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A short article by Sherif Abdelmageed, Strategic Sourcing Lead at Henkel IMEA
The future evolution of Strategic & Operational Procurement (especially in medium to large and/or multinational enterprises) is heavily dependent nowadays (and proportionately) to the ever rapidly developing “megatrends” being witnessed in every global supply chain. Since the COVID-19 pandemic, organizations have acknowledged the “new normal” of our supply chains today with many companies strategically sharpening their future procurement agendas to accommodate, anticipate and outperform markets with agility, sustainability and technological revolutions.
Supply Chain Resilience, Digitalization and AI
Supply Chain Resilience is one of the biggest megatrends in procurement where companies are looking for ways to make their supply chains more robust and able to withstand disruptions, such as natural disasters, political instability, and pandemics. To achieve this, companies are diversifying their supplier base, implementing risk management strategies, and investing in new technologies such as IoT and blockchain to help monitor and manage supply chain risks. Companies are also looking at ways to increase their own internal resilience, such as building up inventory buffers and developing local sourcing capabilities.
One key enabling lever for supply resilience is the increasing focus on localization (Local Sourcing). Companies are increasingly looking at ways to source goods and services closer to home in order to reduce the risks associated with global supply chains. This can include identifying local suppliers, as well as investing in local manufacturing capabilities. Local sourcing can help to improve resilience, reduce transport costs, and promote sustainable and responsible sourcing practices.
Two other megatrends play a big role in how companies can successfully master supply resilience.
The 1st of which is Digitalization which in simple terms refers to the increasing use of digital technologies to automate and streamline procurement processes. This could include the use of digital marketplaces, e-sourcing platforms, and procurement software to improve efficiency and reduce costs. Digitalization also allows for greater data analytics and insights into procurement trends and patterns. This can help companies make more informed decisions about where to source goods and services, as well as identify new opportunities for cost savings. Additionally, digitalization also enables greater collaboration between procurement teams, suppliers, and other stakeholders, which can help improve supplier relationships and drive innovation.
Second comes Artificial Intelligence (AI) and this is the technological revolution we are already witnessing in our everyday life. AI is becoming more prevalent in procurement, helping to automate routine tasks, such as purchase order processing, and improve decision-making through advanced analytics. This can include using AI to analyze large amounts of data from suppliers, customers, and internal systems to identify patterns and trends that can inform sourcing decisions. Additionally, AI can also be used to automate routine tasks, such as invoice processing, which can free up procurement teams to focus on more strategic activities.
It is evident that with the support of Digitalization and AI, and taking into consideration how much organizations are willing to invest in these platforms, a strong relation is developed with the robustness of Supply Chain Resilience. This will be a true determining factor in how companies can stand out in the future when it comes to smart anticipation of external events, the agility of response in terms of necessary procurement actions and the multiple scenario planning that can be studied in advance by strategic sourcing teams.
It’s important to understand (and be prepared) that with the increasing use of digital technologies in procurement, cybersecurity is becoming a growing concern for companies. This can include protecting procurement systems and data from cyber-attacks, as well as ensuring that suppliers have robust cybersecurity practices in place. Additionally, companies are also looking at ways to use digital technologies, such as blockchain, to improve supply chain security and reduce the risk of cyber-attacks.
The focus on sustainability and environmental responsibility is also a growing trend in procurement. This includes not only the selection of suppliers based on their environmental impact, but also the incorporation of sustainable practices into procurement processes and operations. This can include reducing energy consumption, cutting waste, labour rights and implementing circular economy principles. Additionally, sustainability is increasingly being used as a differentiator in the marketplace, with companies seeking to promote their sustainable sourcing practices to attract customers and stand out from competitors.
While the sustainability agenda is seen as more mature and advanced in Europe & North America, other emerging markets are also starting to slowly adopt critical sustainability ambitions within their future national visions (e.g., UAE Environment Vision 2030, Mexico 2030 Agenda and Saudi Arabia 2030 etc).
The chemical recycling infrastructure is expected to come live starting 2025 where we will see a major turnaround in the way waste is processed and transformed into new re-usable materials as opposed to the current mechanical recycling technologies in the market. Not only will this elevate the quality of recycled materials (mainly recycled plastics), but will also add significant volume capacity to the current market which will in turn reflect positively on the supply vs demand situation ensuring accessibility to recycled materials and potentially at competitive prices versus today.
Collaborative procurement is a newer trend, which emphasizes the need for companies to work together to achieve common goals. This can include sharing information, pooling resources, and jointly developing solutions to procurement challenges. Collaborative procurement can help companies achieve economies of scale and reduce costs, as well as improve supplier relationships and drive innovation. This can include strategic partnerships, consortia, and industry-wide initiatives to jointly tackle common procurement challenges.
Accessibility to this could be via international procurement conferences or as far as key strategic alliances between non-competitor companies. There are many successful examples of such alliances ranging across the logistics procurement division, indirect materials & services as well as key commodity materials.
With the sustainability agenda already being high on the priority list, the evolution of AI chatbots, websites and sourcing platforms, the rise of new automation systems increasing efficiencies and reducing time spent on non-value adding tasks; we are yet to see what the coming 2-3 years will still unfold for the world of Procurement along these defining Mega Trends. Most importantly organizations who start paving paths across these trends now, are setting solid foundations for an environmental, consumer centric & technological leap that will definitely play a massive role in the success of businesses.
Sherif Abdelmageed is a Strategic Sourcing Lead at Henkel IMEA. Sherif holds a BSc in Mechanical Engineering and first joined Henkel in 2010. Over the past 12 years, he has held different roles in Local, Regional & Global Purchasing organizations with experience in Emerging Markets & Mature Markets attributed to a 2-year global assignment in Germany HQ. He is currently based in Dubai as a member of the IMEA Purchasing Leadership team leading Direct Materials Strategic Sourcing for the Henkel Consumer Brands business; encompassing a wide knowledge of operational & strategic procurement across commodity/specialty raw materials and packaging materials categories.
Sherif has extensive experience in Strategic Supplier Relationship Management, Transformational Purchasing & E2E Supply Chain Solutions with a passion for Leadership Excellence & developing robust talents.