Summary
Quite a few reports this month, we can summarise across 3 main areas. Business Priorities, Procurement Priorities and Technology Priorities.
Business Priorities – Growth, margin protection, economic concerns, drive for efficiency concerns about risk and cyber
Procurement Priorities – Digital Transformation, Cost Management, Supply and Supplier risk, Driving efficiency.
Technology Priorities – AI, Cyber, Core procurement, category management.
Hackett Key Issues Report
One of the most influential reports was launched this month, with the 2024 edition of the key issues study. With an uncertain economic and geopolitical outlook, organisations are focussed on protecting growth, and building margin. Procurement in its efforts to align and be a strategic advisor to the business then needs to look at the top 3 priorities for procurement namely, improving spend cost reduction, ensuring supply continuity and combatting inflationary price increases.
In the drive for efficiency, its not surprising that digital transformation is in the top 10, and this is aligned with many other research reports recently, and as per last year there is a productivity gap (ie workload increasing, headcount either static or increasing at a slower rate) which the expectation is that technology will need to help. Within the technology, the prediction is for double digit growth in core technologies for pretty much all areas, as well as for supporting tech (category management, pipeline management, risk etc)
A new entrant to the top 10 was operating model transformation, as technology matures, and new technology (Gen AI – which is likely driving the renewed fervour around digital transformation) operating models are adapting to mee these. In the Economist survey for 2024, we have asked a direct question about the type of operating models that are evolving for procurement so stay tuned for that!
Supporting these priorities come the top 10 improvement initiatives, which include better data, talent, and service design (cat man, sourcing, SRM – as these 3 main stays of procurement deployments begin to coalesce and deliver their potential value.
Overall, its worthwhile downloading and reading (as always!)
RS/CIPS Indirect Procurement Report
In this the 7th edition of the indirect procurement report, it identifies that the top business pressures reported are the need to ensure sustainable and ethical procurement (32%), improve asset performance (32%) and cope with reduced operational budgets (30%). Pressure to reduce inventory costs (28%) and the increased cost of indirect materials such as MRO (27%) are also significant.
Key procurement challenges for the next 12 months were identified as Inflation and cost management (37%), managing risk in the supply chain (31%) and supply chain disruption (30%) which in many ways echoes the Hackett report and others with the key issues/challenges for procurement.
Interestingly the day-to-day challenges identified (separate to the broader strategic challenges) included ensuring contract compliance and delivering cost savings. This pressure to derive efficiency, and to minimise internal complexity are seen as the top reasons for adopting new technology.
The report then links these to the digital procurement service, identifying that benefits of this include reduced time, better spend visibility, and off contract spend identification.
The report has a section about ESG which is again rising in the agenda as the economic headwinds slowly ease, and like the Economist report last year identified that less than 40% had confidence in procurement to deliver ESG outcomes. It also identified that the biggest challenges for delivering on ESG outcomes were the cost saving challenge (and priority as earlier mentioned) not enough specialist skills and misconceptions around ESG (which is interesting seeing as one of the misconceptions is the price premium!)
AoP – Procurement Transformation
This paper is a write up of both a podcast and the KPMG report that we covered in detail last month. It is worth reading as it adds a compelling narrative around the numbers in the report.
Key points that jumped out to me (beyond the numbers):
- Supply chain fragility is still top of mind (and I suspect will be for a while yet)
- Supplier relationships are critical for procurement to deliver its objectives, and these are being recognised beyond the procurement walls.
- Having a roadmap for development is critical. These roadmaps should include operating model evolutions talent & skills as well as technology and be beyond the next 18 months.
- Whilst ESG may be more of a priority down the line its crucial to prepare now for this.
AQPC Procurement in the Cloud & Benchmarks
A couple of reports from AQPC this month, the first, procurement in the cloud, surveys how procurement technology is deployed, identifying that cloud technology (31%) now leads on premise (21%) however that most (48%) run a mix of deployments. Of those who run cloud (either mixed or sole then public cloud (31%) leads private cloud (19%) but the majority (50%) is mixed.
What does this mean?
AQPC stated that cloud gives greater benefits including enhanced data security and resilience, lower costs, ability to drive scale and more reliability. The report also identifies that whilst private cloud offers better security, it is also less scalable, so these are some of the tradeoffs discussed.
The second report is a cross industry (there are also industry specific reports) report into benchmarking efficiency metrics. Timely considering that many procurement studies are stating the need for improved efficiency.
Benchmarks included, Electronic PO – 80%, cycle time to issue PO (1.0 for services, 2.0 for goods) P2P cycle times (45 days for goods, 58 days for services)
Beroe/Rob Handfield Interview
Its always worthwhile to listen/read to what Rob has to say on global supply chains and what it means and this interview is no different! Ron is professor of Supply Chain Management at North Carolina State University
In this interview Rob discuses key supply chain trends such as Supply Chain resilience, Technology such as Gen AI and digital twins and their uses for procurement and the geopolitical climate and its impact on strategies such as nearshoring/reshoring.
