Where can the future of sourcing take you?

Spend forecasting, agile decision making and predictive technology can allow your organisation to grasp the future of procurement.

By Stewart Ogilvie and Arun Yadav

In the future, the Procurement function will be clearly viewed by the business as a partner to drive value beyond its core activities. In order to facilitate this, it must work as an integral support leg to the business, ensuring that operational procurement is optimised through the provision of relevant and up-to-date buying channels, as well as providing expertise and strategic direction for those more complex categories. The future of sourcing will enable you to predictively manage demand and outcomes in the following ways:

  1. Forecasting spend, demand, and timing activities accurately by extracting data from contracts, managing spend in real-time and automatically sensing consumption and demand;
  2. Agile decision making through transforming data into dashboards and providing transparency across the supply chain;
  3. Predicting your supply base, innovation and supplier behaviour – predict suppliers of the future based on your innovation needs
  4. Predicting outcomes of supplier negotiations through scenario analysis.

Given the strengths of your procurement function and how it contributes to the wider objectives of the business, which of the below three examples could your procurement organisation embark on or improve in line with the future of sourcing?

Demand forecasting

Having the ability to forecast demand provides the Procurement function with clear foresight on their future activities. As the category manager’s insight becomes augmented through real time spend analytics and enhanced visibility of the organisation’s supply network, the function can enhance and improve its reputation with the business and its suppliers. For example, as the predictability of the businesses sourcing requirements become clear, there are opportunities for Procurement to shape requirements, and engage the business early to reduce the likelihood of shadow procurement.

In addition, it is possible to improve risk mitigation as key buying data is fed into the procurement dashboard to alert Procurement, enabling them to schedule activities and engage with suppliers to ensure continuity of services where required.

Predictive supplier negotiation

Predicting the outcomes of sourcing events can save time and enhance the success of the products or services provided by suppliers. Some platforms offer the ability to mathematically optimise your sourcing events, bringing powerful sourcing analytics to your decision making through application of pre-defined business criteria. For example, building excel formulas into the commercial tool to automate the final supplier score, and allowing the sourcing manager to alter and adapt the formulae to optimise the sourcing outcome.

Integrating your supplier on-boarding and performance data into your sourcing module will allow for upfront analysis of the supplier’s key attributes, such as their responses and scores to your selection criteria. This will in turn allow the Procurement function to leverage existing data to build predictive negotiation outcomes and accurately judge the suitability of suppliers.

Ethical behaviour

By embracing the use of sourcing modules to store and record key data points from sourcing events, the Procurement function can consolidate, audit and analyse supplier capabilities and business practices. Over time, this should help build a strong repository of supplier info to leverage for future events. For example, if ethical standards are of key importance then the technology should be configured to store and report on metadata related to ethical behaviour. To support this, the embedded use of ethical questions in a mandatory template will ensure that ethical standards are continually applied to Sourcing events, ensuring that you uphold your organisation’s ethical standards and help drive the responsible business agenda.

Based on your organisation, its complexities and the content required by the business, how do you see the future of sourcing?

We’d love to know your thoughts on LinkedIn.

This blog is authored by Stewart Ogilvie and Arun Yadav, Senior Consultants, Deloitte.

Did you find this useful?