In a recent webinar, The Smart Cube’s Omer Abdullah talked to experts from CASME and Johnson & Johnson to see what 2022 has in store for procurement.
As another year draws to a close, we find ourselves in a position to both reflect and plan ahead. And what better way to do that than in an expert-led webinar.
Our co-founder and managing director, Omer Abdullah, recently sat down with CASME’s Graham Crawshaw and Len DeCandia of Johnson & Johnson to discuss what 2021 was like for procurement functions. And, importantly, what those working in procurement can expect from the year ahead.
You can watch the full, on-demand webinar here. But first, let’s explore some highlights from the conversation.
Supply vs demand (and the other challenges that made 2021)
Going into 2021, it looked like we might have seen the back of COVID-19, or at least of the worst of it. The initial shock and disruption were over, and it was time to rebuild. For that reason, many procurement professionals entered the year with a good degree of enthusiasm. But ultimately, that enthusiasm may have been misplaced.
“I think we had a lot of optimism going into the year, but in reality it was maybe even more difficult than 2020,” says Len DeCandia, Chief Procurement Officer at Johnson & Johnson. “From the outset, many of the conversations I had with executives were around supply being the number one risk to growth for 2021, with demand really outpacing supply.”
This was clearly a trend that our webinar attendees had felt too, with 65% of them citing supply chain availability, bottlenecks, and constraints as the biggest challenges over the past 12 months. Other risks mentioned frequently were inflation, supplier risk and commodity prices.
“Supplier risk is absolutely a hot topic,” says Graham Crawshaw, Director at CASME. “In the last year, we’ve seen a lot of suppliers themselves begin to de-risk their activities, so even if you have money to spend, you can’t always assume they’ll want to work with you.”
Overall though, despite its numerous challenges, Graham thinks the year past was a positive one for procurement and the way the function is seen within organisations.
“We’ve certainly seen procurement organisations face challenges that they haven’t before. The Suez Canal sort of woke everyone up and showed there was a real issue. We’ve then seen procurement professionals who have never dealt with factors like inflation before have to respond to suppliers putting prices up, which meant new strategies and innovations had to be implemented. But, in general, procurement has been really good at doing that.”
ESG and sustainability take centre stage
One of the key focus areas over the past year, which we expect to continue in 2022, has been sustainability and ESG initiatives. This is a really positive sign considering the other challenges and topics that could have taken precedence, and shows that organisations are taking these initiatives seriously.
“I’m really pleased that this was part of all these conversations and not something that was just viewed as a luxury topic,” says Graham. “ESG is something that only really materialised in Europe this year, and it’s suddenly a really exciting area to work in – it’s something that gets stakeholders interested and therefore something all business have to start taking on board.”
“People need to see ESG as a critical component to supporting an organisation’s growth,” adds Len. “Customers are much more interested in working with companies that want to take care of the world we live in. And talent is much more interested in working for them.”
Other key takeaways from the year? For Omer, it’s all about expecting the unexpected: “I think we all expected 2021 to be a positive year for growth, but the demand ramp-up really caught us all by surprise. For me, that means we need to learn to straddle that line between what we expect and what is unexpected – being nimble is key.”
And for Len, the big lesson from the year just gone is about putting people first: “The people-experience definitely needs to be a bigger part of how we introduce new thinking and innovation – both from the employee, customer and supplier perspective.”
What to expect from the year ahead
The question on everyone’s lips, though, isn’t about what happened last year. It’s about what will happen in the year ahead.
Our webinar audience once again shared what they expected to be the major procurement challenges for 2022, and one topic stood out among the rest. A huge 64% of our respondents cited inflation as the most likely barrier to success.
“I recently did a talk with around 8,500 colleagues, and the number one question floated was about inflation,” says Len. “We have a couple of generations in the workforce now that haven’t really lived in an inflationary environment, so this is all new to them.”
“Inflation is definitely a concern for people, but you have to think about it as an opportunity, and make sure suppliers aren’t taking advantage of the situation,” says Graham. “That means knowing about what’s happening to raw material and labour costs. And understanding what these costs are as a percentage of your overall contracts. It’s just about applying a different approach.”
Importantly, all three of our experts agree that the year ahead will offer great opportunities for procurement as a profession.
“It’s a time of great transformation and a critical time for procurement,” says Len. “Procurement is going from a single-lane road to a superhighway, and we have to start thinking about the positive influence the function can have across the entire enterprise.”
To learn more about what our experts had to say about the year that lies ahead – and to gain some expert advice for your procurement organisation in 2022, watch the on-demand webinar.