Better cost efficiency is top procurement priority

6 February 2020

Improving cost efficiency has moved to the top of procurement professionals’ agenda for 2020, according to a study.

It has overtaken customer focused improvements, which was the number one issue in 2018-19 (and has has fallen to eleventh place this year), to take the top spot in the annual Key Issues Study by consultancy The Hackett Group. Reducing purchasing costs, building strong relationships with business partners, and modernising technology came next.

The study found over half of companies had cost optimisation initiatives as part of their 2020 agenda.

However, the research said “cutting cost is not enough” because digital changes and increasing competition meant companies needed to focus on multiple initiatives and finding value in new ways.  

“Better analytics, increasing spend influence, and improving on value delivered from category management” are also areas of focus for procurement in 2020, said the research.

The study highlighted that automation will continue to grow over the next three to five years and will be “critical” to improving cost efficiency in procurement this year. Process automation was described as “a key enabler” of functions such as payments, accounts payable and spend analysis.

Transformation initiatives related to data, technology and digital were the next three most prevalent after cost efficiency in 2020, for the first time, said Hackett.

The study found that analytics and information management are a key focus for procurement, with over 50% of organisations working on improving data quality and management.

Meanwhile, procurement technology failed to meet expectations in 2019, with half of medium-to-large enterprises saying robotic process automation fell short of expectations. 

Hackett said next-generation cloud-based systems were projected to grow by nearly 25% in 2020.

The top 10 issues for 2020 are:

1. Improving cost efficiency

2. Reducing purchasing costs

3. Becoming a trusted business advisor

4. Modernising procurement technology

5. Increasing spend influence with strategic sourcing

6. Improving analytical and reporting capabilities

7. Aligning skills and talent with business needs

8. Improving procurement agility

9. Obtaining more value through category management

10. Improving performance measurement capabilities

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