2019 Key Issues Study: Procurement Needs Improvements In Analytics, Skills Alignment, SRM, Agility & Customer-Centricity

Last month The Hackett Group released its Procurement Key Issues research, highlighting procurement’s critical development priorities for 2019. It identifies analytical capabilities, aligning skills and talent with business needs, leveraging supplier relationships, enhancing agility, and achieving true customer-centricity as the main areas for improvement.

(Interestingly, ‘turning digital’ in order to enhance procurement’s agility and speed in keeping up with and responding to the business’ strategic aims, was one of the priorities Spend Matters’ analyst Pierre Mitchell identified in his recent video discussion.)

The Hackett Group’s report finds that the impact of digital transformation is beginning to make a significant difference to organisations, specifically in achieving enterprise objectives, and this impact it expects to increase over the next two to three years.

Despite the increase in procurement’s impact, the report also shows a downward trend in procurement’s budget and its staff, while revenues are expected to grow from 5% to 5.7% this year. It doesn’t take a genius to work out that there are some significant productivity and efficiency gaps that procurement organisations need to overcome.

Not surprising then, the research finds that Procurement is planning to spend more on digital tools and procurement-specific technologies over the next two years to help close those gaps. Cloud-based business solutions, master data management technologies, and advanced spend optimisation analytics are headed for the greatest investment, along with RPA, to address the agile need mentioned earlier. Supplier relationship management systems supported by visualisation dashboards and supplier portals are also high on the agenda. “This represents a major shift towards adopting a data and insight-driven mindset, supporting post-contract supplier management efforts,” Nic Walden, Head of Procurement Practice at The Hackett Group told us.

We listened in to the recent webinar in which he reported the results to find out about how the metrics stack up in terms of the digital technologies procurement will be implementing. He explained that from the research 54% of organisations are modernising core source-to-pay platforms, 50% are improving analytical capabilities, 36% are accelerating the adoption of technology tools, while only a minority 14% are prioritising data and systems security. “Benchmark analysis shows that teams with higher levels of digital automation realise real performance benefits,” he said, “for example, those with higher savings realisation, operating with fewer headcount, and with more accurate and reliable data are more likely to be considered valuable business partners.”

"What is disappointing,” he said, “is that only a third of all procurement organisations have a major initiative in place to align skills and talent with business needs, and only 27% said they intend to hire, train, or retain top talent. Even fewer plan to work on the so-needed agility we mentioned earlier, and to improve customer-centricity, or supplier relationship management capabilities. Agility particularly is critical for procurement organisations to respond ahead of changing market conditions and business requirements. Without a focus on customer-centricity, procurement can miss significant opportunities for business value or cost efficiency, simply because they haven’t consistently understood what the business needs. Without managing supplier relationships, the additional supply chain contribution from collaboration and innovation opportunities will also be missed.”

“While all procurement teams are transforming” he advised, “most are choosing to invest selectively from the five critical development areas: analytical capabilities, realigning procurement skills and talent with business needs, leveraging the value from supplier relationships, accelerating agility, and striving for true customer-centricity. However, it is encouraging that advanced analytics, which enable procurement to become more predictive, less reactive, and quickly identify opportunities and avoid risks, is recognised as important. Specifically master data management adoption is forecast to grow by 57% and advanced analytics by 60% this year.”

“In terms of the business case for change,” he discussed, “core source-to-pay automation should reduce operating costs and eliminate transactional work, freeing up time for more value-added efforts, like spending more time on selecting the best suppliers or aligning with internal stakeholders.”

“Having the right people with the right skills in place will be critical to realise the full advantage of what digital can offer going forward,” he advised. “But we find that in some cases, even though procurement knows what it needs to do, objectives are simply not fully translating into an effective plan of action.”

Since that webinar, we spoke with Nic about the talent acquisition or upskilling that will be needed to drive the required results from digital uptake. “Our latest research,” he said, “has found that dramatic changes in the nature of work, as a result of rapid maturation and adoption of “smart automation” technologies, are imminent. The procurement talent profile is significantly changing, and this transition will require unprecedented levels of re-skilling and upskilling of employees. Executives must be prepared to manage the significant implications for talent or they risk losing some of the potential value of increasingly digital operations – up to $82M for world-class organisations.”

The full report 2019 CPO Agenda: Building Next-Generation Capabilities is available to download here.  And the more recent research The Next-Generation Talent Profile: How Will You Fill the Digital Skills Gap? is available here.

 

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.