Throughout 2023, Procurement teams will focus on digitisation, sustainability, strategic sourcing, vendor relationships, and vendor risk management.
These new areas of focus help them save money, reduce their environmental impact, and improve their business’s reputation.
Let’s explore five procurement trends that are going to grow in importance throughout 2023.
We’ll discuss how they will change the role of procurement and how technology such as contract and vendor management software can help businesses to evolve in the coming year.
1. The Rise of Digital Procurement
As more and more businesses move their operations to the digital world, procurement is starting to see the investment it needs to operate at the highest level.
“65% of companies see digitalisation as being important to achieving their company and procurement objectives” -ProcureTech100 2022 Yearbook
Digital procurement platforms streamline the procurement process by automating many of the tedious manual tasks associated with sourcing and purchasing goods and services.
This not only saves time but also reduces the risk of errors and allows procurement teams to focus on more strategic tasks.
Tasks such as vendor onboarding can be digitalised. Digital vendor onboarding refers to the use of technology such as the Gatekeeper Workflow Engine and Vendor Portal to manage the process of onboarding new vendors.
By digitalising this process with Gatekeeper, you can include online forms, digital signatures, and automated workflow systems.
Onboard vendors with Gatekeeper's Workflow Engine
In contrast, manual vendor onboarding often relies on paper documents, spreadsheets, and email for communication and coordination.
Manual ways of working are inefficient and usually lead to disparate data sources within your business.
We want to avoid this at all costs and restore the visibility of vendor data so that the entire organisation can benefit from it.
There are problems with the digitalisation of Procurement. There is “growing skepticism with respect to the maturity and adoption of digital technologies”.
This largely stems from “a lack of knowledge of technologies” that exist and how Procurement can utilise them.
Efficio notes that “the biggest barriers to technology delivering the expected benefits…are:
- Lack of talent to harness the power of machines (72%)
- Poor vendor support in implementing new technology (66%)
- New technology not being supported by the right processes and skills (64%)”.
For the rise of digital procurement to occur, the modern-day procurement professional needs to be digitally astute and equipped with the right technology.
2. Vendor Management turns its focus to Sustainability
Sustainability is becoming an increasingly important consideration for businesses, and this is reflected in the procurement process.
One condition that can slow a company’s growth is poor sustainability performance.” -McKinsey Sustainability, 2016.
Companies are starting to prioritise suppliers that have strong sustainability practices, and are also looking for ways to reduce their own environmental impact through their procurement processes.
To this end, according to McKinsey, “some companies will benefit from innovations that allow products to be made using less energy and material and to be reused or recycled with ease”.
This may involve using more eco-friendly materials, sourcing goods and services locally, or finding suppliers that use renewable energy.
One of the key ways in which sustainability can impact your organisation's bottom line is through the cost of goods and services.
Changes in how your business makes products can make significant savings in the long term. Nike, for example, reduced labour costs by up to 50% and reduced material usage by 20%, which resulted in 0.25% higher margins for some of their trainer designs.
Not to mention that sourcing goods and services from sustainable suppliers can reduce your organisation’s environmental impact and save money.
Sustainability can give you a commercial advantage with a decreased total cost of ownership of the materials you source.
Sustainability can also impact your organisation's reputation. Consumers and investors are increasingly interested in supporting environmentally-friendly companies, and a strong sustainability record can help your company to stand out in the marketplace for the right reasons.
CIPS highlights that Apple has faced allegations of poor working conditions throughout its supply chain. A smaller known brand may well crumple under such allegations.
By prioritising sustainability in their procurement processes, companies can improve their reputation and attract new customers and investors.
Within Gatekeeper, you could categorise your Sustainable Vendors using Custom Data or creating a new Vendor type that indicates this.
Overall, sustainability is important in procurement because it can help companies save money, reduce their environmental impact, and improve their reputation.
By incorporating sustainability into their procurement processes, companies can position themselves for long-term success.
3. From Transactional to Strategic Sourcing
With the emergence of Digital Procurement and Contract Management solutions over the past few years, we’ve seen more organisations source and implement this technology.
With this implementation comes the distinct ROI of removing low-value work so that procurement teams can focus on high-value work, such as strategic sourcing - the practice of carefully analysing an organisation's procurement needs and identifying the most cost-effective and efficient sources for goods and services.
