Procurement professionals face a considerable challenge in the coming years. Widespread supply chain disruptions still linger, inflation rates are the highest they’ve been since the early 1980s and workforces are fluctuating. Companies must review the best procurement strategies to navigate these obstacles.
After two years of COVID-related disruptions, procurement teams have come away with some valuable lessons. Applying these to current goals can help adjust operations to mitigate incoming challenges and make supply chains more resilient. Here are six of the best procurement strategies to capitalize on in 2022.
Digital Transformation
The most important procurement strategy for many companies this year is digital transformation. Just one out of five purchasing departments take full advantage of digital solutions, yet these technologies help make the most of every other procurement strategy.
Digital technologies can add value to virtually every part of the procurement process. In many cases, they’re crucial. Just-in-time (JIT) inventory strategies, for example, rely on consistent and accurate forecasting, which requires extensive data. If companies hope to capitalize on JIT’s cost benefits, they must employ data gathering and analysis technologies to monitor developing trends.
Digital transformation provides the visibility and efficiency procurement teams need to inform and enable other strategies. However, this shift does come with high upfront costs. Companies should review their largest shortcomings and most valuable strategies, applying digital technologies there first before expanding.
Supply Chain Transparency
Most businesses would agree that improving supply chain transparency is one of the best procurement strategies. In such a disruption-prone environment, procurement teams must be able to adapt to incoming changes, and that requires real-time visibility. The key to that visibility is Internet of Things (IoT) technology.
IoT devices can provide real-time data about shipment locations, traffic, weather and other factors. That data can then feed into artificial intelligence (AI) algorithms that analyze it to recognize incoming disruptions and recommend remediation strategies. These alerts will let procurement teams react as quickly and effectively as possible to sudden changes.
Procurement departments should insist that their supply chain partners use these real-time data technologies to provide more transparency. Without them, companies will struggle to gain the insight they need to remain flexible and resilient.
Risk Monitoring and Management
Similarly, procurement in 2022 must involve active risk monitoring. Companies must understand the risks they face throughout their supply chain and watch for warning signs so they can adapt if necessary. Real-time data technologies will enable this vigilance, but teams need to account for all risk factors to apply them effectively.
Procurement risk management today should account for cyber vulnerabilities, not just physical supply chain disruptions. Supply chain cyberattacks rose 42% in Q1 2021 alone, hitting 137 organizations through 27 third-party vendors. Businesses must assess, limit and assess cyber risks in their supply chain partners in light of these threats.
Procurement teams should require suppliers and logistics partners to provide proof of their security before engaging in business with them. Only partnering with third parties that meet security standards like ISO 27001 provides an easy path forward here.
Sustainable Sourcing
Another one of the best procurement strategies for this year is sustainability. Surveys show that one in three consumers have stopped buying from brands out of environmental concerns, and 34% have chosen brands because of their sustainability. Companies must go green to remain competitive, and that includes switching to green partners.
If companies embrace internal sustainable practices but source from unsustainable partners, their overall environmental footprint will remain significant. Regulations like Germany’s Supply Chain Due Diligence Act could even fine companies for failing to protect the environment in their supply chains. Procurement teams must hold their suppliers to a higher sustainability standard to avoid this.
AI and other data technologies can help ensure sustainability. Machine learning algorithms can analyze multiple complex factors to provide a better picture of carbon footprints. Procurement teams can then use this information to determine areas of improvement.
Workforce Retention
Supply chain issues are a focus for most procurement professionals today, and they deserve attention—but they’re not the only challenge to consider. High turnover rates are another prevalent issue that procurement managers must address. Only 50% of procurement employees under 40 strongly intend to stay in their current job.
Procurement departments must focus on workforce retention strategies to counteract this trend. Often, this means helping workers feel accomplished and recognized and providing a future. Bonuses and other rewards for high performance, upward mobility opportunities and professional development programs can all help retain employees.
Competitive pay and benefits can also help retain workers and attract new ones. If procurement teams start to lose employees, they may need to embrace external workforces in the meantime. Hiring temporary workers and freelancers can help fill any gaps until teams can find better fits for long-term employees.
Billing Automation
While procurement professionals navigate workforce challenges, they’ll need more time and freedom to maximize their productivity. One of the best strategies for enabling that is using automation. In procurement, that typically means billing automation.
Billing is a data-heavy, repetitive and often slow process, making it the ideal use case for automated technologies. Automated billing software can handle these tasks to reduce human error and free employees to focus on other tasks, maximizing workforce potential. When that happens, staff shortages won’t be as disruptive.
Teams should look for procurement software with billing automation features in 2022. While switching software solutions will come with initial expenses and disruption, the time it saves in the long run will make up for it. As disruptions abound in the coming year, procurement teams will be glad for the time savings.
New Technologies Are Driving Procurement Strategies in 2022
The road ahead will be challenging for procurement professionals. In light of these obstacles, teams must adapt their resources and workflows to account for incoming changes and become more resilient. Embracing new technologies can enable them to make the most of the best procurement strategies in 2022.
IoT devices, AI, automation software and green technology will become increasingly important to procurement success. Early adopters of these innovations could see substantial growth in the future as they work past obstacles that slow the competition.
