Ardent Partners' Procurement 2021: BIG Trends and Predictions

Procurement 2021: BIG Trends and Predictions

Andrew Bartolini Founder & Chief Research Officer

Christopher J. Dwyer Vice President, Research

February, 2021

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REPORT SPONSORSHIP The views and opinions in this report represent those of Ardent Partners at the time of publication.

Sponsoring companies have had no measurable influence on the content and research in this report. The contents of this research report are the exclusive property of Ardent Partners. Please direct any comments or questions regarding the content and/or our research sponsorship policy to Ardent’s Chief Research Officer, Andrew Bartolini, at abartolini@ardentpartners.com and/or 617.752.1620.

Sponsor:

SpendHQ is a procurement analysis solution that provides rapid, accurate, and detailed visibility into enterprise spend data. This full-service SaaS spend analytics solution delivers actionable insight for sourcing and procurement professionals. SpendHQ has been acknowledged as a leader by being included in the 50 To Know by Spend Matters for the last six years, being a finalist in the SaaS Awards, Procurement Leaders’ World Procurement Awards, and a 2020 SIIA CODiE winner. For more information, please visit www.spendhq.com.

Sponsor Contact: Email: sales@spendhq.com

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Executive Summary While the procurement industry is consistently evolving and shifting, 2021 begins after a truly unprecedented year. In 2020, Chief Procurement Officers and their teams were forced to face massive disruptions, extreme threats, and entirely new challenges brought on by the COVID-19 pandemic. By and large, procurement leaders worked valiantly to ensure business continuity, build supply chain resilience, and prepare their enterprises for the next economic phase.

Against this backdrop, procurement has never been more important to business operations and business results. This report presents the “big trends” in procurement over the last few years and makes a series of predictions for 2021 that will help procurement professionals better prepare for the year ahead.

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Introduction Since 2014, Ardent Partners’ analyst team has gathered at our headquarters in Boston during the second week of January for a multi-day company kickoff (the meeting this year was virtual). While together, the team dedicates itself to review the prior year’s research and main findings. The analysts discuss the prior year’s key findings from our different market research surveys, as well as the highlights from our briefings with technology providers, consultants, and investors. The team also reviews its consulting projects, Chief Procurement Officer (“CPO”) interviews and discussions held at our CPO Rising events, and any notes from the general inquiries we received from procurement and P2P practitioners (more than 700 last year).

This detailed review helps the team develop a list of big trends impacting procurement today as well as a list of predictions for the industry in the year ahead. More recently, Ardent also includes a few big trends and predictions related to the Future of Work following a similar development process.

This report is the culmination of those efforts and is designed to help Chief Procurement Officers, sourcing executives, category managers, or other procurement staffers better prepare for 2021.

BIG TRENDS Procurement’s momentum over the past decade was not thwarted by the global pandemic. Instead, the Coronavirus has provided yet another example of how critical the procurement function is to many enterprises, particularly those with global supply chains. Ardent Partners’ has identified many “big trends” that will impact procurement in 2021; the list that follows captures the key highlights.

Big Trend #1 – The Impact from the Global Pandemic Will Continue No real discussion of what is happening in the market can start without first discussing COVID-19.

Last January, Ardent Partners published a report that that found that global supply risk was at a 20year high, with huge geopolitical uncertainty being driven by the unilateral and unpredictable U.S. trade policies set by the Trump administration and the strong likelihood of a recession. Ardent’s view last year was that the global supply chains of many enterprises would be seriously tested.

It is important to remember that today’s global supply chains are a largely 21st-Century phenomena, driven by the demand for lower-cost sources of supply and production and bolstered by the rapid advances in technology and communication. These global supply chains delivered extraordinary value to the Westernbased corporations that initially moved supply offshore in the pursuit of lower costs. Over the ensuing two decades, manufacturing capabilities expanded rapidly across the traditional low-cost regions (including Asia, Eastern Europe, as well as regions within Africa and across Central and South America) spawning the current age of globalization and innovation. it has gone largely unnoticed that global supply chains, by and large, are ill-prepared for any major global shock or event and remain almost universally untested.

