The procurement operating model has never been more crucial to an organisation's success. In the face of pandemics, supply chain disruptions, and inflation, procurement has stepped up to become a strategic partner. But with tomorrow's challenges looming, how should the procurement operating model evolve to continue creating value and securing its place within the organisation?
Preparing for tomorrows challenges
While it's impossible to predict the future, new challenges will inevitably arise. Key megatrends like technological breakthroughs, climate change, economic volatility, and demographic shifts are creating a complex landscape. When these trends converge, they can create the perfect storm, amplifying their impact on the procurement operating model.
Procurement functions that adapt their procurement operating models early will be well-positioned to turn these challenges into opportunities. By doing so, they can create competitive advantages and deliver new sources of value, further elevating their role within the organisation. In contrast, functions that fail to evolve will face scrutiny, putting their existence at risk.
Using technology to enable self-service
AI and other technologies offer a chance to expand procurement self-service. This concept has been around since the early 2000s when the procurement operating model transitioned the majority of purchasing activity into the business through self-service Purchase to Pay (P2P) solutions. Now, AI can take this further by enabling businesses to source less complex categories on their own, using insights and guidance once provided by category managers.
Increasing the use of self-service is a win-win for both procurement and stakeholders. It allows procurement to focus on more strategic activities while speeding up the buying process for the business and suppliers. A recent report by KPMG on the use of Generative AI in procurement indicated that between 50-80% of procurement work could move to self-service with the use of AI. This is a clear indication of how the procurement operating model can leverage technology for efficiency.
Improved end-user experience
Procurement can learn a lot from consumer platforms like Amazon, which have set high standards for user experience. In their personal lives, end users enjoy seamless, frictionless processes. Procurement needs to match this experience, replacing traditional, cumbersome procedures with a focus on making it easier to buy.
This starts with mapping and tracking the end-user journey to identify friction points. Just as eCommerce businesses analyse shopping cart abandonments, the procurement should continuously optimise its processes to meet user needs efficiently. The future operating model will require dedicated roles focused on end-user experience, working across processes and systems to provide a smooth journey.
Shifting focus: from category to product/service
Today, category management applies to both indirect and direct categories, often with equal attention. However, the future procurement operating model will emphasise categories integral to the end product or service. Lower-risk, less complex categories will be managed through self-service technology.
This shift means traditional indirect category structures will become obsolete. Procurement staff will be aligned more closely with the end product or service, with previous indirect category managers upskilled to support these strategic areas. The procurement operating model will thus evolve to support a more strategic approach to category management.
Future procurement operating model changes
Building future capabilities
To meet future challenges, the procurement operating model needs to develop new capabilities in several key areas:
Technology enablement
Currently, procurement teams spend too much time on low-value tasks. Advances in technology will allow automation of many of these tasks, enabling the procurement operating model to focus on creating strategic value. Procurement organisations must become technology-fluent, understanding how to leverage the latest tools to create opportunities. As the ProcureTech market expands, a flexible ecosystem of suppliers and platforms will be essential.
Data governance
Data is one of procurement's most valuable assets, especially as AI becomes more prevalent. The need for high-quality data has never been greater. Future procurement operating models will place data governance at the core, ensuring clean, seamlessly exchanged data across the digital procurement ecosystem.
Content creation
A good user experience relies on an effective content strategy. The future procurement operating model will prioritise content curation, ensuring stakeholders receive the right information at the right time. Lengthy policies and handbooks will be replaced by concise, targeted communications.
Insight generation
Procurement sits at the intersection of supply markets and internal demand, providing access to vast quantities of data. However, many departments struggle to capitalise on this asset. The future procurement operating model will centralise data and insight creation, employing technology-fluent individuals who can extract and analyse data to predict trends and identify value opportunities.
Leveraging AI-generated insights, procurement staff will need to become adept storytellers, using emotional intelligence and influencing skills to drive business decisions.
Value entrepreneurship
The procurement professional of the future will need to be business-savvy, understanding the flow from the supply chain to the end product or service. With technology providing the space, time, and insights, the procurement operating model will shift focus to areas like risk mitigation, carbon reduction, and product improvements.
Procurement will adopt an investor-like approach to supplier management, nurturing suppliers to develop new innovations and competitive advantages. This new breed of professionals will understand corporate strategy and translate it into value requirements.
Future procurement capabilities
Conclusion: embracing the future procurement operating model
The future procurement operating model will be smaller, more agile, and higher-skilled, utilising a flexible ecosystem of technology platforms to automate processes. While maintaining oversight of third-party expenditure, procurement will delegate more autonomy for low-risk sourcing through AI-guided self-service.
This transformation will allow the procurement operating model to focus on leveraging data and insights to deliver new sources of value. By providing a more consumer-focused end-user experience, procurement will continue to elevate its strategic role within the organisation.
Is your procurement operating model ready for the future? Do you need help to assess your current capabilities and explore how emerging technologies can turn tomorrow's challenges into new value opportunities? Let’s start a conversation about how your organisation can stay ahead.
How can Swan Procurement help?
We are experts in optimising technology supplier expenditure, reducing supplier risk and accelerating procurement maturity. We combine deep specialist knowledge with data insights to deliver a range of services from technology contract benchmarking to procurement target operating design. We will work alongside you as your trusted partner to solve your procurement challenges. Please contact us to discuss how we can help.
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