Welcome back and a happy new year! IgniteSAP wishes all of our community a safe and successful 2021.
Although most of us are still subject to pandemic disruption there is still good news to celebrate. Several vaccines are being rolled out in Europe, America and Asia, and the consensus is that our older friends and relatives will be protected within the next six months.
Meanwhile, here in the on the continent, with most countries under a new lockdown the business community is dusting off its webcams and getting down to some serious WFH.
In this article from IgniteSAP we will be discussing the expected conditions for commerce as we launch into a new year, particularly the area of Intelligent Spend and procurement management in the context of disruption. We shall look at a recent publication on SAP News on the subject and also review the predictions regarding trends in 2021. A review of advice on how procurement and Intelligent Spend will develop over the next year has produced recurring themes which we would like to share with you. We have complied these into a list with brief explanations here for your convenience.
SAP News chose to round up 2020 with “2021 Predictions for Intelligent Spend Management Amid Ongoing Disruption”. The writers asked ten SAP Executives from their Intelligent Spend, Procurement, SAP Fieldglass and Network teams to give a short contribution from their perspective. These viewpoints are clearly motivated by the need of the contributors to assert the value of their particular SAP solutions but they provide an insight into SAP strategy for the year ahead. We will extract the key points, expand on some of these themes, and put them into context in the procurement section later in this article.
Executives for Intelligent Spend and Business Network advocated a holistic, cloud-based approach which takes into account all business areas when making spend decisions, and also pointed out that these decisions should be data-driven.
Procurement and operations management was described as crucial to the world’s response to Covid-19. Questions were asked by those charged with sourcing products like Personal Protective Equipment such as: “How adaptable is our infrastructure, how agile is our technology and how ambitious is our purpose in the race to safely manufacture these life-sustaining breakthroughs and distribute them equitably?”. These helped to frame the response strategy and they may also be applied to other procurement and distribution networks.
Procurement Solutions executives at SAP said it was essential to ensure interconnectivity. It is important for business to diversify and localise supply chains in order to avoid future disruptions. This is a certainly a strategy that has been adopted by others over 2020. The linearity (assumed even by the use of the phrase “chain”) should be replaced with networks. A broader supply network of dynamic relationships necessarily requires processing a larger volume of data and so digitisation and the resulting visibility are key to achieving this.
Also, focussing on procurement technology is a means to resiliency in supply networks. Integration of business processes reduces complexity and fosters collaboration. This theme of collaboration and data sharing rather than hard-nosed negotiation is a recurring theme in predictions of trends in spend and procurement.
Product Strategy executives chose to draw attention to the big picture and long-term view (as one would expect), and predicted that macroeconomic factors such as declining productivity and the stagnation of globalisation would be compensated for by the exponential growth of the digital economy. The proliferation of Artificial Intelligence is expected to begin to reverse the slump in productivity, and it is anticipated that spend management professionals will be required to take on a role as advisors to provide solutions and strategies, rather than just focussing on cost-saving.
In the next year we shall see human and machine intelligence playing a joint role in decision making to a much greater extent: inspiring new business models and initiatives. Cross-company cooperation will also be more common, especially in achieving sustainability. Procurement operations in the new business environment will also require further digitisation to increase productivity, visibility in supply chains, new sourcing strategies, and responsible trading partnerships.
Contingent workers and services providers will continue to help with creativity and flexibility in the response to disruption. We should also expect to see a greater role for cloud-based external workforce management.
The fact that procurement leaders rose to the challenge on behalf of their organisations and ensured continuity of commerce was key to the response of the business community, and that it is critical also to maintain strong supplier relationships in the next year. By understanding the challenges suppliers face, procurement leaders can work towards mitigating these issues and consequently ensure a greater degree of resiliency. More communication in supplier relationships leads to more control and better outcomes for all parties.
Although the main focus of the SAP News article was fundamentally to demonstrate indirectly the usefulness of SAP solutions to compensate for the interruption of traditional supply chains, we can extrapolate from our summary a variety of points to begin our more general discussion of Intelligent Spend and procurement strategies for 2021. These are:
- Procurement decisions should be (as always) driven by the analysis and interpretation of data.
- This data should be augmented if possible and contextualised within a wider business overview.