In 2020 global supply chains were tested, but not in the ways most imagined. In early 2020, CPOs and procurement leaders around the world were suddenly faced with an entirely new set of challenges, accelerated by a global pandemic that has disrupted an interconnected business world and its supply chain.

Ardent Partners research has shown that 70% of all procurement teams have felt an “extraordinary” or “significant” impact from the COVID-19 pandemic.

P2P system.

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Roughly 70% of all procurement teams have felt either an extraordinary or significant impact. But, in 2020 procurement showed its resilience in how it responded to the pandemic.

More difficult days lie ahead, but the end of the pandemic is closer than its beginning. It is clear that the impact of the pandemic on procurement and society, at large, will far outlast the Coronavirus itself.

Big Trend #2 – Uncertainty Remains a Major Force in 2021 Since the Coronavirus has impacted literally every facet of society, its continuing impact and all of the associated “unknowns” means that pervasive uncertainty will remain a major force in 2021. As the global death toll continues to rise at an advancing pace, the growing economic and emotional impact of COVID-19 on families, communities, businesses, and economies will broaden.

And, while early reports of the vaccine impact are promising, it remains unclear as to when enough vaccines will be distributed to make society safe.

Additionally, new virus strains are emerging on a regular basis and the efficacy of the current vaccine to protect against these new strains is unknown.

Big Trend #3 – Procurement’s Impact Continues to Expand Today, most CPOs and other procurement executives are well aware of the impact that their teams can make, and there is good news to report.

In 2021, a majority of CPOs (53%) believe that their departments made a major or significant impact on the enterprise over the last 12 months, while another 42% believe that their impact was solid or notable. To bolster the case that procurement is trending up, only 5% believed that their impact was small, insignificant, or negative.

As a business function, procurement’s been on a major, multi-decade winning streak. Consider the following proof-points in 2021: •

CPOs (or their equivalents by role and title) now exist in more than 90% of large enterprises today, compared with less than 50% 15 years ago.

•

Procurement teams are significantly more likely to be organized as centralized business functions rather than as ad-hoc groups of buyers loosely populated across the enterprise or within business units.

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•

In 2021, almost every procurement department has some type of annual or multi-year strategic plan in place, up from just over 40% in 2006.

•

CPOs and their teams now have unprecedented visibility into business operations, performance, and risk, thanks in large part to advanced analytics, process automation tools, and a connected network of global trading partners.

•

More than 70% of all CPOs have a direct reporting line (and direct accountability) to key enterprise executives such as the CEO (22%), CFO (32%), and COO (19%).

Additionally, a large majority of CPOs believe that their departments’ impact is making a major difference, and 87% believe that their impact increased during the pandemic while almost no CPOs felt that their momentum was trending in a negative direction in 2020.

Big Trend #4 – Change in CPO Focus (to Cash Impact and Savings) Before the Coronavirus, a majority of CPOs were focused on driving proactive initiatives that supported growth, quality, and expanding their team’s capabilities, reach and overall impact.

According to Ardent’s 2020 research, more teams were focused on driving a digital transformation, improving processes, and increasing agility than any other projects.

Once the pandemic hit, business needs immediately changed forcing CPOs to shift their focus to: (1) prioritizing cash management, (2) increasing savings, and (3) improving supply chain visibility. In times of great stress and uncertainty, businesses revert to their more basic “selves.” This means that right now, “cash is king” and savings is a top priority. In response, sourcing teams are increasing sourcing activity and the number of RFPs they are bringing to market.

Big Trend #5 – Big Data is a Procurement “Game-Changer” Many of the procurement profession’s biggest and best opportunities to make an impact on overall operations and results still sit in front of it. One of the most compelling of these is procurement’s emerging ability to leverage advanced analytics to convert procurement data into intelligence and then transform that intelligence into value. With the rise of business process automation tools, cloud- based applications, mobile solutions, connected devices, Big Data permeates the modern business. Each year, more data is created than ever before. The result is a world that has become increasingly data-driven, and businesses around the globe have an extraordinary opportunity to capitalize on it.