Strategic Sourcing can factor in points around ESG, Sustainability, and any other pertinent point that organisations will turn their attention to in 2023.
We’ll see more opportunities for procurement professionals to be involved in Strategic Sourcing roles as activities such as vendor onboarding, contracting, and risk management is increasingly optimised via technology.
4. Becoming Partners with our Vendors
Building strong relationships with your vendors is critical to the long-term success of your business.
Vendor relationship management not only helps to ensure a steady supply of goods and services.
It also allows you to work closely with third-parties to identify cost-saving opportunities and innovations in service offerings, and improve the quality of their products and services.
By fostering a culture of communication with your vendors you can secure commercial advantages such as:
- Lower total cost in ownership
- New services/goods offered to you before their other customers or your competitors
- Increased collaboration that can reduce risk events emerging
It’s impossible to partner with all of your vendors.
Rather, you’d only do this with your most strategic vendors - those that present a high risk, criticality and importance to your business.
These are the vendors you need to spend the most time with. Ensuring you have a way to segment your vendors built into your onboarding process is a simple way to ensure this is top of mind for every interaction.
Within Gatekeeper you can segment every vendor directly in the Vendor Record or through our Workflow Engine, which is where we will digitalise your processes.
I’d suggest that you segment your vendors during your vendor onboarding process as Gatekeeper automatically updates the Vendor Record.
Not to mention that you could then use this data point to govern the type of due diligence questions that you issue to your vendors.
This can offer process efficiencies as you can tailor your due diligence and onboarding experience to the different Vendor types.
5. Prioritising Vendor Risk Management
Vendor risk management should be a priority within Procurement in 2023 because it helps to protect your organisation against a wide range of potential risks and threats.
The types of risks it can protect your business from are:
- Vendor bankruptcy throughout the contract lifecycle
- Cyber risks
- Product defects
- Data breaches
- Poor performance
- Unfulfilled ESG requirements and commitments
By implementing a robust vendor risk management program you can identify and assess the risks posed by your vendors and develop strategies to mitigate or manage these risks.
You can mitigate vendor risks by:
- Conducting due diligence on new vendors
- Implementing contract terms that protect the organisation
- Monitoring a vendor’s financial and cyber health on an ongoing basis
- Tracking vendor obligation fulfilment.
As organisations navigate an increasingly complex and volatile business environment, procurement will play a larger role in managing risk.
This could involve implementing processes and technologies to monitor and manage risk such as Market IQ, as well as building more resilient and agile supply chains. With Market IQ Financial, you can view aggregated data from thousands of vetted data points that will monitor the financial health of your vendors.
See your vendor's cyber and financial health within Market IQ
“Globalization will shatter into pieces. Some regional. Some national. Some smaller. It will be costly. It will make life slower. And above all, worse. No economic system yet imagined can function in the sort of future we face”. - Peter Zeihan
Even if we don’t see this happen, we are seeing cracks in globalisation that are impacting our supply chains negatively.
They are costlier and slower than they have been in recent memory. Resilience is needed throughout our organisations and supply chains to overcome this.
Procurement professionals will need to be proactive in identifying and mitigating risks within the supply chain, including cybersecurity risks and regulatory risks.
By taking a proactive approach to risk management, procurement organisations can build more resilient and agile supply chains that are better equipped to navigate the challenges of the coming decade.
Summarising the Procurement Trends for 2023
We see the focus of Procurement teams shifting to digital procurement, sustainability, strategic sourcing, vendor relationships, and vendor risk management.
Truth be told, this list could have been used for the last few years since the Covid-19 pandemic.
However, as procurement teams have emerged with a renewed focus on their amplified role within their business, we’re seeing teams tell us time and time again:
- We want to do more with less
- We have poor visibility of our vendors and contracts
- We don’t know what risks might emerge
- We’re stuck in the weeds - we don’t want to be there.
If this list resonates with your business and its procurement team, implementing a Contract and Vendor Lifecycle Management platform will help you to get ahead of these trends.
It will give you better visibility of your vendors, greater control of your procurement processes and will make compliance with sustainability and other regulations easier to manage.
If you want to check Gatekeeper out in more detail, let's set up a call and run through the challenges you're looking to solve in 2023.