We’ve broken our predictions for the year into three categories: technology, volatility and people. Read on for a few things to expect in 2019, and what they’ll mean for sourcing and procurement.
1. New Technologies Expand the Realm of the Possible
Digital transformation is a hot topic among supply chain leaders, practitioners and, consultants. While each business has to decide individually what their path to transformation will be, there is a broad consensus that data-driven decision making and the automation of rote tasks are the first steps.
Beyond that, companies are beginning to recognize the potential that new technologies, including AI and machine learning, have to fundamentally change how the business of procurement is conducted, resulting in substantial productivity increases, efficiencies, and cost savings.
Technology is continually evolving, but the existing possibilities are already impressive. A Cognitive Sourcing platform can provide an organization with access to a vast range of data sources and generate actionable information on demand. This easy access, always on source of information allows for radical changes in how procurement operates. Decision-making processes that used to take weeks or months can be compressed to days. Professionals who are freed from number crunching can engage more frequently and strategically with suppliers, meaning more spend under management. Access to a consistent data source allows procurement to provide answers to other functions quickly, and with confidence, paving the way for increased collaboration. Platforms like this also allow for modeling a range of scenarios and potential outcomes.
These expanded capabilities will prove immediately useful to supply chain and procurement professionals, as 2019 looks to be a challenging year…
2. Adoption of AI Technologies Will Grow as Organizations Experiment with Pilot Programs
We’ve seen a clear trend towards digital transformation, with our own research showing that 75% of organizations are engaged in a digital transformation initiative. Unlike large ERP implementations of the past, many AI technologies can be used in a pilot or trial program against a limited data set, giving companies a better sense of the benefit to a wider adoption. We expect this trend to continue as the challenging global environment and the fear of falling behind competitors drives organizations towards new ways to assess risk, model scenarios, and manage the ever-growing tide of data.
3. Predictive Technologies are Next
The automation of manual processes the first step in a lot of transformation initiatives. While a business that is genuinely AI-run remains on the horizon, many organizations are going to take the next logical step and begin exploring predictive technologies. Applying and testing predictive models in specific areas of spend is a reasonable first step in moving towards a full AI approach to business.
RISK & VOLATILITY
1. Increased Volatility is On the Way
The past two years have seen increased volatility worldwide, and that trend will likely continue. Managing the risks from unpredictable world events like natural disasters have always been a part of supply chain and procurement, but professionals will increasingly need to consider geopolitical risk as a factor to be accounted for
The US, in the past a stabilizing influence on the market, has become increasingly unpredictable. Ongoing trade tensions with China has led to the possibility of significant tariffs that would require immediate attention from supply planners. In combination with security issues and some uncertainty surrounding the approval and adoption of The United States Mexico Canada Agreement (USMCA), there is plenty of volatility to manage.
2. Companies Will Explore Shifting their Supply Chains Away from China
In addition to the concerns described above, rising wages in China also make the country less attractive to manufacturers. Many organizations will begin to do research into the costs and benefits of shifting their supply chain into other regions, for example, Vietnam and Mexico. Planners will find a range of factors to weigh. New locations might be attractive from a cost and security perspective, but there may be a trade-off with quality and part availability.
3. The Cost of Tech Components Will Go Up
Over the past decade, reducing costs for components has been driven by overall falling prices in tech. This is going to change as tech components are increasingly used in the manufacture of “non-tech” products like cars, thermostats and any number of consumer goods. The increased demand will raise prices, requiring procurement to develop creative approaches to find savings, or simply limit cost increases.
ORGANIZATIONS & PEOPLE
1. Increased Emphasis on Digital Fluency
While category experts will remain critical to procurement teams, hiring managers will increasingly look for digital savvy candidates across the board. Some will rely on training and technology to boost their category knowledge, but the entire team will need to be comfortable with new technologies.
2. Increased Collaboration with NPI
As organizations adopt Cognitive Sourcing technologies, the transparency and benefits they provide will begin to spread across the organization. New Product Introduction (NPI) teams will be early adopters, using the platform to help select parts, optimize costs, and model how various factors might impact gross margin over a product’s lifecycle. This collaboration will only increase as the increased productivity made possible by technology begins to shrink development time.
3. Procurement Will Play a More Visible & Strategic Role
As Procurement begins to adapt to their new capabilities by becoming more transparent, proactive strategically, and incorporating a wider variety of skill sets, the function will start to take on an elevated profile.