In 2021, many procurement departments are reliant upon process automation tools and

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technology to drive operations. Their systems create and capture tremendous volumes of information – Procurement’s “Big Data” – which has the potential to become the next major force and catalyst for the profession. A majority of CPOs agree, with many focused on gaining better data visibility and analytical capabilities to help procurement ascend to the next level of performance.

Big Trend #6 – Technology is the Linchpin to Procurement Operations Over the last five years, supply management tools have become more user-friendly, accessible, and easily integrated with the enterprise’s technology infrastructure. As a result, their level of usage is increasing, albeit slowly. In turn, users are driving more volume and ultimately more value from them. Digital, automated tools have enabled fewer hands to transact greater volumes of tactical work, which has allowed CPOs and teams to shift their focus to the strategic parts of the business, like relationship-building and long-term planning.

They have also helped practitioners and leaders to extract more value out of their processes and make faster, more informed decisions across the sourceto-settle process.

But, it has taken a global pandemic that has required a majority of businesses to institute “work from home” mandates to get executives to understand the important role that technology plays in supporting operations and the need for digital transformation to pervade all corners of the enterprise.

The digital transformation of a procurement department is an opportunity to use technology as a means to reimagine the organization’s entire scope of operations and how it performs. Unlike the process automation initiatives that preceded it, a digital transformation does not view technology as a process enabler, but rather, as the fundamental process going forward – it is the alpha and omega and everything in-between.

A successful digital transformation requires many things, including sponsorship, effort, collaboration, vision, expertise, and a supporting technology infrastructure; superior program design also remains a critical element in the speed and impact of the initiative.

81% of all CPOs have an active “Big Data” strategy

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Predictions for 2021 The second year of this new decade begins amidst great uncertainty and a global pandemic that will get worse before it gets better. 2021 will be a year of transition, as the world begins to operate in a post-COVID-19 world that will be driven by new ideas, new innovations, and new leaders. Here are Ardent Partners’ top predictions for the year.

Prediction #1 – The Vaccines Work and Countries Slowly Gain Control over COVID In world-record time, a handful of companies have developed, tested, and launched a COVID-19 vaccine. Several others are close to introducing a vaccine too. In the U.S., vaccinations are now being administered at the rate of 1MM shots per day and expected to rise via a new, federally-managed process. The vaccines have been available to the front-line first responders since late 2020 and there is now a prioritized order as to who is to receive the vaccine next.

Over the first few months of 2021, a large number of “Phase I” recipients (those most at risk who are qualified based upon their age, profession, or health condition) will receive their first dose, with the second dose following three weeks later.

While no vaccine is guaranteed to work 100%, it appears to most expert observers that the vaccines are working to inoculate recipients against the virus or, at least, against the most severe symptoms of the virus. This is positive news.

It is going to take months for the vaccine to begin to have a significant impact on society as a whole.

And, while new strains of the virus may develop, Ardent Partners predicts that as we proceed deeper into the year that a majority of developing countries will begin to feel like they have better control over the virus and be in a much better position to fight against it. This will lead to productive discussions and plans focused on operating in a post-COVID-19 world.

Prediction #2: The U.S. and Global Economies, Overall, Hold Steady This is not a financial recommendation, but rather, a prediction from Ardent Partners that the economies of the world, including the United States, do not drop into a deep, deep recession.

Ardent expects volatility but not a massive and deep drop. While the underlying unemployment rates as well as the financial health of many industries (and local businesses) are all not positive, the impact has not been directly felt in the

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stock market or overall economy. This is because, in part, many governments are flooding their economies with cash and keeping interest rates unnaturally low.