It’s a quick 5-minute read, that will have you thinking for a lot longer!
Prevalent 3rd Party Risk
This paper looks at 6 third party risks and gives some ideas for managing them. The 6 are
- Cybersecurity - The rise of ransomware attacks and new data breach notification rules mean that more companies need to understand how their vendors secure critical data.
- Supplier reputational risk - Consumers and business customers are more likely to react poorly to corporate missteps, which could have a significant negative downward pressure on revenues.
- Business Continuity - continue to grow in the face of the rising tide of business bankruptcies and reorganizations.
- Safety and reliability- Understanding the safety and reliability records of your vendors and suppliers can have a substantial impact on your company’s operational resilience.
- Supplier ESG - More regulators worldwide have inked new ESG laws to shed light on corporate business practices.
- Bribery and corruption - As the U.S. Foreign Corrupt Practices Act remains enforced worldwide and more governments monitor their businesses for corruption, companies would do well to understand their exposure to this risk category.
On a recent webinar I was on with Jason Busch of Spend Matters, we discussed the number of suppliers heading toward bankruptcy (according to prevalent 25% of organisations have been impacted by the failure of a supplier over the past year and chapter 11 bankruptcies grew by 72% of the last year!)
Cyber is on everyone’s agenda and in the report they identified that 41% of companies had experienced an impactful third party data breach over the last 12 months.
It’s a very handy how to guide to get you thinking if any of these areas are on your agenda and to act as a starting point.
Proxima CPO Report
This report is a little different that the other CPO reports, in that its not a survey, but the experience of Proxima in their dealings with clients, and in-depth interviews with a range of procurement leaders.
Unsurprisingly the themes of risk, cost and sustainability rank highly in the paper and in the minds and agendas of many procurement leaders, and it is very interesting to read the in-depth interviews from each of these leaders.
Thomas Udesen – Bayer discusses being efficiency and pragmatic with practices and protocols and drive to simplify rules to add value.
Sandra Brummitt – NI Source discuses resilience in terms of balancing supply in the face of conflicting headwinds. She also discussed digital and momentum in sustainability (potentially lost due to the economic headwinds of the previous year)
Laura Cook – Primark, discusses technology and its impact on operating models and the need to develop relationships with suppliers as well as internal stakeholders.
Tim Herrod – Albermarle discusses being ready and flexibility to cope with whatever comes next, as well as using data, digital and partnerships to find solutions.
Gareth Rhys Williams – Cabinet office UK Gov discusses being outcome focussed, regulations and sustainability.
Overall, an interesting read to see how these leaders are thinking about procurement for 2024 (and beyond)
Conference Board C Suite
Thanks to Pierre Mitchell at Spend matters for sharing this with me. This is a study of over 1200 C suite execs including 630 CEOs and provides valuable insights into organisational pressures and how procurement leaders can align themselves to help solve.
The top external issues that will impact companies are Economic downturn, inflation and Global political instability, like the Hackett business key issues study reviewed earlier. As a result most CEOs say they are making supply chain adjustments, two-thirds of CEOs globally and more than half in the US say they either plan to alter their supply chains in the next three to five years or are already doing so. Their number-one adjustment: introducing AI and digital technology.
State of the CIO Report – Foundry
This report from Foundry is a survey of 800+ global IT leaders and 250 LOB leaders, is now in its 23rd year and whilst not exclusive about procurement IT, it is worthwhile understanding the broader context, especially if you want to put a business case up! There are some interesting stats that jump out. 43% identified that automating business processes are the top priority, and 32% stated that implementing or creating AI apps are top. There is a strong drive for cybersecurity investment increases, and increasing operational efficiency are the top 2 business priorities driving IT investment. The expectation from 54% is an increase in budget, with 35% saying it will remain the same as last year. Interestingly 63% of CIO stated that they plan to work closer with LOB leaders over the next 12 months.
Voices of Sourcing - Keelvar
In our final report, we have a Voices of sourcing survey report from Keelvar. IN line with the earlier reports both from this month and last, Supply chain disruption and market volatility and inflation were major challenges for the previous 12 months, and the drive for 2024, will be all about cost management and efficiency.
The pressure to increase savings is getting bigger, and procurement teams, according to the report, are looking to automation non-strategic spend, and optimising strategic spend to help deliver. It was interesting to note the 49% looking at initiatives such as dynamic discounting, as working capital featured highly on the business priorities, but sometimes doesn’t make it to procurement priorities.
Digital transformation then is at the top of procurements agenda, echoing reports from KPMG, Hackett, and others.
As always reach out to discuss more, links to the reports are included and always happy to hear your thoughts!
