Hackett CPO Agenda: What's Top of Mind in Procurement?

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“Do more with less.” Words that send a shiver down many a manager’s spine. But with budgets growing more slowly (1.3%, versus 2.7% in 2018) and expectations of cost and efficiency savings growing faster than ever, that is the reality faced by procurement professionals. The Hackett Group’s CPO Agenda is always eagerly awaited, and this year’s edition does not disappoint, offering clear advice based on a detailed survey (the Hackett Group’s Key Issues Study) of the procurement community.

The report shows that the technology required to meet a business’s requirements from procurement is now available – the challenge now is to embrace that technology, improve capabilities and align skills and talent.

The survey revealed that the community’s top five concerns are:

  1. Modernize application platform(s) (mentioned by 54% of respondents);
  2. Improve analytical capabilities (50%);
  3. Reduce operating cost (39%);
  4. Measure/manage performance and value (39%);
  5. Accelerate adoption of software tools (36%).

A Mismatch with the CPO Agenda

Unfortunately, the survey revealed a clear misalignment between these concerns and what the CPO Agenda terms “procurement critical development priorities”. These are based on an analysis of the gaps between the stated importance of procurement capabilities and organizations’ current ability to address them. The Key Issues Study identified the following as the top five critical development priorities to be addressed by digital transformation:

1. Improve analytical capabilities

Core activities like spend analysis are moving toward real-time, custom and predictive analytics, while less-mature analytics functions like risk management will join procurement’s list of fundamental responsibilities.

To address this gap procurement must, among other things, lay the foundations for analytics, for example by standardizing master data definitions. This implies close cooperation with IT.

2. Align skills and talent with business needs

Hackett identified advanced analytics and data modeling, business acumen, relationship management, strategic thinking and risk management expertise as “must have” skills for the future.

Procurement will be challenged to compete with other business functions for top analytical talent. It must also automate less strategic activities.

3. Leverage supplier relationship management (SRM)

While SRM has long been a core capability for procurement, it is due for a major shift in approach. Relationships between procurement and its suppliers must become much more strategic.

Procurement needs to make it a priority to automate and streamline supplier onboarding with digital tools.

4. Improve procurement function agility

Agility is an important factor in all areas of business, a direct reflection of the changing market and technology advancements. Agility in procurement means faster decision-making enabled by efficient technologies and adaptive staff who possess a variety of skills and competencies.

Here again, procurement will need to leverage new technologies (such as RPA) if the function is to become more agile, according to Hackett.

5. Improve customer-centricity

Procurement must become a partner for the businesses it supports, making it a priority to develop a deep understanding of business needs. Procurement must also make customer processes fast, efficient and easy to understand through means such as self-service, 24/7 support and process automation.

The customer, i.e. the business, must be the focus of digital transformation.

Where do you stand?

Hackett reports that the “number of organizations that believe digital transformation has a high or very high impact on the achievement of enterprise objectives – 32% today – pales in comparison with the 60% that think it will do so within two to three years”. Although many companies are making progress with the adoption of digital technologies, in particular eProcurement, this adoption is typically limited in scope. It seems that many organizations are still not quite sure where to start, or where to go next.

What is your next move? JAGGAER has developed the Digital Procurement Checklist to help you to self-assess where you stand and where you need to improve.

 

About the Author

Georg Rösch | VP Product Management

Georg has been leading the Product Management team responsible for JAGGAER’s Direct software solutions since 2013. Prior to stepping into his leadership role, he worked in Product Development at JAGGAER for 10 years, gaining expertise in supplier relationship management, supplier scorecards, master data management, and audit management.

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