As long as those federal government policies continue, there is a reasonably high floor for each economy (and their related stock markets). If these policies remain in place, Ardent predicts that interest rates will remain very low and housing prices will rise somewhat, before stabilizing.

The U.S. stock market will be volatile until things revert to normal and will most-likely stay below its recent highs. But, as countries begin to gain control over COVID-19, employment numbers will slowly rise and the likelihood of a huge market crash becomes less likely.

Prediction #3: Procurement Drives Critical Business Strategies in 2021-2022 In normal years, this prediction would mean that procurement is expected to expand its purview and in support of the business – getting involved in new business ideas, supporting M&A, helping expand into new markets, driving new product development, etc. But in 2021, Ardent Partners predicts that procurement will drive critical business strategies because CEOs and CFOs will be much more focused on controlling the “controllables.”

These “new” executive priorities will shift away from growth and expansion and instead hone in on initiatives that procurement can more directly control and impact – managing costs, driving strategies that positively impact cash, renegotiating contracts with suppliers to increase value, etc. In 2021, the critical business strategies at many enterprises will focus on matters that play to the strengths of procurement teams.

Ardent Partners’ Predictions for 2021: • The Vaccines Work and Countries Slowly Gain Control over COVID-19 • The U.S. and Global Economies, Overall, Hold Steady • Procurement Drives Critical Business Strategies in 2021-2022 • Procurement Performance will be More Important than Ever • Enterprises Begin to Rethink their Global Supply Chains • CPOs Begin to Push Control to the Regions • Big Data Will Demand Big Action and Big Investment • AI Begins to Make a Major Impact on Procurement Value

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Procurement’s Big Trends in 2021: • The Impact from the Global Pandemic Will Continue • Procurement’s Impact Continues to Expand • Change in CPO Focus (to Cash Impact and Savings) • Big Data is a Procurement “Game-Changer” • Technology is the Linchpin to Procurement Operations

Future of Work Predictions (Page 11): • Direct Sourcing Becomes a Major Strategy • Empathy-Led Leadership Accelerates in 2021 • Nearly Half of the Global Workforce will be Categorized as Nonemployee Talent

Prediction #4: Procurement Performance will be More Important than Ever On their earnings calls in 2021, CEOs will begin to sound like their CPOs as the stress the importance of operating with strict financial discipline, maintaining a maniacal focus on cash, managing costs, renegotiating contracts around the world, and localizing supply. The CEO’s renewed focus on procurement ‘work’ will place CPOs (and their teams) and the performance that they deliver under much greater scrutiny than in recent years.

That means that in 2021, it will become significantly more important for procurement departments to be able to actively monitor and track performance across the full-scope of activity. This will lead to increased investment in performance management resources including automated tools that capture project level activity and performance and translate that into broader, comprehensive organizational impact.

Prediction #5: Enterprises Begin to Rethink their Global Supply Chains Given the events of 2020, Ardent Partners believes that it is inevitable that a majority of procurement organizations begin to rethink the designs of their global supply chains. Driven by a significant rise in “nationalism” and larger concerns for the level of security risk that is posed by having certain items manufactured abroad, there will be a push to localize large portions of some supply chains.

Regulatory/legislative involvement will be a driving force for some industries, with mandates for changes with defined timelines enacted. Other enterprises will look at risk diversification as the primary reason to make changes.

Given the state of the economy today, Ardent does not expect aggressive changes to start in 2021. It is more likely that supply chain shifts are slow and gradual due to the switching costs involved.

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Prediction #6: CPOs Begin to Push Control to the “Regions” One new strategy being discussed by some CPOs is the need to push more control to the regions.

More often than not, it is typical for a procurement department to drive for greater control and centralized policies and management of categories (where possible and appropriate).

Ardent Partners predicts that as a means to diversify operational risk, CPOs will start to push autonomy back to their regional teams. This action will also help accelerate making supply chains more regional and less global in nature.

Prediction #7: Big Data Will Demand Big Action and Big Investment In the “age of intelligence” nearly every aspect of the contemporary business will be tracked and monitored in some fashion. Developing an intelligent procurement operation is a marathon not a sprint. Chief Procurement Officers and their teams need to have the motivation, stamina, and long-term vision to go the distance. However, with a surplus of new data comes a dearth of real expertise in how to analyze it and extract intelligence.

While many procurement executives/professionals have strong analytical

capabilities, the next generation of analysis falls within the arena of “data science.” In 2021 or soon thereafter, a majority of procurement teams will soon be focused on improving these capabilities.

Prediction #8: AI Begins to Make a Major Impact on Procurement Value Artificial intelligence (AI) is one of the most disruptive technological innovations to hit the business community since perhaps the introduction of the commercial internet in the early 1990s. AI has a rich legacy as both an academic discipline and a continuously-evolving set of autonomous and self-learning operating systems whose development spans the better part of a century. It is simultaneously one of the most widely lauded, feared, and misunderstood phenomena of the contemporary business environment, representing significant opportunity for many knowledge workers and significant peril for many others. AI has quickly emerged as a core component in the development of nextgeneration supply management technologies, including eSourcing and advanced sourcing, eProcurement, contract management, and spend analytics. 2021 will be a historic year for AI-driven procurement solutions and those that use them.

Keep an eye on these tools.

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Bonus Section: The Future of Work in 2021 The challenging events of 2020 not only stressed the limits of business operations, they accelerated key drivers in the evolution of talent management and the rise of the “Future of Work” movement.

Ardent’s predictions for the Future of Work in 2021 are essentially extensions of the innovative strategies that were introduced in 2020 in response to an unprecedented work environment.

Prediction #1: Direct Sourcing (of Candidates) Becomes a Major Strategy Less than five years ago, only 12% of talent was engaged and sourced via “real-time” or “ondemand” means, such as digital staffing technology, tech-enabled talent marketplaces, and direct sourcing/talent pool-based programs.

Today, that number hovers around a third (33%) of all talent engaged/acquired via real-time means, with a heavy increase expected as 2021 drags on.

Ardent Partners expects, the utilization of direct sourcing strategies to increase threefold over the next 12 months, owed to the fact that talent pools allow businesses to tap into “known and vetted” talent in an efficient and on-demand manner.

Prediction #2: The Rise of Empathy-led Leadership Accelerates in 2021.

Pandemic-led anxiety, a lack of schooling or daycare (and the stress of remote learning), and general health concerns sat in constant alignment with the typical stressors of corporate life.

Flexibility- and agility-led strategies were quickly employed during the initial phase of the global shutdown. Within this, there was a rise in “empathy-led” leadership. Business leaders that led with an empathetic approach are the ones that will be able to build trust, confidence, and, most importantly of all, retention, within the ranks of their highly-valued workforce. This trend will surely continue in 2021.

Prediction #3: Nearly Half of the Global Workforce will be Categorized as Nonemployee (or Contingent/Extended) Talent As businesses employ staffing scalability with the optimism of vaccines and economic recovery ahead, the contingent/extended workforce will become ever more critical in helping enterprises across the globe not only survive in these trying times, but also thrive as they seek to optimize how work is done in a post-Covid-19 world.

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About the Author: ANDREW BARTOLINI, FOUNDER & CHIEF RESEARCH OFFICER, ARDENT PARTNERS

With 22 years in the industry and 12 years leading the charge at Ardent Partners, Andrew Bartolini is a globally-recognized expert in sourcing, procurement, supply management, and accounts payable. As the Chief Research Officer at Ardent Partners, Andrew oversees all research and client programs including the annual State of the Market and Metrics that Matter eBook Series’, Technology Advisor Reports, Ardent’s monthly webinar series, as well as its in-person and virtual CPO Rising Summits. Andrew is also the publisher of CPO Rising, the news and research site for Chief Procurement Officers and other procurement leaders (www.cporising.com).

