Executive Briefings

Supplier Diversity, By 2025

Analyst Insight: By 2025, issues such as globalization, social transparency, risk management and sustainability will bring new challenges to all the best procurement organizations around the world. For diverse suppliers, these changes will pose new challenges, while bringing new opportunities for those with a vision for the future. - Angie Li, Partner; Curtis Simpson, Manager; Kirsty A. McNally, Manager, all with Advisory Services of Ernst & Young LLP

Supplier Diversity, By 2025

The journey to 2025 will transform procurement from solely price-focused to holistic dimensions that impact global supply chains. Outlined below are 10 procurement "change dimensions" to look out for over the next decade.

Risk management: By 2025, procurement risk management will have completed its evolution from a reactive qualitative approach to a proactive quantitative function, integrated into sourcing and supplier management decisions. Diverse suppliers should already be starting to understand the new tools and techniques and forming a small risk-management team.

Sustainability: The next 10 years will see transition from a transactional to a circular economy, in which organizations will have to balance creation of economic and social value. In 2015, diverse suppliers should already be building metrics into each phase of the procurement process and understanding regulatory reporting needs.

Globalization: By 2025, emerging markets will have redefined go-to-market and sourcing strategies globally. Now, diverse suppliers should begin to develop their expertise in local emerging market sourcing, such as China, Brazil, Russia, India and Western Africa, that will define the high-growth areas.

Integration: Ten years from now, procurement will serve as a critical information hub for supplier and market information flowing into the enterprise. Diverse suppliers should now be strengthening their information management and process/function integration capabilities.

Finance: Leading procurement organizations will be fully integrated with finance 10 years from now, with the best procurement managers resembling finance professionals as much as traditional “buyers.”  To prepare for this eventuality, diverse suppliers should consider the relationship between finance and procurement and strengthen the financial skills of procurement leaders.

Innovation: By 2025, leading procurement organizations will serve as a primary channel for driving global supply base innovation. In 2015, diverse suppliers can prepare by understanding the role that outside entities play in driving industry innovation and how procurement can be a greater conduit of innovation.

Collaboration: By the time 2025 rolls around, leading procurement organizations will be deploying collaboration models for integrating with partners. Diverse suppliers should already start considering whether their outsourcing and service acquisition models drive truly collaborative models.

Transparency: By 2025, rise of social media and increasing information transparency will change the degree of scrutiny on procurement organizations. In 2015, diverse suppliers can start to develop a social operating model that prepares for a world of increasing transparency.

Analytics: Leading procurement organizations will, by 2025, be using advanced data mining and statistical analysis technologies. In 2015, diverse suppliers can begin to assess their data management and analytical capabilities and ask how those skills need to evolve in the coming decade.

People: By 2025, leading procurement organizations will be working with new social skill sets, global mindsets and technologies. Diverse suppliers can already begin preparing for this by assessing recruiting sources that encourage diversity of thought and backgrounds to unlock new sources of value.

The Outlook

Procurement is one of the most complex business functions, with a staggeringly complex landscape of requirements. In such a daunting world, new challenges will continue to emerge. For diverse suppliers to stay competitive over the next decade, they will need to take a holistic, lifecycle approach to identifying and implementing value-creation opportunities, risk-mitigation actions and efficiency-related initiatives in the supply chain.

The journey to 2025 will transform procurement from solely price-focused to holistic dimensions that impact global supply chains. Outlined below are 10 procurement "change dimensions" to look out for over the next decade.

Risk management: By 2025, procurement risk management will have completed its evolution from a reactive qualitative approach to a proactive quantitative function, integrated into sourcing and supplier management decisions. Diverse suppliers should already be starting to understand the new tools and techniques and forming a small risk-management team.

Sustainability: The next 10 years will see transition from a transactional to a circular economy, in which organizations will have to balance creation of economic and social value. In 2015, diverse suppliers should already be building metrics into each phase of the procurement process and understanding regulatory reporting needs.

Globalization: By 2025, emerging markets will have redefined go-to-market and sourcing strategies globally. Now, diverse suppliers should begin to develop their expertise in local emerging market sourcing, such as China, Brazil, Russia, India and Western Africa, that will define the high-growth areas.

Integration: Ten years from now, procurement will serve as a critical information hub for supplier and market information flowing into the enterprise. Diverse suppliers should now be strengthening their information management and process/function integration capabilities.

Finance: Leading procurement organizations will be fully integrated with finance 10 years from now, with the best procurement managers resembling finance professionals as much as traditional “buyers.”  To prepare for this eventuality, diverse suppliers should consider the relationship between finance and procurement and strengthen the financial skills of procurement leaders.

Innovation: By 2025, leading procurement organizations will serve as a primary channel for driving global supply base innovation. In 2015, diverse suppliers can prepare by understanding the role that outside entities play in driving industry innovation and how procurement can be a greater conduit of innovation.

Collaboration: By the time 2025 rolls around, leading procurement organizations will be deploying collaboration models for integrating with partners. Diverse suppliers should already start considering whether their outsourcing and service acquisition models drive truly collaborative models.

Transparency: By 2025, rise of social media and increasing information transparency will change the degree of scrutiny on procurement organizations. In 2015, diverse suppliers can start to develop a social operating model that prepares for a world of increasing transparency.

Analytics: Leading procurement organizations will, by 2025, be using advanced data mining and statistical analysis technologies. In 2015, diverse suppliers can begin to assess their data management and analytical capabilities and ask how those skills need to evolve in the coming decade.

People: By 2025, leading procurement organizations will be working with new social skill sets, global mindsets and technologies. Diverse suppliers can already begin preparing for this by assessing recruiting sources that encourage diversity of thought and backgrounds to unlock new sources of value.

The Outlook

Procurement is one of the most complex business functions, with a staggeringly complex landscape of requirements. In such a daunting world, new challenges will continue to emerge. For diverse suppliers to stay competitive over the next decade, they will need to take a holistic, lifecycle approach to identifying and implementing value-creation opportunities, risk-mitigation actions and efficiency-related initiatives in the supply chain.

Supplier Diversity, By 2025