The world of procurement is always evolving, and 2023 is set to bring with it some exciting new trends.
Professionals in Australia and New Zealand need to stay ahead of the curve and be aware of the latest procurement trends that will shape the industry in the future. From predictive analytics to sustainability initiatives, understanding what’s ahead for procurement is essential for businesses in Australia and New Zealand to remain competitive. In this blog post, we’ll explore some key procurement trends that professionals should consider in 2023.
The rise of artificial intelligence (AI)
The use of artificial intelligence (AI) in procurement is expected to become commonplace – in many businesses its quickly becoming the norm.
AI-powered software can help procurement professionals manage a range of tasks more quickly and efficiently, from tracking orders to optimizing buying decisions.
In the U.S., the Department of Health and Human Services (HHS) has been using AI as part of a larger procurement improvement process to meet the department’s goals. It created an AI algorithm to enable the department to compare and contrast previous purchases by analysing two million current contracts and assessing up to billion words.
Examples of other AI use include for the automation of contract creation and management, and can help identify potential savings opportunities. As the use of AI continues to become more pervasive in the procurement sector, businesses are looking for ways to leverage the technology to get ahead of the competition and achieve greater success in the future. Procurement in 2023 may require organizations to develop strategies for incorporating AI into their operations in order to stay competitive.
In supply chain management, AI is being used for demand planning. One study showed it has helped the product volume affected by extreme errors to fall by 50%, and decrease forecasting errors by more than 33%.
Car manufacturer Audi have an AI tool that allows decision-makers to select suppliers which are the most committed to sustainable business practices.
The technology analyses supply chain partners from 150 countries and shortlists the ones which show the most sustainable values during a business relationship. It does this by screening social media and news sources associated with the business.
The continued growth of e-procurement
As technology advances, e-procurement is becoming increasingly prevalent in the procurement industry. More businesses and organisations will be leveraging e-procurement tools to streamline their purchasing and supplier management process. Kissflow suggests about 66% of organizations are planning to centralize their procurement functions.
E-procurement enables businesses to manage their entire supply chain digitally and access a vast range of vendors and products online. This means organisations can purchase goods and services at competitive prices without having to go through the manual process of placing orders and managing paperwork.
E-procurement tools allow organisations to search for vendors, compare prices, and place orders easily from one platform. These tools also enable procurement teams to track purchase orders, invoice processing, payments, and receipts in real-time. With powerful analytics and reporting capabilities, organisations can gain valuable insights into their procurement activities and optimise their processes accordingly. Additionally, these tools can help organisations adhere to compliance regulations and ensure that purchases are made within budget.
E-procurement is set to become even more widely adopted by organisations as they seek to reduce costs and increase efficiency. In a survey of CPOs by GEP, 50% claimed cloud-based procurement platforms produce significant value for their procurement function. “Significant portions of the respondents claim procure-to-pay solutions (44%), tax technology solutions (40%), and workflow automation (40%) produce significant value as well,” GEP say.
The importance of data analytics
Data analytics help procurement professionals make more informed decisions and ultimately lead to better outcomes. With data analytics, procurement professionals can gain a deeper understanding of their customers’ needs and preferences.
Research firm MarketsandMarkets suggests the demand for procurement analytics will fuel an increase in the global market size to US $8.0 billion by 2026, up from $2.6 billion in 2021. The Asia Pacific Region is expected to play a significant part in the rise.
“The region is witnessing increasing demand for cloud-driven procurement analytics solutions, resulting in higher investments and technological advancements in the manufacturing industry,” MarketsandMarkets say.
Leveraging data analytics allows procurement to track trends in the market and anticipate changes in demand. This will allow teams to act quickly and make adjustments to their procurement processes accordingly – as was witnessed during the pandemic. Additionally, data analytics will enable procurement professionals to identify new opportunities and develop better strategies for supplier management and risk management. Ultimately, data analytics will help ensure that companies are making the most out of their resources and securing the best deals for their products and services.
Greater shift towards sustainability
As global concerns around sustainability continue to rise, ESG (Environmental Social Governance) considerations will become increasingly important for all businesses. For procurement professionals, this means that there will be a greater emphasis on sustainability in the sourcing and procurement of goods and services.
More than 70% of surveyed executives say demonstrating their corporate ESG commitments was a “high or business-critical priority” for their organisation’s senior leadership, according to Icertis.
In 2023, circularity is billed as an emerging trend as organizations look to reduce their environmental impact and build more sustainable supply chains. This shift towards a circular economy involves reusing resources and materials as much as possible instead of relying on new resource. Businesses are looking to procure products that are recyclable, biodegradable, or made from recycled materials. Procurement in 2023 may also involve assessing the life cycle of products to identify potential savings or opportunities for waste reduction.
In November 2022, the European Commission officially adopted legislation requiring all large companies in the EU to disclose data on the impact of their activities on people and the planet and any sustainability risks they are exposed to.
The Corporate Sustainability Reporting Directive (CSRD) will require almost 50,000 companies in the EU to collect and share sustainability information. This compares to about 11,700 companies covered by the current rules.
The need for agility
Procurement in 2023 will require organizations to move towards agility if they want to stay competitive. With inflation rearing its ugly head and supply chain issues continuing, companies must be able to quickly and effectively respond to changes in market conditions and customer demands, while also keeping an eye on cost reduction and efficiency. The findings of a key study by Procurious and Ivalua, show 81% of procurement teams are pressured by executive teams “to more quickly and effectively respond to challenges.
With the use of technology, companies can easily access the right data to make the right decisions and react quickly to changes. Agile Procurement is a new way to maximise responsiveness to your organisation’s true needs and make informed decisions about suppliers, contracts, and processes quickly. With the growing complexity of the supply chain, organizations need to focus on being agile so they can capitalize on opportunities and limit risks.