Advisor to corporate executives and leading solution providers alike, Andrew is a sought-after presenter, having lectured and presented more than 500 times in nine different countries. Over the past decade, Andrew has benchmarked thousands of enterprises across all facets of their sourcing, procurement, supply management, and accounts payable operations and his research is currently part of the Supply Chain/Management curriculum at several US universities.

He actively covers the technology marketplace as well as trends in sourcing, procurement, supply

management, and accounts payable and has been published or quoted in leading business publications including The Wall Street Journal, Business Week, Investor’s Business Daily, Forbes, and Fortune, as well as the major trade publications focused on accounts payable and supply management.

Prior to becoming an industry analyst, Andrew developed, packaged, deployed, and used supply management solutions on behalf of enterprises in the Global 2000 while working for several prominent spend management solution providers.

Additionally, his experience in strategic sourcing (where he managed sourcing projects totaling more than $500 million in aggregate client spend), business process transformation, and software implementation provides a “real-world” context for his research and writing.)

Andrew’s post-MBA work started in management consulting and investment banking where he structured, managed, and advised on large capital market transactions.

Andrew began his professional career running a homeless family shelter in Los Angeles. He welcomes your comments at abartolini@ardentpartners.com or 617.752.1620.

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About the Author: CHRISTOPHER J. DWYER, VICE PRESIDENT OF RESEARCH, ARDENT PARTNERS

For the past 16 years, Christopher J. Dwyer has been the industry’s preeminent contingent workforce management (CWM) analyst and an early Future of Work evangelist. His research focuses on the application of innovative workforce and technology strategies that help businesses around the world optimize how work is done. Dwyer is the author of hundreds of research studies and briefs related to CWM, talent acquisition, human resources, and supply management, and the underlying technologies that enterprises can utilize to improve how talent is engaged and managed. This research has enabled thousands of organizations make smarter technology investment decisions related to their talent and workforce needs.

As the Vice President of Research at Ardent Partners, Dwyer oversees all research programs related to talent and workforce management. His research and consulting in the digital and ondemand staffing space have helped revolutionize how businesses source talent and labor.

Dwyer is the also voice behind Contingent Workforce Weekly, the industry’s first podcast dedicated to the contingent workforce industry.

Now in its fourth season, the podcast is one of the top Future of Work-oriented shows across all major podcast platforms.

Dwyer has been quoted/featured in USA Today, Staffing.com, The Christian Science Monitor, Forbes, CNBC, The Recruitment Innovation Exchange, and other major business publications. He has been honored multiple times by HRO Today (2013, 2014, 2015, and 2016) as an “Analyst and Advisor Superstar” and was twice recognized as a “Pro to Know” by Supply and Demand Chain Executive Magazine (in 2014 and 2019). And, in 2018, he was named as a “Top 100 Future of Recruitment Influencer” by Onalytica. He welcomes your comments at cdwyer@ardentpartners.com or 617.752.1624.

Connect with him on LinkedIn (www.linkedin.com/in/christopherjdwyer).

Industry Standard “Fine Print:” The information contained herein has been obtained from sources believed to be reliable. Ardent Partners, Ltd. disclaims all warranties as to the accuracy, completeness, or adequacy of such information. Ardent Partners, Ltd. shall have no liability for errors, omissions, or inadequacies in the information contained herein or for interpretations thereof. The contents expressed herein represent Ardent Partners’ best analysis at the time and are subject to change without notice. © 2021 Ardent Partners, Ltd. All rights reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. Solution providers and consultancies should take special note that Ardent Partners reserves the right to seek legal remedies including injunctions, impoundment, destruction, damages, and fees for any copyright infringement (which includes but is not limited to usage of any Ardent Partners content in company collateral, presentations, and websites) in accordance with the laws of the Commonwealth of Massachusetts and the United States

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Ardent Partners Since 2010, Ardent Partners has delivered Research with Results™ to business executives working in procurement, finance, and HR on multiple platforms and in multiple formats. Ardent advises clients and publishes research that helps business decision-makers understand: •

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•

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