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Jason Busch's Predictions for 2010

Jason Busch, author of Spend Matters, discussed some current issues at a Zycus conference in Chicago that I attended todday.  He emphasized the volatility of commodities, and the likelihood of a 20% increase in inflation in 2010.  The slushiness of the credit markets also emphasized that this could further impact the economy.  Trade restriction and Japan’s cornering of precious metals, as well as the green markets and restrictions in the US will drive down our volume of exports as other countries also pull back.

Jason also emphasized that many organizations share suppliers who have been hit by the recession, and may not be able to stay in business.  Supplier performance risk, including cutting corners to stay afloat, cutting QA people on the 3rd shift, and other factors could lead to problems.  Inventory risk also exists.  By this, Jason meant that organizations are more serious about inventory as a buffer – and the fact that virtual inventory exists.  In outsourcing data centers to India, if there was a major provider to India – everyone would have the same backup plan.  But what happens if a provider fails and everyone has the same backup plan.  Your contingency could be someone else’s as well!

We keep a lot of our information in silos – which are good if you are a farmer.  Many new silos include different types of applications – new information on suppliers and capabilities, and details on suppliers that are transaction, payments, certifications, quality data, and new data on demand planning, global sales, customs and trade information.  All of this new data, unfortunately, is being stuffed into silos!  In the next five years, we will have to find ways to integrate this data will increase supply risk.

One of the most interesting parts was Jason’s predictions.  He emphasized supply risk – but also new ways of negotiating contracts from a risk management perspective.  There is also a theme around contracting.  He also emphasized delayed ERP upgrade cycles and resulting procurement technology investments will create a better tools environment from what we originally expected.

Politics will become more important and play a role in procurement decisions.  China and other countries will play an issue.  He also pointed out the importance of social networks – and using them to spy on suppliers.  Companies will mind data on Linked in to see if they are updating their profile or their resume, to see if they are worried about leaving, perhaps indicating the company is not doing well. 

The taxman gets paid too much!  Governments will continue to increase taxes, and it has been very easy to create a VAT and new import and export strategies.  This is likely to lead to new procurement strategies – and are thinking about strategies around a bond offering to avoid repatriating profits.    Also, finance will get more involved in procurement.  Volatility is going up – and CFO’s are having to manage throuth this situation.  Companies are getting better at managing cash flow, and are pushing back on supplier payables.  Credit lines are still very tight, and if there is a backlash of the economic clouds – and many first generation systems will drive procurement to do more of this.

Another scenario – new interfaces in and technologies will continue to drive functionality and interconnectivity and breakthrough collaboration and visibility.  People will communicate much more frequently, and technologies are changing dramatically.  Video is much more prevalent – and we will be able to see things like child labor in a supplier factory – and if broadcast could negatively impact an organization.  Data in the cloud and master data management will enable identification of structured and unstructured data to people in the company, and will influence negotiations.  He also noted that buying and digesting companies will continue to be important, but procurement will be much more involved.

Finally, new talent is entering procurement form the bottom, and will change things forever.  Younger people are entering senior management procurement positions.  New people in these roles will change how we manage as leaders, and how we think of career growth in procurement.  This is certainly great news for our grads!  Thanks again Jason for a very informative and great discussion!