Over on our World Class Procurement LinkedIn group (all practitioners welcome), we shared some of the summary findings from the 2012 edition of our annual Procurement Key Issues study we did a few months ago, and I thought the Spend Matters readership might be interested. So, to quote the Bud Lite commercial, "here we go"...
- From an enterprise level, revenue growth was the top enterprise issue, closely followed by operating margin improvement. Consequently, revenue and growth enablement was the top procurement issue behind cost savings (again the perennial top-priority in our procurement list) and stakeholder alignment. Alignment around complex indirect spend categories was a particularly high priority to close remaining spend influence gaps.
- Procurement budgets were basically flat, but headcount (FTEs) was expected to rise slightly, indicating some wage pressure which was in turn partially driven by a trend toward increased specialization and offshoring -- primarily in transactional areas, but increasingly in other areas such as spot buying, reporting, data gathering/intelligence, etc.
- FTEs being placed in low-cost geographies is expected to leap from 16% to 25% in the next few years, but we shall have to see -- our data shows that companies tend to consistently overestimate their ability to lift/transform and shift resources.
- Outsourcing is expected to gradually increase and accelerate the offshoring trends for knowledge-based work (e.g., supply market intelligence). In our other studies/benchmarks we have this by process area, industry, etc., but it's fair to say that it's a general trend across most processes.
- Procurement is actually doing a good job relative to its functional partners in terms of delivering value services to the enterprise. It was the least cited problem area, and was far ahead of IT (which has a parallel life to Procurement) and HR, which was the worst performing function (viewed as administrators and gatekeepers rather than talent management enablers)
- Talent management dropped as a key capability-building priority down a few pegs from its previous #2 position, but it's still a major issue as companies continue to refine their procurement service delivery models.
- For the rest of the 2012 key issues list, supply risk was next, followed by working capital improvements. Supply risk has broadened from supplier viability/continuity to a broader approach that also includes supplier compliance, both from regulatory standpoint, and from an SRM/SPM standpoint.
- Except for firms on the "bookends" of the supply chain, supply-side sustainability continues to wallow at the bottom of the list. Similarly, BPO and offshoring are also fairly low even though the planned FTE migrations are fairly large. Much of this activity is G&A-level or enterprise-level initiatives -- e.g., via Global Business Services (GBS) organizations.
- For capability-building, SRM and category management were the big movers, as was better quantification of more complex and higher-value contributions by Procurement. This continues to be one of our highest, if not the highest, client advisory inquiry activity. Lean and Six Sigma adoption in Procurement was also growing in interest, but still further down the overall priority list.
- For technology-related priorities, the ERP consolidation/upgrade "death march" continues (OK, it's not as bad as that -- there is definitely better functionality in latest SRM/iProcurement releases), but the most active area is in Analytics, MDM/SIM (with some focus on SRM too via supplier compliance/risk), and Supply Market Intelligence.
Well, this list, to quote Spinal Tap, will not go to 11.
How about you? What are your big priorities for 2012?
-- Pierre Mitchell, Director, Hackett Advisory Group