Harvard Business Review: 4 Ways Procurement Is Evolving in 2021 and Beyond

Harvard Business Review finds that procurement’s role in the enterprise is evolving, and explains how leaders can empower their teams to act strategically.

Image placeholder

A tumultuous year of change has highlighted the need for enterprise-wide digital acceleration. Yet, in a study by Harvard Business Review, 92% of procurement leaders described their digital processes as less than best-in-class going into the pandemic. 

With these digital limitations, procurement teams faced incredible challenges, including managing volatile demand, disrupted supply chains, and disjointed remote collaboration as stay-at-home orders spread across geographies. In the blink of an eye, procurement teams were tasked with sourcing scarce personal protective equipment (PPE), supporting a more diverse supplier ecosystem, and ensuring business continuity—all while mitigating risk and cost to the business. 

Enterprises increasingly turned to their sourcing teams for guidance on how best to navigate uncertainty, unveiling a new future for the office of procurement. And while the office of procurement was steadily gaining traction as a strategic business partner, the global pandemic—coupled with social justice movements and worldwide disruption—has dramatically expedited the rise of procurement, propelling it to the forefront of enterprise strategy. As journalist Fareed Zakaria noted, “the biggest effect of COVID-19 has been to accelerate trends that were already underway.” 

To keep pace with this accelerated timeline, procurement teams must be empowered to do their work better, faster, and smarter than ever before. In its latest report, Harvard Business Review calls for an innovative new operating model and predicts that procurement will evolve in the following ways:

Prioritizing Supplier Relationships

No longer solely focused on cutting costs, procurement’s ability to build and maintain deep supplier relationships remains critical in enterprise recovery. Amidst volatile demand, changing consumer habits, and shifting markets, supplier relationships were foundational in ensuring enterprises could recover and ultimately thrive during uncertainty. 

Additionally, enterprise procurement teams that were able to collaborate in real-time with their suppliers were better positioned to find creative solutions to disruption, including extended payment terms, renegotiated minimums, and mutually beneficial contracts. 

While suppliers have proven to be instrumental in enterprise recovery, they are also a key resource for businesses looking to gain an edge over the competition. Enterprises that successfully harness the power of their supplier networks can drive product innovation that in turn boosts revenue. To encourage supplier innovation, businesses are re-evaluating their supplier management strategies. According to the latest study by Harvard Business Review Analytics Services, 60% of business leaders reported that they were fast-tracking plans to digitize supplier management.

When procurement teams partner strategically with suppliers, they are better able to mitigate risk and generate competitive advantage for the business. Backed by technology, leading procurement teams are able to collaborate in real time and bridge the gap between suppliers and stakeholders, driving major impact across the enterprise.

Leveraging Automation for Increased Visibility

Another key shift in the enterprise landscape is the emergence of automation. In a new report by Harvard Business Review, Dr. Elouise Epstein, partner at Kearney, a global management consulting firm, argues that “we are at a reckoning with procurement in terms of the way we’ve done things,'' and that “digital technologies are on pace to automate most routine procurement processes within three to five years.” With increased automation for spend management, procurement teams across all industries are winning time back to act strategically and achieve better outcomes for the business.

Procurement leaders are also turning to automation and digitization to provide complete visibility to their stakeholders. By aggregating their contract, supplier, and project data, procurement leaders and key decision makers have a birds-eye view into the end-to-end sourcing process. 

“Our goal is to change the traditional role of procurement and give executives the visibility and the ability to act proactively.”

David Geyer Director of Corporate Procurement Blue Cross Blue Shield Tennessee

A unified core of procurement data not only saves procurement teams time, it also simplifies the reporting process. With automated reporting, procurement leaders can view results from anywhere and give recommendations to the C-Suite based on real-time information. As procurement evolves into an increasingly strategic function for spend management, teams must rely on automation and centralized data to help reduce procurement cycle times and make informed decisions. 

Building an Agile and Resilient Sourcing Function

Global uncertainty and supply chain disruption caused by the pandemic highlighted procurement’s ability to quickly steady the enterprise and ensure business continuity. Going forward, procurement will be expected to play a major role in supporting organizational agility by building sustainable, resilient supply networks

Between securing PPE for employees, building new supplier relationships, and helping the business navigate a changing world, risk management became a key responsibility for procurement. Procurement leaders with complete visibility into their contracts and real-time collaboration capabilities were able to pivot quickly and assess risk without missing a beat. 

"Procurement is empowering [executives] by putting relevant, up-to-date information at their fingertips so that they can make better informed decisions.”

Joe Patchett Director of Global Procurement Gemological Institute of America

If there is anything the past year has taught us, it’s that change is inevitable. Enterprises were forced to learn how to adapt as markets and consumer habits fluctuated widely. With an agile and resilient procurement team, businesses can adapt to current environments while also planning strategically for future disruptions. 

Supporting a Purpose-Driven Organization

With their increased visibility into suppliers, compliance, and resilience, procurement teams will play a pivotal role in upholding enterprise values. One way procurement can do so is through partnering with a more diverse set of suppliers. The supply chain disruption of the past year has exposed cracks in the conventional supplier relationship and has pushed many companies to contract with smaller, more local vendors in order to shore up their supply chains. Enterprises with robust supplier diversity programs are seeing impressive returns while also supporting key corporate goals. 

Procurement is also a key driver in promoting ethical business practices. Compliance and risk management have always been a core piece of procurement, but recent human rights legislation has underscored procurement’s role in ensuring fair labor markets. 

Laws like those in California, the European Union, and Australia are requiring global businesses to prove there are no instances of human rights abuses in their value chains. Enterprises are looking to their procurement teams to drill down into their suppliers (and their suppliers’ suppliers) to comply with these laws and create more equitable working conditions. In the report, Johnson & Johnson CPO Shashi Mandapaty calls this focus on social responsibility “corporate citizenship.”

“A big stake for all good procurement organizations at this point is what can we do in terms of sustainability—economic sustainability, environmental sustainability, and social sustainability.” 

Shashi Mandapaty CPO Corporate Group Johnson & Johnson

Procurement’s New Operating Model

Events of the past year have only served to accelerate procurement’s evolution into a truly strategic arm of the business. Backed by cloud solutions, leading procurement teams can deliver on their supplier relationships, provide visibility to the C-suite, enable organizational agility, and help their enterprises deliver on their values. 

In its latest report, Harvard Business Review outlines key shifts facing procurement and how spend management leaders can empower their teams to meet the next normal head on. Explore how you can elevate procurement in your own organization and become a strategic partner to your business.

More Reading