Within the procurement chain, some organizations still complete critical functions using basic toolsets or manual, offline processes. But there has been an important shift in the way organizations are looking to streamline their activities.
Many leaders within procurement are turning towards a new class of tools and software, platforms that focus on deeper workflows, increased collaboration, and smarter automation. Demand for innovative tools is growing as procurement leaders look to address new and existing challenges.
So what is driving this demand? What is behind the trend towards these new platforms?
We already know that today’s sourcing teams are increasingly being challenged to deliver against aggressive goals—often grappling with limited time, resources and insight.
Going beyond these challenges, what factors and industry trends are steering modern sourcing teams towards this latest generation of software?
Trends shaping the sourcing industry
Viewing the industry as a whole, there are a few significant and far-reaching trends driving this change. Here are three of the main trends we identified that are shaping the move towards the new class of sourcing software:
1. Sourcing's ascendancy
Sourcing’s role is growing in importance, becoming one of the primary value drivers across the entire chain for both indirect and direct procurement.
For indirect procurement, capturing and controlling more spend management has always been important. But in today’s climate, sourcing’s ability to get great products or services at great prices has a greater impact on the organization’s performance—on all fronts.
Failure to do so can cause increases in maverick spend, dissatisfied stakeholders, overrun budgets, and missed performance targets. When this happens, your procurement performance and strategic goals are put at serious risk.
For direct procurement, the ascendancy of sourcing is even more clear. The impact of the global markets has magnified the benefits of great sourcing and can make the difference in your competitiveness on the global stage.
2. Sourcing's 'strategic impact' problem
Sourcing’s growing role and importance have highlighted the need for a more strategic approach to sourcing.
Yet only 32% of procurement leaders report that their sourcing team is a strong strategic partner to their organization (The Deloitte Global CPO Survey 2016). Many leaders also have difficulty even defining what ‘strategic impact’ means for their teams, let alone creating and managing the framework for measuring their impact.
It’s clear that many sourcing teams are struggling to make the transition towards more strategic decision-making. The challenge is made more difficult by growing decentralization and the lightning-fast rate of technological change.
3. Escalating skills/talent gap
In the same Deloitte study, only 38% of procurement leaders believed that their teams had “the skills needed to deliver their procurement strategy.” This was part of an alarming downward trend for leaders, with confidence projected to dip below 30% in 2018.
Imagine a sales executive explaining that only a third of their team has the capabilities and tools to meet their sales targets. That is not a sustainable situation for sales, nor is it for procurement.
More is being asked of procurement teams today than ever before. Delivering against increased performance and strategic objectives requires new approaches, better tools, and improved efficiency and effectiveness.
Sourcing has never been more important, yet many procurement leaders doubt their ability to have a strategic impact or that their teams can deliver against strategic objectives.
A wave of new technology continues to help procurement teams innovate their processes and transform the way suppliers, buyers, and competitors perform.