Reflection from science on procurement trends
The times they are changing…..
Forecasting is difficult, especially when it concerns the future. This is of course an old, a bit ‘cheesy’ joke, originally applied to attempts to forecast demand aiming to improve supply chain performance. Having said that, this statement should certainly also be kept in mind when looking at the results of trend studies. Let me immediately stress that this doesn’t mean that such studies have no value. So, what value can we derive from Supply Value’s 2017 Procurement Trends study? Are the times changing in our domain?
The title of this preface refers to a classic (1964!) song of Bob Dylan, who recently was awarded the prestigious Nobel Prize for Literature. With some British understatement, one may conclude that this choice was not undisputed, but that is not my point here. I am interested in an answer to Dylan’s issue of changing times.
At first sight the Supply Value 2017 Trends study appears to be an example of ‘nothing new under the sun’: the results apparently confirm procurement’s focus on, or ‘obsession with’ if one prefers a bit more drama, cost reduction. Just like in 2016, the subject ‘procurement led cost reduction’ scores highest: 4,16 (on a fivepoint scale) in 2016 compared to 4,05 in 2015. This result is also in line with the findings from a survey recently executed by the Dutch procurement magazine Deal!.
So, nothing new, no changing times? Well, that is actually a matter of perspective, or phrased differently, which lens is being used in the analysis of the data.
These data in Supply Value’s 2017 study are based on the responses of about 190 organisations from a variety of industries. In terms of country of origin, the participating companies are mainly from the Benelux (about 85%), but there were also responses from countries like Hungary, Poland, Germany and Finland.
So, what happens when we replace the ‘absolute score’ lens with one that focuses on the difference between the planned and the current focus? When using this difference based lens, the top five trends for 2017 becomes procurement led innovation, bundling procurement with partners, supplier involvement in order to stimulate innovation, use of Big Data and risk management. The absolute number one trend ‘cost reduction’ doesn’t even make it to the top ten based on the difference lens. I feel these findings are reassuring and also reconfirming the importance of ongoing scientific research on topics like Earlier Supplier Involvement in innovation, (key) supplier collaboration and (supply) risk management. Personally, I had hoped for a slightly higher differential score for sustainability related issues, yet “CSR in procurement” does rank as number nine in the difference driven top ten. It is also interesting to see that, in more qualitative terms, sustainable procurement is most often mentioned as the most important procurement trend for 2017, followed by the already mentioned procurement led innovation trend.
Moreover, it is quite interesting to observe that, when looking at firm size, CSR in procurement is the number one difference trend for the medium category of companies (51-250 FTE, representing about 25% of the total population in the Supply Value study). Given the importance of medium-sized companies in our economy, this is a promising finding when it comes to making a sustainable impact via the procurement function.
I feel these are promising outcomes and this report contains more interesting analyses, for example linking the outcomes to the selfreported maturity levels of the participating organisations. It is especially intriguing to see that the top five of trends based on difference are notably different for companies focusing on ‘lowest unit cost’, with the more operational ‘catalogue buying’ trend as a clear number one.
In conclusion, and keeping the caveat of inherent forecasting difficulties in mind, I feel the times are indeed starting to change in the procurement domain. While cost reduction is still the absolute number one, this 2017 Supply Value study reveals a growing attention for more innovation and value driven topics. I can only hope this trend continues in the coming years and I wish organisations a lot of success and wisdom in exploring these new territories.
NEVI Professor of Purchasing Management