A busy month (well 2 months - as this includes some in december as well)
Global Gig Economy – SIA
SIA estimates the global gig economy was worth USD 3.8 trillion in 2022. SIA treats the gig economy as synonymous with contingent work.
Breaking this down a little more into the subsets:
- Temporary workers assigned through a staffing agency, make up 14 % of the total,
- Temporary workers sourced directly, make up 24 % of the total,
- Self-employed with no employees (independent contractors), is by far the largest category of contingent work responsible for 50 % of the total,
- Statement of Work (SOW) consultants employed by consulting firms, make up 10% of the total.
- Temporary workers via talent and work services platforms make up, less than 1 % of the total.
The report also goes into more detail on a country-by-country assessment of the market size per type of worker.
Procurements Value Measurement – Hackett
This study identified the trends in value measurement and what elements of value procurement is tracking today. In news that shocks no one, year on year cost savings, and cost avoidance are the top 2 elements in a procurement scorecard!
What is interesting, is that of those savings, on average 50% hot the bottom line for direct, and 40% for indirect. As the report states, ensuring that the savings are realised (and real) is essential for credibility for procurement teams. So, thinking about what makes a saving and how they are treated is therefore important.
Price reduction is largely taken (97%) as a saving (though 3% identified as cost avoidance). Interestingly only 59% identified early payments, rebates as savings, with 17% as cost avoidance and nearly a quarter not counting them as savings. Whether this is because there is no guarantee that they will be taken or not is interesting. Working capital is basically excluded as a savings calucalation with 79% not counting them as saving.
Demand Management, touted by many to reduce costs (it is) is however excluded (largely) from savings calculations with 65% not counting it as a saving. This is also true for revenue uplift following collaboration with suppliers, with 86% not counting it as a saving.
Savings from RFx to final price are largely cost avoidance (or hypothetical savings as one enterprising CPO once said to me!). Changing spec, is just over 50% stated saving, with around a quarter cost avoidance (again the number that don’t count this as a saving is interesting
56% don’t do anything after savings are identified, ie no further measurement of hitting the bottom line, and being realised. With just under a quarter verifying that it does hit the P&L and just over 20% reducing budgets accordingly
Gartner Predictions 2024
This paper is about technology’s impact on procurement, and the “predictions” go a little longer than 2024 but are worthwhile considering. Knowing where technology is going, its impact on how work is getting done, who is doing it, and what skills will be required are critical for (CPOs) to build sound long-term staffing plans. It is clear that AI and automation will change the nature of how work is done, and to that end when planning, Gartner suggests the following assumptions/predictions:
- By 2026, virtual assistants and chatbots will gain traction, being used by 20% of organizations to handle internal and vendor interactions.
- By 2026, advanced proficiency in data and technology competencies will be equally as important as social and creative competencies (i.e., soft skills) for procurement staff.
- By 2027, 40% of sourcing events will be executed by non-procurement staff.
- By 2027, 50% of organizations will support supplier contract negotiations using AI-enabled contract risk analysis and redlining tools.
- By 2029, 80% of human decisions will not be replaced, only augmented by GenAI, as humans will maintain their comparative advantages in ingenuity, creativity, and knowledge.
The 2023 Gartner Balancing Sustainability and Resilience Survey found that 53% of respondents reported their supply chains were facing disruptions 50% of the time or more. Buying organizations that have supplier risk management technology can monitor and analyze supplier risk events in real time or near real time.
Supplier risk management is a key competitive advantage. Enhanced supplier risk management enables sourcing and procurement professionals to impact a company’s continued success. Supplier risk comprises a variety of risks, however the paper identifies the 7 below as the most common categories:
- Risk Event Monitoring — Refers to supply chain disruptions caused by weather, geopolitical events, and other hazards.
- Financial — Identifies the financial viability of a supplier.
- Sustainability/ESG — Enables companies to track and manage corporate goals, improving their impact on social and environmental goals.
- Performance — This refers to the creation and management of supplier performance dashboards that can track many metrics, including risk, to provide a holistic supplier view.
- Compliance — Refers to regulatory and compliance mandates often managed by a category of software called third-party risk management.
- Capacity — Refers to what end users often cite as a top risk when mentioning suppliers.
- Cyber-Risk Monitoring — Refers to the ability to evaluate a supplier’s or prospective supplier’s designed cybersecurity maturity, current cyber-risk posture and cyber hygiene effectiveness.
Beroe/GEP Category Forecast 2024
These are both good resources that detail market trends in differing industries to inform category strategies for direct, indirect and services especially as many procurement teams look to increase their internal and external collaboration, having this market analysis is a great input for those strategies.
Whilst the beroe paper, is pure categories with commentary on the specific category, the GEP paper does have some broader context such as the geopolitical and supply chain disruption and factors that underpin many of the category analysis. As such, in my opinion they should be read together.
