Where is Procurement Going? 3 Key Insights from ProcureCon’s 2017 CPO Study

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Worldwide Business Research and ProcureCon released their Annual CPO Study Wednesday, a survey of chief procurement officers and what they see as their challenges or priorities for this year. The report, titled "Exploring the Role of Technology in Procurement’s Strategic Transformation," tackled topics ranging from the structure of the procurement department to the potential of automation to innovative sourcing techniques. In addition to data, the report includes excerpts from interviews with several senior procurement officers.

The results of the study came from responses to a benchmarking survey delivered at ProcureCon Indirect West 2016, as well as responses from CPOs in the ProcureCon database. A total of 35 executives took part in the study. Let’s take a look at some of the interesting findings.

From Tactical to Strategic

Half of the executives surveyed reported that their procurement teams are on schedule in their transformations from tactical to strategic, while not a single person reported that this transformation was complete.

Source: ProcureCon’s Annual CPO Study

As you can see from the graph above, the respondents were more or less evenly divided on which department they report to. A quarter now reports directly to the C-Suite, which perhaps reflects a “trend towards greater authority and consolidation of responsibility within procurement departments.” Half of the respondents, however, believe reporting directly to the C-Suite to be the ideal.

What to Do About Sourcing?

Although there is a clear trend that CPOs want to make procurement more strategic, they are split on the topic of approaches to sourcing. Among the survey respondents, 43% is expanding internal sourcing, whereas 23% are expanding outsourced or collaborative sourcing. Another 34% are not changing their sourcing practices.

As VSP Global’s CPO Greg Tennyson argued, “If you think about it, who has the vested interest in the outcome, who has keener insights into the data, who wants to drive savings? It’s the business.”

And when procurement teams are picking among vendors, savings potential is the most important factor for 60% of respondents. Pricing came in second, with 20% of respondents picking it as their top concern.

Let’s Talk Automation

One in three of the executives surveyed reported that between 21% and 40% of their procurement processes are automated, and another one in three reported a percentage between 1% and 20%. Of course, there is a big difference between an organization with 1% of its procurement processes automated and an organization that boasts 20%, but these numbers show that the majority of procurement teams are certainly interested in automation – and they are giving it a try.

To prove that last point, just look at the findings of the next question, which is in regards to the percentage of procurement processes that will become automated in the next 18 months. One in three surveyed responded with between 21% and 40%. Compare that to the 44% of respondents who had said that fewer than 20% of their procurement processes will be automated. Only 3% have no plans of automating.

“We’ve observed a liberation of the CPO,” explained Paula Shannon, SVP at Lionbridge Technologies. “Before procurement automation technology, spend-related data was difficult and time-consuming to collect. These tasks are now largely done by technologies.”

Parting Thoughts

The report concludes with three recommendations, paraphrased below:

  • Think strategic. Keep embracing procurement’s strategic role and work directly with stakeholders across the business. It’s “not about simply cutting costs anymore,” but rather taking a “co-owner role in the value being created across the business.”
  • Use technology. Take advantage of Big Data and analytics to better understand buying patterns. Innovative technology, including automation, will be key to keeping up the “forward momentum.”
  • Be flexible. Procurement needs to have global sourcing guidelines that account for sourcing at all levels and potential disruption in global markets. An approach that “looks to the future while accounting for the unexpected in the here and now” is needed.

If there is one takeaway that must be gleaned from the report, it is this: The role of procurement is evolving into a more strategic one, becoming a fundamental part of the management function. More so than ever, CPOs will be finding themselves at the executive table.

Spend Matters encourages you to check out the report in its entirety for yourself.

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