Procurement Organizations Focus on Becoming More of a “Trusted Advisor”

For 2015, the top priority of procurement organizations is to elevate their role to more of a trusted advisor in support of improved enterprise agility, according to new Procurement Key Issues research from The Hackett Group.

But the research finds that procurement may face challenges, as becoming a trusted advisor is one of several areas where procurement organizations have a low ability to meet objectives today.

“The continuing signs of economic recovery, combined with increased volatility, are driving companies to place new demands on procurement, including a renewed focus on helping the business be more agile,” said The Hackett Group Principal and Global Procurement Advisory Practice Leader Chris Sawchuk. “But the capability gaps in procurement, particularly for becoming a trusted advisor and in improving business agility, are daunting. It will take significant time and effort for procurement organizations to achieve their transformation goals in these areas.”

In an interview with SCMR, Sawchuk added that the perception of procurement as a “cost center,” must also be mitigated.

“Procurement must clearly state its value proposition to all stakeholders,” he said “It’s time for a cultural change.”

As reported here, a similar conclusion was made in a recent IBM study.

The Hackett Group’s research revealed a change in procurement’s priorities for 2015. While traditional goals such as cost reduction and expanding the scope of spend influence remain important, new objectives are coming into focus. More than 70 percent of study respondents cited elevating procurements role to more of a trusted advisor as their top priority for 2015, making it the number one procurement strategy. Improving procurement’s business agility was cited as the third most critical goal, right below cost reduction.

However the study revealed that many procurement organizations are not equipped to support these new goals - particularly when it comes to becoming more of a trusted advisor and improving business agility. The research found that both of these are “critical development” areas, rated as highly important but with a low ability of procurement to address.

To address these new goals, The Hackett Group recommends that procurement organizations invest in new capabilities, particularly in the areas of talent management and analytics or “big data.” In talent management, the research found that procurement organizations are planning major initiatives in 2015. Many companies scaled back training and development programs to reduce cost in recent years, but they are now being widely reinstated.

Mastery of analytics or “big data” is another key enabler as procurement evolves toward being more of a trusted business advisor, the research found. Procurement has the opportunity to drive insights and powerful strategic advantage if it can improve its ability to capture and analyze both information generated internally and also data from suppliers and other external sources.

But taking advantage of advanced analytics requires procurement organizations to create new technology competencies, realign agendas, and elevate their overall technology knowledge. Today, while most procurement organizations have implemented basic reporting and data access capabilities, use of next-generation analytics such as multidimensional analysis remains limited. Sophisticated techniques such as predictive modeling, risk analysis, and data mining are being used by only a small minority of organizations.

The Hackett Group’s research also found that procurement budgets are expected to increase by 2.7 percent this year. This is a greater increase than that seen in 2014, when both rose by less than 1 percent. But procurement will still need to be selective about funding only the highest-priority initiatives.

The Hackett Group’s new study, “Procurement’s Key Priorities in 2015: Harnessing Big Data and Renewing Training Programs to Promote Enterprise Agility,” is based on research conducted with executives from over 170 large companies in the US and abroad, most with annual revenue of $1 billion or greater. A complimentary version of the research is available with registration at this link: http://www.thehackettgroup.com/research/2015/pr/keyissuespr15/

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