Procurement may be moving online and into the digital age, but it’s back to the traditional basics this year for many CPOs, according to analysts.
Procurement for 2016 is all about a balancing act, says The Hackett Group in a new report examining how chief procurement officers will be handling the forces at play impacting their businesses this year.
This balancing act may be referring to the task for CPOs of finding the middle ground between reducing costs and becoming a more strategic aspect of the enterprise, but The Hackett Group’s report also uncovers a different kind of balancing: the need for the procurement function to utilize Big Data analytics to achieve their business goals, with the need for this function to turn to more traditional procurement strategies.
“For 2016, companies are expecting to see business uncertainty and risk increase, along with greater struggles to grow revenue,” said The Hackett Group Global Procurement Advisory Practice Leader Chris Sawchuk in a statement last week.
“At the same time, procurement leaders need to balance this with other, more strategic priorities, like becoming a better strategic business partner,” he added.
Sawchuk noted that, according to research, procurement budgets are only expected to grow by 1.1 percent this year; staffing, meanwhile, is expected to increase by just 2.2 percent.
“So, procurement can only afford to fund its highest-priority initiatives,” Sawchuk explained.
The Hackett Group spoke with major corporations across the U.S. and elsewhere and found a few key patterns among procurement executives. With limited budgets and manpower, CPOs are likely to place their resources and efforts in several key areas.
These executives identified becoming a trusted advisor, becoming more agile, increasing their influence on overall corporate spend and taking advantage of supplier innovation as their key priorities this year.
But reducing costs and becoming a more strategic component within an organization don’t necessarily go hand in hand. “Finding the right balance between these companies’ conflicting goals is one of procurement’s greatest challenges,” the report concluded.
According to The Hackett Group, Big Data analytics can provide procurement teams with a high-tech way to achieve traditional goals this year.
“Becoming information-driven should be a primary focus area for procurement; it must develop the tools and skills that will allow staff to apply market data and intelligence to decisions on spending and sourcing strategies,” the report stated.
“However, over half of the Key Issues Study respondents lack a formal market intelligence program or are in the very earliest stages of adoption,” it continued.
Just 3 percent of survey respondents said their intelligence programs are fully integrated into their processes.
CPOs are well-versed on the potential of business intelligence strategy, however.
“One clear differentiator we saw in the research this year was the recognition of the value of improved market intelligence,” Sawchuk added in the statement. “Procurement leaders are realizing that higher-quality information can help them drive greater business value.”
Researchers found that predictive analytics and forecasting tools were cited by 65 percent of the executives surveyed as having some of the greatest impact on the procurement function over the next decade.
Nearly half cited cloud computing, and nearly one-third cited cognitive computing and its integration into procurement software.
“Taking advantage of the value of advanced analytics requires creating new technology roles, aligning agendas and elevating the overall level of institutionalized technology knowledge,” wrote The Hackett Group. “Procurement leaders who have not already started down this path should use the high-stakes competitive environment of 2016 as a burning platform.”
Sawchuk added to this advice to CPOs, pointing to this year’s potential to get procurement processes on a new level of sophistication — even if procurement executives’ goals remain more traditional, like cost savings.
“Big Data has been a game-changer when it comes to customer analytics, offering an unprecedented ability to quickly model massive volumes of structured and unstructured data from multiple sources,” the executive said. “But procurement’s lack of maturity in the market intelligence is a significant obstacle that must be overcome.”