7 Strategic Sourcing Trends for 2021 and Beyond
Strategic sourcing has been growing in importance in the world of procurement. The traditional sourcing strategy of picking the supplier who offers the lowest cost worked for centuries but doesn’t cut it in a modern, globalized business climate.
Strategic sourcing has proven to be far more effective. In 2020, we saw the value of this approach as a pandemic pushed supply chains to the breaking point. Consumer buying behavior was upended, while many companies were forced to pivot and produce high-demand products like PPE.
Adding to the challenges, there were travel and shipping restrictions, and many employees rapidly shifted to working from home.
Based on developments in procurement that have already been underway—and the many lessons learned during 2020—it’s clear that strategic sourcing is more important than ever. Looking to the new year and the near future, here are seven strategic sourcing trends for 2021 and beyond, that every procurement professional should have on their radar.
Have a Digital Strategy in Place
One thing that 2020 has made clear is that every company must have a digital strategy in place—including for its sourcing team.
Many organizations found themselves caught off guard by the events of 2020. Those that already had a digital strategy fared better. With the groundwork already in place, they may have had to move faster than planned, but there was less sense of panic and they were able to pivot more efficiently
Solutions were deployed that made sense and followed the established framework. Companies that lacked a digital strategy at the start of the year often found themselves flailing to adopt technology in response to rapidly changing conditions. When the situation is normalized, they will likely have to walk back some of those solutions because they don’t integrate, lack needed features, or are the wrong tool for the job.
Embrace the Cloud
Another key lesson of 2020 is the need for companies to embrace the cloud. In many offices, management sent staff home to work to maintain social distancing. That includes many procurement teams and sourcing staff. Those companies that adopted cloud-based solutions were able to quickly and effectively adapt to employees working from home.
When your software is cloud-based, you can access it from home just as easily as in the office. Those that relied on traditional software packages installed on office PCs and running off corporate servers had a much more difficult time providing the remote access needed to keep running.
Embracing the cloud doesn’t just provide insurance against events like a pandemic. It makes working from home or any remote location possible and makes it far easier to incorporate throughout entire procurement teams, regardless of location.
Be Prepared for the Unexpected and Increased Volatility
Organizations that took the status quo for granted had a tough time in 2020. In 2021, vaccines will bring the pandemic under control, but that doesn’t mean an end to volatility. Companies must be prepared for increased volatility from extreme climate events like the California wildfires to geopolitical factors like oil price wars.
From a sourcing and a predictive procurement perspective, this can mean challenges like shorter product life cycles and the need to rapidly find new suppliers.
Agility is Critical
Closely related to increased volatility is the trend toward increased agility. With so much upheaval and the unexpected on the rise, sourcing teams need a software solution that can accommodate changes quickly. Having to wait for months for a new feature to be rolled out to all the PCs in the office isn’t going to cut it in 2021 or further down the road.
Companies that stick with their traditional procurement software solutions risk being bogged down with deployments. Those that adopt modern cloud-based software solutions will have access to new easy to use features immediately, giving them a significant competitive advantage.
Build Deeper Supplier Relationships
2020 has taught many companies the value of having deep supplier relationships. When there is a global run on products or key components, it’s tempting for suppliers to go with the highest bidder. Having a deeper relationship with your suppliers helps to prevent the risk of being left short because a company half the world away has much deeper pockets.
A key component of building deeper supplier relations is collaboration and communication. Strategic sourcing software and predictive procurement platforms that specifically tracks and enables supplier management will be an increasingly important tool.
Conversely, effective supplier management increasingly means access to comprehensive analytics and reporting tools that help identify the best suppliers in your network—the ones you should be focusing on when building relationships.
Be Prepared For Increased Focus on Factors Like Sustainability
Supply chain management is going to increasingly include accountability for factors that were once considered nice-to-haves. A new U.S. administration is committed to the transition to sustainable power sources, which has implications throughout the supply chain.
In addition, climate change and pollution awareness have been increasing dramatically in recent years. Procurement teams will need the capability to verify factors like carbon neutrality, use of recycled materials, and sustainable growing practices throughout their supply chain.
Finally, advanced technology that has the potential to be the most transformative impact on strategic sourcing in 2021 and going forward: artificial intelligence. If nothing else, the previous six points have shown that there will be many, many balls in the air that sourcing teams will need to manage and effectively execute. Lose track of just one, and it becomes a costly error. Worse, each of these variables is increasingly inter-related.
Supply chain is incredibly complex and becoming more so with every year, and adding to the challenge is a need for increased speed. When the competition for suppliers is global, every second counts.
Artificial intelligence is the answer. AI can simultaneously track, analyze, and account for a large number of variables. Additionally, AI can process information in a manner that is significantly more expedient than what a procurement team could achieve on their own. All this is to say that in today’s fast-paced global economy, strategic sourcing software that is powered by AI is a huge competitive advantage. Moving forward, it will become a necessity.
You Know the Trends, So How Do You Prepare for the Future of Strategic Sourcing?
There’s a lot to digest in this list of strategic sourcing trends. Fortunately, the solution to acting on them all is simple: Arkestro. Arkestro offers procurement teams the unique ability to solicit and evaluate quotes, identify bottlenecks, and deliver impressive business value. By allowing your team to discover and scale your best sourcing strategies quickly, Arkestro enables you to deliver more than savings, making an impact on your project pipeline that wins recognition.
Within a few minutes, you’ll see Arkestro was not just built by procurement professionals, but for procurement professionals. Arkestro, a Predictive Procurement Orchestration platform powered by AI, was designed from the ground up to leverage the most advanced technology. Sourcing trends change, but the need for effective process and workflow will never go away. In actuality, as the world continues to evolve and technology becomes more and more prevalent, we will expect workplaces to become more efficient. Don’t find your sourcing team on last year’s trend list, request a demo of our strategic sourcing technology today to get started with no upfront costs.