Every year, source-to-pay technology firm Zycus releases its Pulse of Procurement report, a survey of procurement professionals to understand where they are in their efforts to strengthen their organizations' procurement processes and to explore changes in how procurement fits in the overall enterprise.
This year, the 2017 Pulse of Procurement report is a tale of progress, but also of the ongoing struggle companies and their procurement teams face to meet business goals. Richard Waugh, vice president of Corporate Development at Zycus, likens the report’s findings as demonstrating both headwinds and tailwinds that procurement teams experience today.
“There are both encouraging signs and warning signs on the horizon,” Waugh recently told PYMNTS. “For me, the tailwinds are that, overwhelmingly, procurement leaders feel that the C-Suite believes they’re a strategic contribution to the business. And, more importantly, they seem to be putting their money where their mouth is.”
Indeed, Zycus’ survey found that 38 percent of respondents have bigger budgets this year, and nearly the same said they have bigger capital budgets. Labor budgets are up, too, reflecting the organization’s confidence in using resources to support the procurement function.
“That’s encouraging,” Waugh said of the news. “Those kinds of tailwinds, if you will, show business leadership believes in procurement, and they’re investing in procurement.”
He also pointed to the finding that procurement professionals continue to have what he described as “bullish goals” when it comes to meeting cost savings goals in payments. Cost savings was cited as the number one strategic area of focus for procurement officials — and will probably continue as a top priority moving forward, Zycus said.
“But there’s a balancing act; there are headwinds as well,” Waugh added, reflecting on the report’s data. Specifically, he said, there are a few lackluster key performance metrics in the report that suggest the procurement department continues to struggle to meet its cost savings goals, like spend under management and the ability to drive compliance. “Both of these are relatively low,” he said.
That finding is particularly interesting, considering the majority of professionals surveyed said they have implemented some type of smart technology to boost procurement performance.
For instance, 68 percent of respondents said they have a spend analysis solution in place, while 67 percent said they have a contract management solution deployed. Most respondents are also using electronic sourcing, procure-to-pay, project management, request management, savings tracking, supplier performance and supplier network tools, too.
“In all cases, they’re better than 50 percent adoption,” Waugh said. “But the satisfaction with the solutions they have is relatively low.”
The ability for each of these solutions to integrate and communicate with each other can be a major source of satisfaction for procurement executives, the research suggests. When these solutions are implemented independently, it creates silos that disrupt the flow of data from one platform to the next. State-of-the-art solutions, however, provide a suite of these services that are all interconnected.
“Lower satisfaction is directly correlated to the fact that it’s more likely that people that have a solution are using some kind of legacy application that’s homegrown, as opposed to best-of-breed,” the executive explained.
Luckily, Zycus found, significant portions of survey respondents said they are planning upgrades, and as investment in procurement solutions rises, so does the ability for a procurement department to implement the type of integrated solutions necessary to achieve those goals like cost savings and beyond. According to the report, those goals certainly are reaching outward, a sign that Waugh said reflects the fact that procurement is becoming a strategic part of a bigger, broader whole, whether through collaborating with other areas of the enterprise, or reaching out externally to vendor partners.
Adoption of procurement smart technology that can aggregate data analytics are critical, noted Waugh. The need for a better grasp on data is clearly demonstrated in the report, he said.
Zycus compiled a list of top pain points for procurement executives. The top two are lack of time and resources, and insufficient process standardization, which Waugh said is quite typical. But third on the list, cited by 30 percent of respondents, is poor information and data quality, followed by poor visibility into supplier performance, and lack of compliance in the fifth spot. Issues like data in disparate sources and unstructured data analytics reporting also made the list, but many of these problems, Waugh said, have data at their core.
“Fundamentally, the respondents are saying they have to spend too much time on lower-value activities, like gathering data and trying to make sense of it, instead of making strategic decisions,” he explained. “At their core, [these pain points] are all around the veracity of data — how do you have a single source of truth?”
As companies look to address these pain points through investment in better procurement tech, Zycus’ report suggests procurement executives are also working to strengthen their positions within the company as a whole. While cost savings and process efficiency are the top two areas of focus for procurement officials this year, collaboration with other functions, supplier performance improvement, and supply-risk management are also top of this list. There is a common factor among these priorities, Waugh said: looking outward.
“They're becoming more of that trusted advisor to the business, more of a business partner,” he said of the evolving role of the procurement department. “They’re less isolated, and they recognize that need to get outside of the procurement group and really be a collaborator with the business, and more engaged with the external supply base as well.”