SIA Must Haves
This article is a summary from a webinar held by SIA exploring trends from 2023, that will continue into 2024 for external workforce. They identified some key improvements for each of the subsections within external workforce. One of the biggest areas that was identified for improvement was SOW management. Issues identified were: Rogue spend, scope creep, supplier selection without competitive bidding, headcount difficulties and missed onboarding compliance are risks that come with letting SOW projects “do their own thing.”
This was similarly identified in the soon to be released Art of Procurement study on services procurement that SAP sponsored and worked with.
A good read for the wider external workforce when planning external workforce priorities.
AQPC Priorities
This report (350+ respondents) is a cross industry report at all aspects of supply chain priorities for 2024. It starts by looking at broader trends and identifies, big data and analtics as having the biggest impact over the next 3 years followed by digitisation, and data management (all around 60+%). The report also makes the point that compared to 2023, the proportion of respondents anticipating major impacts from those top trends has increased substantially, meaning that these three will have an outsized impact on the next 3 years.
Over half of the respondents (55 percent) expect their organization’s budget for supply chain management tools, technology, innovation, and initiatives to increase for 2024.
Overall, sourcing and procurement is the second top area of focus for the broader supply chain (after supply chain planning) and within sourcing, the op focus area was identified as Supplier Relationship Management (32%) followed by risk management.
When we isolate down to priorities (ie the things that will deliver the focus areas) we see that there is a reliance on technology as the top 3 are all related. implementing new technologies and capabilities, standardizing processes, and identifying and implementing best practices.
Compared to 2023, a larger proportion of organizations are planning to put in place new technologies and capabilities (51 percent in 2024 vs. 38 percent in 2023).
Improving supplier relationships was 4th overall at 40% and visibility into lower tier suppliers was tied at 40%. I see this trend as the need to drive digital and to automate to create the time and space to concentrate on the supplier relationship improvement.
KPMG Global Procurement Study
This 400-person study was conducted during the middle of last year with 400 procurement leaders and has some interesting points emerging from it.
The report identifies that most procurement teams have developed roadmaps for their development that mostly covers 1-3 years (84%) and over half have a plan that covers 3-5 years. The short term plans identified SRM (70%) as a priority, followed by 66% for strategic sourcing.
Longer (3-5) years the focus areas move to Sustainability (56%,), strategic sourcing and value generation (54%). Whilst this means that the short-term concerns and priorities remain, the longer-term emergence of sustainability is expected to grow.
According to the report implementing tech, followed by rationalising the supply base and improving business partnering are the top 3 agenda items for the next 12 months, however these move down one spot for the longer term as ESG moves to the top activity being planned.
The types of tech that procurement expects to have the biggest impact in the next 12-18 months is predictive analytics, followed by Gen AI, these positions are reversed in the longer term. In a throw to the economist impact paper last year, the most challenging aspect of supplier management is performance management, and specifically getting the right data about performance management.
Procurecon CPO report
This survey and report, sponsored by Icertis, is from 100 respondents mainly in US and Canada. Similar to the other reports reviewed the top 3 focus areas are:
- Process improvement
- Supply chain disruption
- Tech implementation and transformation
In order to meet these focus area, the high priority activities are, reducing costs (53%), 46% identify ESG are a high priority with increasing speed and efficiency also at 46%.
The technology identified that would help drive that speed and efficiency (and deliver on the focus areas) include digital tools to reduce manual data entry (32%), process orchestration across systems (28%) and data enrichment (27%). Therefore, the actual tech that was identified was digital procurement platforms (34%) and CLM (27%)
GEP Outlook
The GEP outlook, is as the title suggests GEP’s thoughts on what the next 12 months (and in some cases longer) will look and the impact on procurement. The main headlines are:
Supply chain volatility is declining, specifically in relation to shortages in the supply chain. Whilst I agree that when looking at the pure numbers there is excess supply in the broader supply chain, I would suggest though that the geopolitical uncertainty will impinge on supply chain stability.
Digital and AI arrive. When we look at the surveys recently completed, and reviewed in this report, digitisation is certainly one of the top priorities and the possibilities that AI present are clearly intriguing.
ESG is back (or did it leave us?) 2023 saw that ESG was susceptible (in terms of momentum) to economic headwinds, now that these are easing then expect to see the re-emergence of ESG as a priority, especially in the longer term.
Talent. Its perpetually on the agenda, however the skills needed in a digital world are radically different from traditional procurement skill sets. Availability of talent and skill sets, means that these strategies need to evolve.
The report also goes into some of the global business and macro trends that will impact organisations and can be read in tandem with the category outlook from both GEP and Beroe to give a broader understanding.
As always reach out to discuss more, links to the reports are included and always happy to hear your thoughts!
