As 2018 heads into its final stretch, we thought it timely to make some predictions about the state of procurement in 2019.
by Salim Khalife, Founder & CEO
1. Pervasive Talent Shortage
A shortage of qualified talent will be a significant obstacle facing procurement agencies going into 2019. The U.S. Bureau of Labor Statistics reports that jobs in logistics are estimated to grow by 26% through 2020. Furthermore, one global study estimated that demand for supply chain professionals exceeds supply by a ratio of 6:1, with some predicting that ratio could be as high as 9:1. A survey by DHL, the logistics giant, revealed the top factors driving the talent shortage:
- Changing skill requirements
- Aging workforce
- Lack of development
- Perception that supply chain jobs lack excitement
As procurement professionals’ jobs change, additional skill sets are gaining importance — soft skills like leadership, strategic and critical thinking, creativity, and imagination are now just as vital as the hard skills more typically required in procurement professionals.
2. Continuing Rise of Digital Technologies
Digital technologies including cryptocurrency, blockchain, cloud, internet of things (IoT), artificial intelligence (AI), and robotic process automation (RPA) will continue to gain momentum and become an increasingly prevalent presence in the procurement department. A March 2018 survey conducted by Forrester Research revealed that 60% of enterprise organizations and 54% of midmarket organizations are making accelerating their digital business a top priority.
McKinstry & Company, a leading research agency, found that almost 60%5 of the hundreds of individual tasks involved in the source-to-pay process have the potential to be fully or largely automated using currently available technologies. Importantly, McKinstry’s study found significant automation potential not only in transactional activities, such as order and invoice processing, but also in much more strategic tasks, such as vendor selection and management.
3. Cybersecurity Concerns
Cyberattacks are the fastest growing crime in the U.S., and they are increasing in size, sophistication, and cost. There is little doubt that cyberattacks will continue to plague organizations in 2019 — and at a very high cost those affected.
- The total cost of a successful cyber-attack is over $5 million, or $301 per employee.1
- The most expensive component of a cyber-attack is information loss, which represents 43 percent of costs.2
- Damage related to cybercrime is projected to hit $6 trillion annually by 2021.3
- Malware and web-based attacks are the two most costly attack types — companies spent an average of US $2.4 million in defense.4
In response to the threat, procurement teams must aggressively protect the sensitive personal and financial information belonging both to their own organizations and to their suppliers.
4. Fact-based Procurement Decisions
“Give me the best price and you’ll get the business,” is still the driving force for many procurement organizations. And while the singular focus on cost savings is beneficial in the short term, it can fail as a long-term approach. In the era of big data, it’s now possible and practical to include strategic considerations such as vendor performance, risk analysis, and sustainable practices in procurement decisions. More than half of all midmarket and enterprise organizations surveyed in the Forrester study cited the ability to better leverage big data and analytics as a priority.
Access to data and analytics provide organizations with greater insight into their supply chain. The insight can help procurement professionals improve spend management, detect potential fraud, mitigate risks, and promote more strategic vendor negotiations.
5. Impact of Tariffs
New tariffs on $200 billion worth of products comes on top of the $50 billion worth already taxed earlier this year, meaning nearly half of all Chinese imports into the United States will soon face levies. Due to the volume and variety of goods imported from China, these tariffs can potentially impact the prices of products and services, which directly impacts the procurement department.
Strategic sourcing— the process of developing supply channels at the lowest total cost, not just the lowest purchase price — will become increasingly important as procurement professionals look at add value to help offset rising prices.
2019 promises to be an interesting year, with challenges and opportunities aplenty. We’ve highlighted trends and predictions to watch for here, but strong procurement tools aren’t trendy — they are a fundamental necessity for the continued success of organizations of all kinds and sizes. Learn more through a series of informative webinars.
About the author:
Salim Khalife is the founder, president and CEO of Paramount WorkPlace, a technology company that develops, sells, and supports advanced web-based and mobile requisition, procurement, and expense software solutions for mid-market organizations. The company introduced its first cloud-based SaaS requisition application in 1997 and continues to innovate and expand its partnerships and integrations ever since. Learn more at www.paramountworkplace.com.