This transcript has been lightly edited for clarity.
How is the procurement function changing?
Roman Belotserkovskiy: The role of the procurement organization and the position of procurement leader have been elevated to a much more visible and impactful position across most companies, in almost every industry.
Jennifer Spaulding Schmidt: Right now what we’re seeing is procurement is involved very early on, scoping and shaping the demands of the business, and then helping find the partners that the business needs—short-term partners and long-term partners. Over the next ten years, I think that’s only going to become a more central part of how executive teams work and function.
What does this mean for the procurement organization’s operating model?
Samir Khushalani: As inflation tempers down and supply chains become a bit more stable, we are finding that chief procurement officers (CPOs) are starting to pivot to operating model upgrades, as well as digital enablement.
Jennifer Spaulding Schmidt: Looking ahead at the next ten years, we see three fundamental shifts within the operating model for procurement organizations. One will be moving transactional activity to more automation, gen AI. Those activities will be shifted away from the procurement team.
That leaves time for the second, which is a much more strategic, global view of categories. Then lastly, enabling organizations to self-serve, empowering functions to be able to make decisions on their own.
What is the role of the procurement function as a source of resilience?
Samir Khushalani: In this day and age of geopolitical tensions, it is increasingly important for clients to be able to look for alternative sources of supply from organizations, companies, and countries that have lower risk profiles.
Increasingly, the notion of friendshoring is becoming very important, because the whole notion is the idea of buying from suppliers and countries with shared values, countries that are not subject to tariffs, and that do not get influenced by the geopolitical tensions happening today.
What does this new approach to procurement mean for talent in the function?
Milan Prilepok: We know through our research that the single biggest predictor of procurement outcomes is the talent. So one thing is investing in getting world-class top talent, securing that.
Another important element with talent is retaining the current top talent. What that takes is having really thoughtful capability building. Also, it takes looking at career planning and getting people energized and excited to stay.
What is the role of technology in making the procurement function successful?
Samir Khushalani: Digital is the unlock for the next horizon of procurement excellence. It would be easy if there was one single app or tool that could be all things to all categories to all stakeholders. But there isn’t. Leading procurement functions are starting to invest in an ecosystem of a digital procurement engine.
Roman Belotserkovskiy: In reality, the potential of technology is probably underhyped; artificial intelligence/gen AI has already proven real value in procurement.
Jennifer Spaulding Schmidt: I know gen AI is a topic on everybody’s mind, and we’ve been discussing it for the last 12 to 18 months.
We really do see it making teams more productive. It makes teams smarter, gives people opportunities to find suppliers around the world, and qualify new suppliers in a way they’ve not been able to in the past.
Is sustainability rising up the procurement agenda?
Eric Hannon: We’re moving now into an era of increasing regulatory pressures for people who operate globally, such as the Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) in Europe, but then also the reporting requirements that are coming across globally.
One trend we’ve been seeing is actually trying to marry cost programs and carbon programs together.
For most companies, scope 3—both downstream and upstream—is on average around 80 percent of the overall emissions, a massive amount. So procurement actually plays an outsized role in decarbonizing companies.
That provides us some pretty significant benefits. First of all, there are a lot of win-win measures out there. Often when people think of carbon, they think of cost; that it’s very expensive to address. But across industries, around 20 to 40 percent of decarbonization can be achieved with cost-neutral or even cost savings if we just find the right measures.
What’s your final message for procurement leaders?
Roman Belotserkovskiy: In many cases, procurement leaders have been elevated to a position of influence and are able to drive a lot more impact for their organizations. The expectations have risen significantly. And that means we need to reimagine procurement.