It’s that time of year. Time to look back at the many challenges the world of procurement faced in 2021. More importantly, it’s time to learn from what took place over the past year and use that information to determine the top procurement and sourcing trends for 2022.
We did that last year, coming up with a list of seven strategic sourcing trends for 2021 and beyond. That effort hit the mark in many ways, including a shift toward sustainability becoming a big focus in supply chain management.
In 2021, procurement teams had to deal with continued fallout from the global pandemic and its many ripple effects. There were localized closures as manufacturers and suppliers dealt with COVID-19 outbreaks. Logistics became a nightmare.
Shipping rates skyrocketed while cargo vessels stacked up at ports waiting to unload. Surging fuel costs made ground and air transportation more expensive, while many regions also experienced shortages in truck drivers. Extreme weather events impacted the prices and availability of raw materials. Semiconductor manufacturers were unable to meet the demand for computer chips, resulting in automobile production lines grinding to a halt while popular consumer electronics devices disappeared from store shelves.
Adding to the chaos, government policies like Build Back Better are adding new rules and regulations around factors like sustainability and “made in America” requirements. And hybrid workforces are becoming permanent for many companies.
That is a lot to digest and account for in 2022. Here’s what procurement and sourcing teams need to be prepared for in the coming year.
Disruption and Volatility Will Be the New Normal
Disruption and volatility were trends in both 2020 and 2021. The pandemic was a driving factor, of course. That may reduce somewhat in 2022, but the Omicron variant is showing every sign of raining on that parade. There will also be new variants to deal with after Omicron.
COVID-19 wasn’t the only disruptor that we’ve had to deal with. There have been geopolitical tensions, including an ongoing chill between the U.S. and the world’s largest supplier—China. Energy prices have been out of control. Oil and natural gas prices were at record lows in 2020, only to hit historic highs in 2021. Extreme climate-related events like wildfires, flooding, and storms have also been on the rise.
In other words, disruption and volatility aren’t going away in 2022; they are set to be the new normal.
The Agile Will Thrive
Variables and factors that impact the procurement process are changing rapidly. New regulations are being put into place, tariffs are imposed, and currency exchange rates are volatile. Shipping costs and delivery times have spiked. In addition, the procurement industry faces a talent shortage, with intense competition for top performers.
In this highly volatile environment, procurement teams must be agile. Those that can’t adapt quickly to the changing conditions will be left behind.
Shift to the Cloud
Many companies are permanently adopting hybrid or even full-time remote work arrangements. Doing so addresses issues like disruption caused by lockdowns and helps retain employees—many of whom are pressing for the ability to work from home. A distributed workforce makes companies less vulnerable to sudden and catastrophic regional issues such as natural disasters or virus outbreaks.
However, being fully productive and “plugged in” while working remotely is challenging. The answer also happens to address the challenge of agility: the cloud.
In 2022, expect more companies to adopt cloud-based procurement solutions. These are easy to deploy, new features can be rolled out almost instantly, and anyone with an internet connection can have full access.
Adopt Predictive Procurement Orchestration
Clearly, with so much uncertainty, disruption, and variables in play, sourcing and procurement teams are going to be challenged in 2022. The difficult part for many will be avoiding the pitfall of reacting to what happens. Look for the shift to proactive, strategic sourcing to be one of the top procurement and sourcing trends in 2022. Predictive Procurement is the tool for 2022 and the tool for high-performing teams.
It helps to break predictive procurement down into its key components. We like to think of these as the three Ps: predict, prioritize, and produce. Let’s examine what each means in this context.
Predict amounts to the ability of the procurement team to manage projects in a pipeline so that they exceed targets.
Prioritize means focusing on key performance indicators (KPIs) to measure the success of a project in real-time.
Produce is probably the most obvious of the three. Procurement teams that produce business results.
AI Will be Critical to Success
Tracking a virtually unlimited number of variables (many of which are interconnected) while dealing with huge volumes of data is incredibly time-consuming and error-prone. That wasn’t good enough in 2021, and it’s not going to be good enough in 2022. Procurement professionals will need to make critical decisions quickly, and those decisions could impact businesses for months to follow.
Artificial intelligence has increasingly been a competitive advantage adopted by leading procurement teams when making business decisions. Look for the move to adopt AI in procurement to be a high priority for companies that are now falling further behind.
Know Your Suppliers and Build Strong Relationships With the Best
2020 and 2021 taught us the value of strong supplier relationships. It will continue to be critical for companies to know their suppliers in 2022. It’s likely that shortages will continue, and it will be essential for procurement professionals to build strong relationships to achieve KPIs and high performance.
Even if there are no disruptions in the supply chain, there is always value in maintaining strong relationships. High-performing procurement teams have historically focused on relationship building.
Finally, one of the biggest procurement and sourcing trends in 2022 will sound familiar. It was a top trend in 2020, 2010, and 1950 for that matter. It doesn’t matter what year it is, where a company is located, how large it is, or what challenges it faces. The procurement team will be under pressure to cut costs and deliver savings. The good news is emerging procurement solutions and technology are making it easier to do so.
How Do You Ensure Your Procurement Team is Ready For the 2022 Procurement and Sourcing Trends?
The first step toward being prepared for 2022 is the most important: book a free Arkestro demo. Learn first-hand how Arkestro encompasses key 2022 procurement and sourcing trends, including cloud computing, AI, and Predictive Procurement Orchestration. In addition, moving to Arkestro supports other important procurement trends, including the ability to build supplier relations. At the end of the day, Arkestro will also deliver on cost savings, the procurement trend that never goes away.