Procurement Must Reduce Costs While Continuing to Become a Better Strategic Advisor

Procurement faces a dual challenge in 2020 – reducing internal and external costs while at the same time adding value and becoming a better strategic advisor to the business, according to new Procurement Key Issues research from The Hackett Group, Inc. Better analytics to improve spend influence and enhance value are key focuses for procurement in 2020, the research found.

Improving cost efficiency in procurement operations has moved to the top of the procurement agenda for 2020. The long-time top priority of purchasing cost reduction has shifted to second place, followed by the need to become a trusted advisor.

“Companies are simply demanding that procurement deliver value in new ways. Economic uncertainty is pushing companies to be more agile, and procurement must do the same, becoming a more cost-effective and value-driven function,” said The Hackett Group Research Director Laura Gibbons.

“We also see digital transformation, including technology infrastructure modernization and analytics, as helping drive cost efficiency and value to the top of the procurement agenda,” said Gibbons. “Procurement organizations have made significant investments in these areas over the past few years, and many are mid-way through their transformation. Corporate leaders are now looking to see greater ROI.”

This research is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/20keypro1912sm. Note – The full research piece includes 10 charts containing more than 70 complete metrics.

The research identified five areas where procurement has critical capability gaps that need to be addressed in 2020. These are : improving procurement's agility; becoming a trusted advisor to the business; aligning skills and talent with business needs; modernizing application platforms; and improving analytical and reporting capabilities.

“It's critical that procurement focus in these areas,” said Gibbons. “Technology & analytics are essential for success in today's business world. Aligning skills and talent is key to enabling procurement to support enterprise objectives, but it's an area where procurement has not focused sufficiently. There's been a lot of effort by procurement to be a trusted advisor to the business, and it's key to being able to accomplish other things, like better influencing spend and supporting business innovation. But clearly more progress is required.”

In an interview with SCMR, Gibbons noted that adoption and utilization are some of the top reasons projects fall short. Here are some examples: