Procurement Has Narrowed Digital Capabilities Gap, Says The Hackett Group

Procurement organizations have significantly shrunk the capability gap in digital transformation over the past year, with two thirds now having a strategy in place and nearly half having the resources and competencies needed to execute, according to new Procurement Key Issues research from The Hackett Group, Inc.

Procurement leaders expect to rely on digital transformation to help them achieve an array of critical objectives in 2018, including cost-cutting, improving agility, and improving their ability to serve as a trusted advisor to the enterprise.

According to The Hackett Group, procurement organizations are expected to dramatically increase their use of robotic process automation and AI related technologies (i.e., cognitive, machine learning, virtual assistants) over the next two to three years.

Furthermore, researchers found, that the procurement function of supply chain managers also expands their use of more mainstream technologies such as cloud-based applications, advanced analytics, data visualization, and mobile computing.

Constantine Limberakis, Senior Director, Advisory, The Hackett Group, told Supply Chain Management Review in an interview that risk mitigation is also addressed in the research.

“With the deluge of information being created in both direct and indirect supply chains, supply chain managers need more innovative ways of interpreting data,” said Limberakis.

He added that one is by way use of AI / cognitive technologies, which can expand the ability to sense, recommend, act and learn based on the external and internal data impacting an enterprise. Another is evolving areas like blockchain , which promises a fundamental change to the way information is shared and documented.

“The classic example of this is related to food safety linked with IoT - like verifying the authenticity of food products and catching counterfeits before they endanger people's health and lives,” he said.

But their ability to execute digital projects will require reassessment of competencies and realignment of resources, as procurement budgets are expected to remain virtually flat in 2018. In addition, while procurement leaders acknowledge the importance of strategic enterprise objectives, including expanding procurement's influence, elevating the role of procurement, and improving agility, procurement's ability to address them is low.

The study identified similar capability gaps in four key internal capability areas for procurement, and offers guidance for how these can be addressed.

The Hackett Group's research identified four key capability areas where procurement must improve in 2018:

• aligning skills and talent with changing business needs;
• measuring and managing procurement performance and business value; obtaining more value from existing suppliers through relationship management;
• and obtaining more value from existing categories through category management.

These key capability areas reflect the need to continually innovate and expand collaboration by investing in resources and technology that promotes actionable intelligence, improves the user experience, and enhances supplier collaboration.

“Last year, procurement leaders told us that digital transformation was a priority. But most simply didn't have the strategy and resources in place to move forward,” said Chris Sawchuk, The Hackett Group Principal & Global Procurement Advisory Practice Leader.

“This year, that gap has closed significantly. Momentum is growing. More organizations are planning for digital transformation and more are in a position to do something about it. But a significant number of companies have not gotten there yet, and digital transformation has the potential to be such a game changer that these procurement organizations are at risk.”

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