoing transformation of procurement organisations. Procurement teams offer data-driven insights that support the organisation’s strategic goals through deeper relationships and supplier-led innovations. 

As procurement becomes more deeply embedded with CSR initiatives and business processes, the procurement organisation becomes integral partners with finance, legal, engineering, manufacturing, and marketing to manage information flow in and out of the organization. To get a seat at the table, procurement organisations must deliver value beyond finding the lowest-cost suppliers.

Predicting the future is impossible, but preparing for it is not. From early indicators of on-coming chaos, to warning signs and priorities, you need to know how to spot risks in order to mitigate them.

Register for our next webcast, “EARLY WARNING: What needs to be on your 2022 Risk Radar, to understand exactly what you need to know. Register now and avoid the risk of not knowing!