A lot has already changed within the first few weeks of the year. The China asset bubble finally burst, oil prices are near $25 a barrel and indicators predict especially uncertain times. Could 2016 be the year that we see the predictions of 2008 come home to roost? Whatever the year holds, David Bowie was right, the future will not be boring.
As we hope for the best and prepare for the worst, here are my key business considerations for the year ahead:
Understanding Security & Technology
Global cyber attacks cost businesses up to $575 billion per year. Due to these risks, corporations are scrutinizing their approaches to data security and consequently the on-boarding of new vendors is taking longer. So long, that some feel it’s easier to stick to the incumbent.
Too often IT acts like a gatekeeper, holding the rest of the organization hostage. But ultimately, the entire organization, not just the IT teams, must take responsibility for security. To put it simply, organizations must better understand how behaviors and activities impact business risk and value. Procurement and IT must collaborate from the start of each new procurement initiative. Failing to do so can have significant negative impacts, such as:
- Delayed implementation times
- Delayed ROIs
- Project fatigue: Sometimes resulting from the time-lag between vendor selection and the go live date; or key stakeholder/project owners are assigned new projects and priorities are switched.
- Failure to meet deadlines: The exponential increase in IT security teams’ workload coupled with the shortage of talent has led to the perfect storm.
- Recruitment plans for cyber security specialists in sectors like retail is expected to grow by 9% in 2016… Some consultants are commanding $4,500 per day for their services.
Appreciating the value of 20:20 spend visibility
Fairly obvious starting point here, but not all spends are equal. It is important to understand the end game and to establish a link between spend decisions and corporate value. This goal is lofty, but simply understanding the risks to your corporation is a good place to start. Translating these risks into tangible goals for your stakeholders with direct reports is where the rubber meets the road. Improving spend visibility is one way to make Procurement more relevant.
Collaborating with other stakeholders
Stakeholder understanding of spend analysis is wildly different. Many still assume reporting data from a P2P tool or ERP is spend analysis. It is not. Educate your colleagues in IT on the differences and the constraints associated with this thinking.
Improving efficiency to up resources
Robots may cut 25% of US jobs in the next 4 years. By 2025 automation could replace 22.7 million employees. Often automation equals efficiency. Productivity gains can be found by automating existing activities such as P2P processes. Don’t let low value tasks take up too much time. Make 2016 the year to improve productivity. The ROI may not be immediate, but taking this approach pays off in the future and requires action now. If you don’t act, your competition will improve faster.
Reducing supplier and supply-chain risks
There is a lot of uncertainty emerging from the Chinese asset bubble bursting and the retrenching of overseas investments and commodities surpluses. Vendor exposure to these risks is difficult to gauge. To reduce risks, Vendor Management is crucial. Choosing the right vendor for the right product, price-wise and quality-wise, to reduce costs and increase the proportion of spend to become more variable (from fixed) can protect strategic suppliers and your business.
Aligning procurement with the broader organization
Align procurement processes across the entire business and weave those practices into day-to-day activities without creating a silo of administration or bottleneck. Automate when and where you can and be customer-centric. Have a vision for what it’s going to take to survive and thrive in 2016. Work with IT and others to gain insights into opportunities for better security, control, collaboration and revenue-generating activities. These efforts can mitigate risks, and will help your organization manage the good with the bad while securing real benefits for your business.
In summary, the coming months must be about extracting value from your businesses while protecting it from increasing risks. Use existing resources differently to achieve better understanding of how your decisions can positively impact revenue- generating activities.
These are just a few consideration to keep in mind as you prepare for the future.
Request a demo to see the possibilities, or give us a call and tell us your procurement goals for yourself, your team and your company in 2016. We’re sure we can help you realize them!