- There should be regular assessment of the adaptability of the data network and supply strategy, along with logistics infrastructure.
- Alternative supply partners should be found in case of interruption.
- Regular communication with supply partners can avoid potential problems before they arise.
- Further integration of data with suppliers can also benefit both partners.
- Allocate time to creating new strategies for supply and increasing supply chain visibility.
We will now add the most prevalent strategies (in no particular order) advocated in other discussions we have found in our review of expected trends in procurement strategy for 2021. Many of these (but not all) come from the Spend Matters website supply chain predictions for 2021, a series of articles which feature contributions from businesses with a variety of backgrounds. By drawing these together with other sources we provide a range of possible responses that can be adopted in order to compensate for Covid-19 interruptions.
Find Local Suppliers
By shortening the supply chain procurement managers reduce the potential risk of a failure of the delivery of a shipment as there are less connections to be made. Diversify supply networks with this in mind. Taking several smaller shipments from a selection of more local suppliers may be more reliable than one large supplier.
Watch Out for Regulatory Changes
Brexit is not the only major shift in the economic environment to be aware of this year. Political isolationism and national economies under pressure will result in a wave of smaller changes in cross-border trade. Contract management systems will allow companies to track changes and connect contractual information to operational systems, giving an advantage to those ahead of the paperwork. Equally it is important to regularly review contracts with suppliers to make sure that external events have not made these require updating, and consider creating dynamic contracts with more provision for changes in circumstances.
Favour The Cloud
The adoption of cloud-based applications will facilitate the agility of a business in orchestrating a supply network by extending real-time data visibility: allowing timely and appropriate adjustments to changes in demand.
Supplier Risk Management
Risk management should if possible extend to assessment of Tier 2 suppliers and beyond. Suppliers may be assessed on overall performance, response times, reporting and regulatory compliance among other criteria.
Speed And Transparency
Preferred supply partners will need to demonstrate transparency and speed as well as continuity of supply. Meticulous mapping of a supply chain and tracking of shipments not only benefits the operation of a supply chain but also contributes to future supply strategy and development.
Corporate Social Responsibility
With greater transparency organisations need to protect their reputations and so suppliers will also need to demonstrate good CSR credentials as customers expect these values to be upheld.
More focus on sustainability will reduce overall spend in the long-term and ensure compliance with upcoming legislation on the environmental responsibility of corporations.
Automated Payment Systems
The use of automated payment solutions will increase employee efficiency and the ability of a business to grow at speed along with customer satisfaction. This also increases the level of transparency of information available to chief financial officers and accounting.
B2B Payment Solutions
Setting up a business-to-business or procure-to-pay payment solution will also ensure transparency and the quick access to data required for daily business decisions, and ensure that shipments are not delayed unnecessarily.
The changing work environment will inevitably lead to substantial innovations in machine learning and artificial intelligence, and these changes will trickle down to software solutions in daily use. These developments will affect supply chain strategy by providing further functionality in assessing supply chains and suppliers: augmenting the ability of procurement managers to deal with massive data sets. Automation of repetitive processes previously carried out by employees will increase. This can be as “simple” as Optical Character Recognition making data entry far quicker, or as advanced as modelling market or supply chain behaviour in real-time based on current and historical data: allowing quick and more informed decisions on business strategy.
Integrated Architecture For Spend Management.
Whatever software solution you subscribe to be sure that the integration of data from all aspects of your operation is paramount in your strategy. Increased end-to-end transparency leads to countless opportunities to reduce overall spend.
This list of strategies for procurement in 2021 is not exhaustive and some of these points may be relevant to a business whatever the economic circumstances, but at the beginning of a new year and in the current climate it is good to bring them up for review.
If we were to reduce the list further to a few fundamental modus operandi then it would be: Integrate, Analyse, Strategise and Implement. How one goes about this is of course up to the individual, but in essence that is how a human being sustains itself in its environment. A sustainable business will similarly always be concerned with adaptation to a changing environment. Of course the current situation is somewhat outside of the norm but we still have the same conceptual tools that we always did and they are infinitely adaptable.
Once again, IgniteSAP wishes you all well and hopes you have a happy, healthy, and successful new year!