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The new shape of responsible procurement

How to create responsive and resilient procurement practices that bolster organizational goals.

Many businesses have endured a pandemic, supply chain disruptions, inflation, and a variety of natural disasters in the last half-decade alone, and as a result are elevating resilience as a fundamental organizational goal. With that has come the recognition that procurement processes are core to that objective. It’s no surprise, then, that 81% of respondents to Amazon Business’ 2024 State of Procurement Data Report said that building resilient and agile supply chains was a top priority over the next one to two years.


“Organizations are moving from a reactive to a predictive sort of function,” says Joe Chmielewski, strategic sourcing and digital procurement practices leader at Deloitte. “That is a pretty dramatic sea change within the world of sourcing and procurement.”


Fundamental to this pairing of organizational resilience and procurement practices, he says, is the adoption of digital solutions, including artificial intelligence. Chmielewski points to key functions of digital procurement that, taken together, promote meaningful resilience. “The first is to provide spend visibility. How can we make sense of the sheer volume of data?” he asks.


Procurement also plays a critical role in risk management practices.


“It’s about establishing workflows to make sure everyone is buying from approved suppliers and contracts. Digital tools are also increasingly key for compliance flagging and reporting,” Chmielewski says. “Identifying choke points in the system, then marrying that with financial performance data, weather data, world events, reputational data of suppliers, and so on to create a holistic picture that becomes predictive of where risk-creating events may occur.”


Digitization in service of strategic goals

Consensus on the need for data-driven solutions in procurement has reached near ubiquity. Ninety-eight percent of respondents to the Amazon Business survey indicated they are planning investments in analytics and insights tools, automation, and AI for their procurement operations in the next few years. And 95% said their procurement processes have room for optimization. Critically, more than half (55%) expect procurement budgets to rise in 2024 over 2023.

"When technology can provide a comprehensive vision, you understand where spend and cost are going and can drive a much bigger impact on the bottom line."

— Julie Scully | Director of Software Development, Amazon Business

All signs reflect the ascendance of procurement as a core business function impacting an organization’s full range of strategic goals. As one respondent, the procurement head of a multinational telecommunications company, noted, “Two years ago, you never heard of a CEO talking about sourcing or supply chain. Now, it’s a big part of every earnings call.”


Digital tools can also help procurement departments steer the company toward a single source of truth, making it easier to spot opportunities to control costs and eliminate inefficient ordering practices that undermine broader corporate goals around fiscal oversight.


“When technology can provide a comprehensive vision, you understand where spend and cost are going and can drive a much bigger impact on the bottom line,” says Julie Scully, director of software development at Amazon Business. “You can drive automation to places you might not have thought of and build diversity to strengthen supply chains. You have a system that makes it easy to stay within compliance guardrails.”


Shifting expectations in procurement

For digital initiatives to successfully reshape procurement processes to reflect broader organizational priorities, the solutions must effectively combine the capacity to meet strategic goals with an experience that promotes buy-in. “Organizations are increasingly adopting interfaces designed to look and feel as intuitive as the experience for us as consumers,” Chmielewski says. “That’s only accelerating expectations of the end-user experience.”


Most consumers, Scully says, are familiar with Amazon’s shopping experience, one replicated in important ways on Amazon Business, but with guideposts designed to reflect organizational goals. That includes prioritizing a more diverse supply chain, whether to add greater sourcing variety to bolster resilience or to support the communities in which employees reside. (94 percent of respondents to the 2024 Procurement Report consider it essential to know the location from which the products they purchase originate, and 89% said it was important to understand the ESG and diversity, equity, and inclusion policies of the organizations they buy from.) “We handle the certificate verification and tagging of suppliers, so people know whether they meet one of the prioritized categories,” Scully says.


The same guideposts apply to compliance and risk management practices. Amazon Business lightens the burden on procurement teams by absorbing the responsibility for managing and monitoring vendor relationships, allowing companies to deepen their supplier base without creating additional overhead or workloads.


“It’s a huge amount of risk that can be mitigated there,” Scully says.


Most important, she says, is the ability to make sense of the massive amounts of data companies must synthesize to optimize procurement practices.


“We make it possible to see the results, and whether or not they are achieving their goals,” Scully says. “Having rich AI capabilities behind the scenes can surface insights that help determine success or whether a policy change is needed, and even recommend what could be done to resolve problems.”



Originally posted on the Wall Street Journal.

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