As Business Uncertainty Rises, Procurement Faces 2016 Balancing Act

Procurement leaders expect operating budgets and staffing to increase slightly in 2016 as they attempt to balance the need to reduce costs with the desire to become a better strategic business partner and other priorities, according to new Procurement Key Issues research from The Hackett Group, Inc.

Increased business uncertainty and risk are driving a resurgence in traditional cost reduction strategies, according to The Hackett Group's research. At the same time, the research identified critical development gaps in four key procurement strategy areas: becoming a better strategic partner to the business; increasing spend influence; improving agility; and tapping supplier innovation. These are important targets for capability development.

To improve agility, The Hackett Group's research recommended that procurement organizations become more information-driven and harness the value of “big data.” Unfortunately, the research found that over half of the study respondents currently lacked a formal market intelligence program or were only in the earliest stages of adoption. Study respondents also identified predictive analytics and forecasting as the trend with the greatest transformational impact for procurement over the next decade.

Finally, The Hackett Group's research recommended that to unearth new sources of savings procurement examine tail spend – the 20 percent of spend that is spread thinly across up to 80 percent of its suppliers. This is an area where most procurement organizations have not focused heavily. But with effort, The Hackett Group estimates that realistically, savings of 3-5 percent for less mature sourcing organizations is possible, in part by identification of high-dollar maverick spending that should have been strategically sourced.

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