Although the pandemic has left a legacy of significant learning over recent months, procurement teams have taken on an exceptionally positive leading role. The spotlight turned to procurement teams as those responsible for sourcing everything—from masks and gloves to jet fuel and microprocessors. In this article, you will find a reflection on the key procurement trends for 2022 through the lens of economic recovery and analytical projections.
As the global economy continues to recover and prepare for future supply chain disruptions, the lessons learned in recent months have shaped the procurement profession for years to come. The pace of change has never been this fast, and it will never be this slow again. Therefore, we highlight several trends in strategy development and resource investments across procurement departments.
A reflection on the top 10 Procurement trends for 2022
1. Sustainability
From lithium mining for electric vehicle batteries to clearing rainforests for palm oil, your company may be negatively impacting the environment without your knowledge. Therefore, if you do not yet have visibility into sustainable procurement practices, now is the time to take action.
One of the procurement trends for 2022 stems from stakeholder expectations, as they expect organizations to proactively collaborate with suppliers to improve mutual environmental and economic performance.
It is becoming the procurement team's responsibility to understand this impact and do everything within its power to improve it. Ignorance is no longer a defense in the court of public opinion or in legal courts.
2. Ethical sourcing
Ethical sourcing is the vehicle through which procurement teams can achieve their socially sustainable goals. Furthermore, it is 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 hub of corporate social responsibility for an organization as a whole. And this is yet another strong procurement trend for 2022.
Certain components of corporate social responsibility, such as certification tracking, can be automated, contributing significantly to this transformation.
3. Transparency and visibility
Consumers, investors, regulatory agencies, and other stakeholders expect organizations to be open and honest about their business relationships. That is, your organization must have visibility into the partners it is doing business with, as deep into the supply chain as possible. After all, tier-two and tier-three suppliers may be engaged in unethical sourcing practices that can lead to adverse public exposure for your organization. In this context, procurement teams must also understand the risk of disruption among lower-tier suppliers.
4. Digitization and automation
Process digitization removes paper, spreadsheets, and manual handling from procurement activities. Without digital transformation, procurement leaders remain constrained in their ability to derive strategic insights from the data they collect.
Organizations generate too much information for manual analysis. Therefore, sophisticated analytics tools are necessary to drive agile decision-making.
Procurement organizations are well-positioned to leverage data for reporting, spend analysis, supplier assessments, and compliance audits.
Leading companies are already using AI—Artificial Intelligence—to automatically manage online reverse auctions and high-volume orders, as well as to update inventory lists and purchase orders. Smart contracts and blockchain capabilities will validate transactions and authorize automated payments.
In 2021, supplier and contract management, risk, and analytics tools were the most commonly deployed solutions. For 2022, artificial intelligence, machine learning, RPA, and predictive analytics hold the greatest promise for mitigating future supply chain disruptions.
5. Cybersecurity
It may be difficult to imagine, but a cyberattack can lead to ransom demands, intellectual property theft, and other risks resulting in lost business, potential fines, and damage to your company's reputation.
Attackers only need access to a single person's email to spread rapidly across an organization. Fraudulent emails requesting money or system access can undermine relationships with clients and suppliers.
6. Supply Chain Resilience
Supply chains have been significantly disrupted by shipping delays and production shutdowns. The concept of a lean supply chain has its merits, but it may not be adaptable enough to accommodate disruptions.
Just-in-time inventory and manufacturing do not tolerate delays well. A resilient supply chain is equipped with alternative resources so that it can pivot in response to unforeseen events.
Disruptions can be short-term, such as severe weather events, or long-term, such as the shift toward e-commerce during the pandemic. While you cannot prepare for every eventuality, you can put plans in place to guide your response.
7. Risk Management
Your supply chain is vulnerable to various disruptions; however, as seen recently, traditional measures such as long-term contracts do not fully protect your organization from unexpected events.
In 2021, several organizations saw suppliers invoke “Force Majeure” clauses on contractual obligations. This scenario saw a 50% increase compared to 2020.
It is crucial to identify and analyze risks originating from external sources, such as regulatory changes or economic trends. However, it is equally critical to understand risks that are more within your control, such as customer experience and top talent attraction and retention.
New risks can emerge as previous risks subside. Build a continuous process to reprioritize threats and mitigation efforts.
Monitor key market indicators that signal impending change to avoid surprises—for example, contracts with ocean freight carriers that can secure vessel capacity as volumes surge.
8. Supplier Relationship Management
Disruptive technologies are strong procurement trends for 2022. Ultimately, they are what best help procurement teams balance the pursuit of competitive pricing with the objective of building collaborative relationships that foster supplier innovation.
With the security of stable relationships, suppliers are more inclined to invest in technology and capability development. While traditional bidding may not disappear entirely, transactional relationships will be complemented by collaborative contracts with strategic suppliers. Design Thinking sessions will help uncover improvement opportunities within organizational processes.
9. Strategic Sourcing
Success in traditional sourcing is typically measured by contracting products and services at the lowest cost. Consequently, procurement teams often gain little loyalty from their suppliers when challenging times arise. Strategic sourcing takes into account the Total Cost of Ownership (TCO), anchored in facts and business intelligence.
The procurement team responsible for supplier qualification must be integrated into the continuous supplier relationship management (SRM) team. This approach will unlock greater value that far outweighs initial acquisition costs.
10. Organizational Transformation
As procurement teams become more integrated into core business operations, the procurement organization becomes a full partner to finance, legal, engineering, manufacturing, and marketing to manage the flow of information across the organization. To earn a seat at the C-suite table, procurement teams must deliver value that extends well beyond finding the lowest-cost suppliers.
Predicting the future is impossible, but preparing for it is not. From the earliest indicators of looming chaos to warning signs and priorities, you need to know how to identify risks in order to mitigate them.
