From magic triangle to hexagon

Procurement has undergone profound change in recent years. In particular, the rise of digitalisation has completely transformed many processes since the turn of the millennium.  However, these technical advances mean that the procurement department can take on a much more important role within companies. Most recently, the increasing number of global crises has served to highlight the essential role of purchasing. Until a few years ago, the magic triangle of cost, quality and time, well known in project management, was also highly relevant for procurement, but other parameters have now been added. This can be viewed as turning the triangle into a hexagon: supply chain resilience, sustainability factors in procurement, ongoing technological change and the consequent ability of suppliers to innovate play an equally important role.
The trend of recent years will most likely continue to shape the agenda of procurement departments in the near future. Price stability is the central issue, due to heavy cost increases in some areas, but this must always be seen in the context of overall operating costs. If you put the reliability of supply at risk, you may have to halt production, which can result in considerably greater expense. Companies which fail to comply with environmental and social requirements will face even more drastic consequences.

Success factors in modern purchasing

Purchasing consultant and author Tanja Dammann-Götsch has identified five areas in which procurement must be modernised to meet the requirements of the future:

  • Digitalisation
  • Purpose
  • Agility
  • Human touch
  • Remote working

As she describes in her book "Purchasing in Transition" (only available in German), these factors are generally contingent on successful implementation within the company and cannot be separated from each other. Without advanced digital transformation, neither agile working nor a well-functioning remote workflow can be guaranteed. And without purpose - a value-based foundation that puts people first - other success factors would be on shaky ground.

Artificial intelligence: how it’s changing procurement

Last but not least, artificial intelligence will permanently change purchasing. Buyers can already benefit from ChatGPT and similar tools: for example, when working out negotiation tactics, researching suppliers or automatically evaluating the transaction and master data at their disposal.
According to entrepreneurial magazine Maddyness, forward-thinking companies are already using AI applications to leverage historical data, market trends and supplier performance data to make better informed decisions regarding supplier selection, pricing negotiation and contract terms.  In addition, AI can help to identify potential risks and disruptions in the supply chain and implement measures to mitigate them. As well as auditing supplier reliability, AI can analyse the potential effects of geopolitical risks and unusual but high-impact events, such as a pandemic.

Purchasing will continue to gain relevance

As a result of this change, many experts agree that purchasing will continue to gain strategic relevance in companies until 2030. However, this also increases the demands on purchasing departments in terms of added value and innovation.
Cooperation with start-ups, which usually offer innovative solutions, could lead to a competitive advantage, particularly when it comes to key issues such as artificial intelligence, marketplaces and sustainability. It’s important to be open to these technologies in order to benefit from the anticipated value they can add in terms of automation, transparency and efficiency.