Overview: The biggest procurement trends for 2023
In 2023, procurement will focus more on digitalisation and strategic sourcing. Sustainability is becoming increasingly important as consumers and investors prefer businesses that prioritize sustainable operations. Good relationship management with suppliers is crucial to building confidence, assisting growth, and ensuring security of supply. Governments may become more involved in trade due to geopolitical events, inflation, and trade disputes. Finally, digitization will enable procurement teams to work more efficiently and effectively, allowing for better management of supply chains and vendor relationships.
As anything in the world, the procurement area is also changing constantly – and rapidly. Companies will need to focus on new trends in procurement if they want to keep up.
Procurement professionals will still face challenges in 2023 due to global supply chain disruptions, ongoing conflicts and trade disputes among countries. Strong procurement strategy is crucial because one wrong move can result in significant financial losses. But what are the new developments that companies will have to deal with? This article explores seven procurement trends that will become increasingly important and discusses how technology like contract and vendor management software can aid businesses.
1. Flexible supply chains
In the year 2023, the international economy will continue to be influenced by high energy and commodity prices, inflation, and a widespread shortage of skilled workers. Due to recent crisis events, companies are already adjusting their supply chains by diversifying their suppliers, building up inventories, and adopting near- or on-shoring. Decision-makers in procurement will adapt their procurement strategies, question production models, and strive for better collaboration and a thorough evaluation of suppliers.
2. Risk management and transparency
Crises such as the Covid-19 pandemic and the war in Ukraine continue to have significant impacts on international supply chains. For this reason, professional risk management is of crucial importance. Comprehensive information about the entire supply chain is necessary to achieve this. In 2023, it is expected that companies will create the organizational and technical conditions to bring more transparency to their supply chains. The focus will be on acquiring information about sub-tier suppliers. Strong relationships between buyers and suppliers are crucial for reducing crisis-related risks. Transparency can only be achieved when companies rely on trusted relationships and exchange information with existing suppliers, rather than immediately seeking new partners when problems arise.
3. Improved Supplier Relationship Management (SRM)
Building strong vendor relationships is important for the long-term success of businesses, as it allows for improved quality of goods and services, identifying cost-saving opportunities, and more innovation in services and products. Effective Supplier Relationship Management (SRM) will be crucial for the success of procurement teams in 2023. This will require regular communication, collaboration, and feedback, as well as a more strategic approach to supplier selection and management. Effective SRM can help mitigate risks associated with suppliers by addressing potential issues before they become significant problems.
4. Digitalisation
Technology is essential for efficient collaboration between buyers and suppliers. Only with a fully digitized source-to-pay process can procurement professionals fully leverage efficiency potential, automate routine tasks, and take the collaboration with suppliers to a positive new level. This includes, for example, automating invoicing processes and creating opportunities for early payment to suppliers. To achieve this, greater digitalisation and a stronger commitment to process automation are becoming increasingly important.
As more businesses move to digital operations, procurement is finally receiving the investment needed to operate at the highest level. Digital procurement platforms automate tedious tasks associated with sourcing and purchasing goods and services, allowing teams to focus on more strategic tasks. In contrast, manual ways of working are inefficient and lead to disparate data sources. However, a lack of knowledge of available technologies and poor vendor support are major barriers to technology delivering the expected benefits. The modern-day procurement team needs the best technology. SapienceS2P can provide companies with just that.
5. Sustainability
As ESG (Environmental, Social, and Governance) standards gain more importance in the corporate world, companies will focus on sustainability in 2023. This is due to the implementation of new regulations and laws worldwide, such as the German Supply Chain Due Diligence Act (LkSG). However, only few companies have prioritized ESG progress, while many procurement teams from international companies have had to compromise on their sourcing criteria to ensure supply. This poses a dilemma for companies in 2023 as they strive to comply with stringent laws while maintaining their production and viability. In response, organizations will introduce processes and systems that can accurately determine their current CO2 emissions, track progress, and document it for reporting.
To prioritize sustainability, procurement teams need to source goods and services from suppliers that use eco-friendly materials, source locally, or rely on renewable energy. By doing so, companies can achieve long-term cost savings, improve their reputation, and receive support from consumers and investors.
6. Strategic Sourcing
In recent years, Digital Procurement and Contract Management solutions have become more popular and many organizations have implemented this technology. The implementation of these solutions can provide a distinct return on investment by allowing procurement teams to focus on high-value work, such as strategic sourcing. This involves analysing an organization’s procurement needs and identifying the most cost-effective and efficient sources for goods and services, while also taking into account factors such as ESG and sustainability. As technology continues to optimize activities such as vendor onboarding, contracting, and risk management, we can expect to see more opportunities for procurement professionals to be involved in strategic sourcing roles.
7. Pay Your Way
The practice of flexible payments has become widespread among consumers through companies like Klarna and Afterpay. Soon, similar flexibility will become available in the procurement process. These “pay your way” options will allow Finance to manage spending and cash flow more efficiently, creating options for unexpected expenses. Currently, contingency planning involves tying up cash funds, keeping a line of credit, or taking out short-term loans, which can be expensive and time-consuming. However, a specialized payment system based on the consumer model can benefit both vendors and buyers, allowing the latter to make purchases that support their organizational goals. This will happen through ERP or Procurement Software platforms that are adept at handling both POs and invoices, as well as finance and accounting functions.
Many challenges – great solutions
In conclusion, the procurement landscape in 2023 will be shaped by digitization, sustainability, strategic sourcing, and supplier relationship management. Companies will continue to face global supply chain disruptions and ongoing conflicts, making it crucial to have a strong procurement strategy. As companies strive to comply with stringent laws and maintain their production and viability, prioritizing sustainability and sourcing goods and services from sustainable suppliers will be essential. By adapting to these trends, companies can achieve long-term cost savings, improve their reputation, and receive support from consumers and investors.
With their advanced procurement solutions, including contract and vendor management software, SapienceS2P is well-equipped to help companies navigate the evolving procurement landscape in 2023 and beyond, ensuring efficient processes, strong supplier relationships, and sustainability-driven practices for success in the modern business world.