A recent study by The Hackett Group discusses the changing role for procurement and the need for technology to achieve those goals.
This article originally appeared on the Corcentric blog.
Businesses are still feeling the effects of the 2008 global financial crisis, and volatility of demand is the overwhelming determinant when it comes to business strategy. Yet other issues have continued to rise as concerns. The Hackett Group has released their 2014 Procurement Agenda: Rethinking How Procurement Defines Its Value, Balances Risk and Gets the Most from Technology Investments.
When the study was conducted last year, procurement’s biggest concerns were cost reduction/avoidance. This year, the #1 issue is expanding the scope of procurement’s spend influence, followed by the need to provide innovation and product/service support. In fact, last year’s top concern fell to fourth place.
According to the study, this change in priorities may be due to the fact that many procurement specialists may have reached the limits on reducing costs for products it has traditionally been responsible for and are now interested in taking on new spend categories to find additional savings for the company. The study finds that, “Leading-edge organizations are not treating sourcing as a sporadic event, but rather as part of a life-cycle-based approach to category management. Doing so requires working with a wide range of stakeholders to influence their spending behavior.”
The study finds three key themes in procurement for 2014:
- Rebalancing supply risk – The scope of procurement’s role in risk mitigation now involves more than just following market trends and intelligence for areas of distress and finding alternatives. Now there is also a need for procurement to work with IT to track data-security compliance in suppliers since data breaches often occur at the supplier level.
- Recalibrating procurement’s technology and tools – Since spend for new procurement-related technology is expected to be limited, procurement will need to focus on innovative uses of existing technology, master data management, and the use of BI and analytics to mine huge amounts of data to develop new insights.
- Reinventing procurement’s value proposition – Procurement will need to develop ways to show their value, not just by traditional KPIs but also by monitoring, measuring, and reporting on their activities when it comes to these additional areas of spend.
As silos continue to fall in company organizational structures and crossover and collaboration between departments becomes ever more essential, the transformation of procurement from a department that mainly has control over spend to a value added, internal service provider is the next logical step. The most forward-thinking companies are already taking steps in that direction.
For more details, read the full study.