New Parameters Shaping the Future of Procurement
Procurement has undergone profound change in recent years. In particular, the rise of digitalisation has completely transformed many processes since the turn of the millennium, opening new opportunities for business development within procurement. However, these technical advances mean that the procurement department can take on a much more important and resilience-focused role within companies.
Most recently, the increasing number of global crises has served to highlight the essential role of purchasing and the need for greater resilience in supply chains.
Until a few years ago, the magic triangle of cost, quality and time, well known in project management, was also highly relevant for procurement, but new parameters have now been added.
This can be viewed as turning the triangle into a hexagon: supply chain resilience, sustainability factors in procurement, ongoing technological change and the consequent ability of suppliers to innovate play an equally important role.
The trend of recent years will most likely continue to shape the agenda of innovation in procurement departments in the near future. Price stability is the central issue, due to heavy cost increases in some areas, but this must always be seen in the context of overall operating costs.
If you put the reliability of supply at risk, you may have to halt production, which can result in considerably greater expense. Companies which fail to comply with sustainability requirements weather environmental or social will face even more drastic consequences.
Success factors in modern purchasing
Purchasing consultant and author Tanja Dammann-Götsch has identified five areas in which procurement must be modernised to meet the requirements of the future:
- Digitalisation
- Purpose
- Agility
- Human touch
- Remote working
As she describes in her book "Purchasing in Transition" (only available in German), these factors are generally contingent on successful implementation within the company and cannot be separated from each other. They form a foundation for driving innovation and ensuring resilience in modern procurement strategies.
Without advanced digitalization, neither agile working nor a well-functioning remote workflow can be guaranteed. And without purpose - a value-based foundation that puts people first - other success factors would be on shaky ground.
Artificial intelligence: innovations and how it’s changing procurement
Last but not least, artificial intelligence is driving innovation and will permanently change purchasing. Buyers can already benefit from ChatGPT, Gemini and similar tools: for example, when working out negotiation tactics, researching suppliers or automatically evaluating the transaction and master data at their disposal.
According to entrepreneurial magazine Maddyness, forward-thinking companies are already using AI applications to leverage historical data, market trends and supplier performance data to make better informed decisions regarding supplier selection, pricing negotiation and contract terms. These advancements are a significant step forward in the digitalisation of procurement processes.
In addition, AI can help to identify potential risks and disruptions in the supply chain and implement measures to mitigate them. Alongside auditing supplier reliability, AI can also evaluate the sustainability of suppliers by analyzing compliance with environmental and social standards, while considering the impact of geopolitical risks and unusual but high-impact events, such as a pandemic.
Purchasing will continue to gain relevance in business development
As a result of this change, many experts agree that purchasing will continue to gain strategic relevance in companies until 2030. However, this also increases the demands on purchasing departments in terms of added value and innovation.
Cooperation with start-ups, which usually offer innovative solutions, could lead to a competitive advantage, particularly when it comes to key issues such as artificial intelligence, marketplaces and sustainability. It’s important to be open to these technologies in order to benefit from the anticipated value they can add in terms of automation, transparency and efficiency.
