Procurement is where big decisions get made and paid for. High-quality procurement practices are central to running a profitable project, but it’s an area of the construction sector facing considerable change.
Procurement teams will need to get on top of new technologies, master taxes and could find themselves essential to reputation management. We’ve highlighted five trends for procurement professionals to follow.
1. Taxes and tariffs
The introduction of VAT to Saudi Arabia and the UAE at the start of 2018 has been something new for purchasing teams. It gets more complex given VAT can impact contracts that pre-date its introduction, but whose products or services arrive after. Understanding the tax system will allow companies to adjust their fees to account for the tax and the cost of its collection.
Also on the horizon is the threat of global trade tariffs. At first these seem distant from the regional construction industry. But tariffs and counter-tariffs levied against raw materials could quickly see additional costs enter the international supply chain. Procurement teams will have to be alert to the origins of a product and its component parts.
The technology behind Bitcoin and other crypto currencies may not seem an obvious consideration for the construction sector. But blockchain is about transactions and those needn’t be limited to the financial services sector. The rise of blockchain will create new opportunities for procurement teams to improve the traceability and security of their transactions.
The technology’s application could lead to full transparency on any physical purchase, right down to its raw materials. Such applications are very much at the early stages, but could secure supply chains and provide end-to-end transparency of physical transactions.
3. Value, not cost
The construction sector frequently focuses on the cost of something, not the value it provides. As the regional market matures, there is a shift toward looking at products and services in the context of their operational value, not just their capital cost.
Influenced by new environmental regulations, which demand greater performance from the built environment, buying decisions based on value have become a necessity. In order to find this value, purchasing teams need to work closely with their technical colleagues to gain a deep understanding of the products and services on the market.
4. Responsible sourcing
The idea of responsible sourcing is one readily associated with consumer brands, but is just as important for businesses. Procurement teams can take on the role of the consumer in lobbying for supply chain transparency. They can then pass their confidence in purchases on to their clients and end-users.
This pressures the entire supply chain to take measure each transaction against high ethical standards. It also puts procurement teams on the frontline of managing their organisation’s reputation. From there they must ensure they are dealing with credible providers. As other industries have shown, this can be incredibly challenging. Getting it right means extracting detailed information directly from each supplier.
5. Digital procurement
Digital procurement is another aspect of the evolving impact of digital technologies. When successfully implemented companies can buy better products, for less, while reducing operational costs. Some think the gains for the construction industry could be greater than in any other sector. The scale of change from traditional construction procurement practices would be huge, since construction is one of the least digital industries around. To achieve the predicted benefits the industry will have to push digitisation deep into the supply chain. While it will be challenging, tight margins and compressed construction programmes make it necessary too.
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