3 Trends That Are Driving Procurement Transformation
Digitalization, Procurement, Trends and Technology, Source-to-Pay, eProcurement
This year’s ProcureCon Benchmarking Report is out. It gives valuable insight into the key procurement challenges, goals and trends – after all, hearing the views of 100 European Chief Procurement Officers (CPOs) should provide some insights into where the market is headed.
The topmost sentiment after reading the report is that the pace of change and transformation are increasingly obvious in procurement. For a quick summary, I picked three trends that stuck out to me from the CPOs’ answers, and, I feel, reveals some general truths about procurement transformation.
1. Evolving priorities: from cost reduction to increasing efficiency
If you would’ve asked any procurement professional about their top priority a couple of years ago, the answer would have undoubtedly been cost reduction. While cost-cutting has held on, the data from this year's report indicates that CPOs have an evolved view of their priorities.
When the respondents assess the biggest benefits to ge gained from digital procurement technology, ‘cost reduction’ ranks number four, and the top place goes to ‘increasing efficiency’, before ‘innovation’ and ‘enabling growth’. As automation has already streamlined procurement processes and started eliminating the labor-intensive routines, procurement departments must feel they have more time to focus on the strategic tasks that add value to business.
The CPOs’ focus has turned to a low total cost of ownership (TCO) when it comes to implementing an eProcurement solution. According to the responses, it should, first and foremost, be easy to integrate and easy to adopt to be quickly up and running and providing immediate value.
2. Focusing on simplification: letting go of basic commodity groups
The one result I found most surprising in the report was the fact that 45% of the interviewed CPOs expressed significant interest in joining a marketplace where basic commodities would be available at pre-negotiated prices, terms, and conditions. This ties in nicely with the pursuit of increasing efficiency: CPOs are willing to forgo sourcing and negotiation, i.e. the basics of procurement, in the commoditized categories, as they feel there is only little value to gain there.
Digitalization may be driving procurement transformation in the B2B world and is surely making supply chains simpler and more agile, but we clearly still have work to do. What do you make of the fact that 36% of respondents admit that they don’t have electronic catalogs from all of their key suppliers? It is hard to be fast and efficient in purchasing without real-time product data. Perhaps this is a motivating factor behind the desire to leapfrog the typical procurement setup and simply join an established marketplace.
3. Deepening collaboration: taking advantage of supplier knowledge
When asked what will their business most need from future suppliers, CPOs replied with things like quality and continuity, locality, and, of course, best price. No surprises there. But what’s worth highlighting in my opinion is that almost one in five CPOs (18%) cited ‘access to innovation’ as the most important demand they make from suppliers.
Recently the value of supplier knowledge has been underlined in many other surveys as well, which is a clear sign of a desire to deepen the buyer-supplier relationship towards more of a partnership. In the ProcureCon report, most CPOs estimate managing supplier performance is either very or extremely important in the procurement of indirect goods and services. It goes to show how vital suppliers and supply chains are to organizations today, and how working closely with suppliers and leveraging their competence is connected to the success of the entire business.
It looks like procurement organizations still have their work cut out for them. The contradictory results on how supplier information is kept up to date – 32% of respondents stating their supplier information is accurate and up to date with self-service options, while almost an equal share reports that they struggle to maintain accurate data with similar systems – show that the culture of collaborating with the suppliers is still evolving.
There is plenty more nuance to the extended report describing the current state of procurement transformation. It’s a good read for anyone who is interested in knowing what’s on top of the CPO hivemind. So go ahead; download your copy of the ProcureCon 2018 Report for free and let me know what you make out of the results. You can find me on LinkedIn or Twitter.
Rowan has more than 10 years of experience in the purchase-to-pay arena. During this time, he has managed the go-to-market for a diverse set of portfolios including Accounts Payable Automation, B2B Networks, Financing Services, eProcurement and Product Information Management.
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