Exploring the Future of Global Sourcing in Procurement

The world is more connected than ever. With this comes global sourcing plans for procurement which are evolving rapidly thanks to technological advancements. Global sourcing presents obstacles that could affect supply chains, ranging from geopolitical tensions to a greater emphasis on sustainability. But for procurement leaders, what does the modern procurement landscape look like?

Procurement Magazine speaks to Sam de Frates, Vice President of Procurement for Europe, CIS and Turkey at Mars and Onyekachi Izukanne, Co-Founder and CEO of TradeDepot, about navigating these complex dynamics through the strategic use of AI, automation and robust risk management practices, all while aligning operations with broader business objectives.

As well as views from Tony Harris, SVP at SAP Business Network and Lari Hämäläinen, Senior Partner, Technology and Advanced Industries Practices at McKinsey, who featured on Procurement Magazine online.

The role of AI and ML in global sourcing

Artificial intelligence (AI) and machine learning (ML) are reinventing procurement daily as new solutions are developed continuously. These technologies are transforming global sourcing strategies by providing procurement teams with tools to enhance decision-making and operational efficiency. At Mars, Sam describes these tools as playing a “crucial role” in its procurement transformation journey, particularly in reshaping and automating simple tasks and simplifying complex processes.

“Technology allows us to automate routine work so that we can be more efficient,” Sam adds. “It can democratise data by making it easy to access, tidy up and track information, such as spend, contracts and sustainability metrics, so that we can focus on the decisions and actions that we should take from those insights. When it comes to complex tasks, this is where we see AI creating a competitive advantage, by bringing insights from complex internal and external datasets that we would never have been able to handle previously, allowing us to make better and faster decisions.”

Lari adds: “When we talk about gen AI agents, we mean software entities that can orchestrate complex workflows, coordinate activities among multiple agents, apply logic and evaluate answers. These agents can help automate processes in organisations or augment workers and customers as they perform processes. This is valuable because it will not only help humans do their jobs better but also fully digitalise underlying processes and services.

“For example, in customer services, recent developments in short- and long-term memory structures enable these agents to personalise interactions with external customers and internal users and help human agents learn. All of this means that gen AI agents are getting much closer to becoming true virtual workers that can both augment and automate enterprise services in all areas of the business, from HR to finance to customer service. That means we’re well on our way to automating a wide range of tasks in many service functions while also improving service quality.”

Onyekachi is using AI to leverage the regulatory tasks at TradeDepot, which provides a unique competitive advantage for brands looking to enter specific markets. 

“We ensure that products are compliant with local regulations, reducing entry barriers and facilitating a smoother, faster market entry process,” he adds.

“This technological edge enables brands to focus on their core business while we handle the complexities of regulatory compliance and supply chain logistics.”

Geopolitical events and their impact on global sourcing

McKinsey’s Procurement 2024 report outlines how leaders are already recognising the need for organisations to adopt more sophisticated methods to meet both short-term challenges and the long-term vision for Procurement 2030.

This was something formulated by McKinsey after speaking with CPOs from a wide range of industries about how their roles are changing and where they see opportunities for the future. “Their perceptions, combined with McKinsey’s analysis, coalesce into a vision for Procurement 2030 that comprises three critical challenges for the CPO: becoming an end-to-end value entrepreneur, expanding into new venues of value creation, and building the organisation of the future that provides a strategic blueprint to guide procurement leaders (Exhibit 1). By embracing these challenges, CPOs can position themselves as strategic partners, incorporating innovation, resilience, and sustainability throughout the value chain.”

McKinsey’s report outlines six market forces and trends that are transforming the business landscape in 2024, one of which is supply chain disruptions. These disruptions often go hand-in-hand with geopolitical and climate issues, prompting companies to review their globalised sourcing strategies. Successful organisations are reassessing their risk and resilience practices, including supplier relationships.

Geopolitical events can significantly impact global sourcing strategies, affecting supply chain stability, costs and regulatory compliance. These factors have the potential to cause hugely disruptive supply chain interruptions, necessitating swift strategic adjustments.

This sentiment is echoed by our speakers, with representatives from Mars, among others, reporting supply chain disruptions in recent years. Sam mentions Mars has faced “significant disruptions”, exposing weaknesses in some of their data and processes. However, strong relationships have helped Mars navigate these issues. 

“The key has been learning from every event and then building processes, enabled by technology, that push us to have routines that identify, prioritise and performance-manage our mitigation plans,” Sam says. “We still have surprises, but we have developed reflexes that mean we can deal with them easily.”

Speaking to Procurement Magazine, Tony explores how supply chains have been heavily shaped by geopolitical tensions, climate impacts, economic uncertainties and more in the past year. These challenges pushed leaders to scrutinise their supply chains and consider unprecedented scenarios to de-risk them, in addition to managing costs.

As the list of supply chain challenges and disruptions evolves and supply chains remain in a “permanent crisis”, technology is no longer optional, Tony says.

“Businesses must use integrated technologies to keep track of their suppliers and their suppliers’ suppliers,” he adds. “They need a sophisticated solution that not only connects supply chain and logistics data across an organisation but also organises a global network of suppliers, including logistics providers and more, in one platform to enable efficient collaboration.

“This visibility gives leaders a heads-up on potential disruptions and allows them to quickly identify a backup plan and provides other critical information like environmental impact.”

Onyekachi adds: “To mitigate geopolitical disruptions, TradeDepot employs a multifaceted risk management approach designed to ensure resilience and stability in our supply chain operations. Given the complexities and uncertainties introduced by geopolitical events, our strategies are both proactive and adaptive.”

The future of global sourcing

With the rapid development of AI, global sourcing is set to continue its transformation. As more organisations digitalise their operations, every aspect of the value chain will come under more scrutiny, with a focus on ESG and a shift towards more localised sourcing. Sam adds that the most successful procurement teams are those driving value in the “exciting intersection” where the business meets the supply base. 

“It is in that intersection that we must drive those win-win-win opportunities where we tap into brand-new areas of value, build resilience in our sourcing decisions and make our supply chains sustainable for our people and planet,” he adds.

“With these goals at the core of what we do, increasing and applying our knowledge of AI and automation is an important enabler. However, it's important to remember that the primary purpose of AI is to make us better at what we do best as humans — building partnerships with suppliers and stakeholders and unleashing our creativity.”

Onyekachi concludes his views on the future of global sourcing, which he believes will be profoundly influenced by several key trends, each driving significant changes in how companies manage their supply chains.

These include increased digital transformation, emphasis on sustainable sourcing techniques, reshoring and nearshoring production and advanced risk management practices.

“Advanced risk management practices will become increasingly essential to navigate the complexities of global sourcing,” he adds. 

“Companies will leverage AI and analytics to predict potential disruptions, diversify their supplier bases and develop robust contingency plans. Regulatory technology (RegTech) will play a pivotal role in ensuring compliance with market entry requirements and adapting to legal and regulatory changes. 

“These practices will enable businesses to stay ahead of potential risks and maintain operational stability in a rapidly changing global landscape.”

To read the full story in the magazine click HERE

****** 

Make sure you check out the latest edition of Procurement Magazine and also sign up to our global conference series - Procurement & Supply Chain 2024 & Sustainability LIVE 2024

******
Procurement Magazine is a BizClik brand.