Part 2 of Frank Vorrath, Executive Partner, Supply Chain, Gartner, exploration of his predictions for the procurement business landscape in 2020.
Sustainability will drive future consumer behaviour and companies further developing future circular economy concepts
Every company is looking at sustainability and saying, what does it mean to us for our future? Some of them have acted years ago, but as we move to the future consumers, especially younger generations, will think very hard before buying a product. That comes into play with how a company has positioned itself. For these younger generations it’s less about the product and more about the brand. What is the brand really representing in the marketplace? Can I trust that brand? Is the brand really focusing on sustainability? Or is it just talking about it?
That will be the deciding factor for younger generations going forward when they make their buying decisions. We predict that by 2029, in certain ecosystems, you could run supply chains totally waste free. We must make the right commitments now, so that everything we do today doesn’t have a negative impact for generations to come.
Personalization of products and services will be a driver of complexity and cost for most companies and not necessary increase Revenues, EBITA margin expansions and shareholder value
There is a strong drive to become more personalized and give better experiences and service. It will create more complexity because you are planning your product not based on a consumer group, but on an individual person and individual needs of that person.
You have to be geared up to execute on that, because it is a highly complex environment you’re dealing in. Complexity drives cost. If you’re not able to handle that through, better systems, better technologies, more skills, or talents in your organization, you could end up with a whole heap of cost, which then actually impacts your EBIT margins.
The rise of Procurement Professionals through Value Based and Risk mitigating Sourcing Strategies
What we will see in 2020 is a rise of procurement professionals. Companies are starting to understand the true value of a procurement professional, which is not just reducing spend, but also about a value based sourcing model.
A value based sourcing model is about how I can drive value for the consumer in the future and how am I going to generate sustainable business performance and results, but also shareholder value? What that means is your sourcing is not only about sourcing the right material at the right cost. It is also looking at sustainability. That’s where the value comes on top.
Risk mitigating sourcing strategies will be also more on the focus, especially when you think about shortage of certain material and how to source them. Some industries they have experienced that are ready with shortage of certain raw material. It’s about making sure that you have a sustainable end to end value chain.
Human intelligence can’t be replaced and it’s all about people and technology as an enabler
We’re forgetting we still have people, and we have human intelligence and that can’t be, and it shouldn’t be replaced. ultimately, people and technology act as an enabler together to drive better outcomes.
Technology is being seen as the silver bullet, but we know it doesn’t exist. Technologies have always come and disrupted the environment and that won’t go away. I would rather have the conversation and focus more on people and human intelligence, and how we can use technology to enable people to further involve human intelligence instead of just talking about technology as the answer for everything.
Increase of promotions of CSCO’s into CEO positions to manage on-going business complexity and shareholder value creation
Many chief supply chain officers got promoted in leading companies into CEO positions. As a matter of fact, because they understand the end to end value chain of an organization and they really have the ability to run a company on a sustainable basis and also sustainable business performance and results.
We will see it even more because of all the complexity we have to deal with, with all the changes, ongoing changes in the world, having the top senior leaders who are supply chain professionals who have the ability to further grow the company and making a real impact.