Organisational resistance to change is the biggest barrier to procurement transformation, according to a report.
A survey forming part of Hackett Group’s latest Procurement Key Issues Study found almost half (42%) of respondents cited organisational resistance, followed by lack of critical skills, (39%), data related issues and organisational complexity (both 37%).
Complexity of technology and processes, inadequate funding and resources, lack of commitment from executives within the business and talent constraints within IT were also mentioned as hurdles.
The report said procurement faced the twin challenges of reducing external and internal operating costs while at the same time adding value from new technologies. It said modernising procurement application platforms and driving better analytics to improve spend influence and enhance value were key focuses for 2020.
For a long time the priority for procurement was to reduce costs but this has shifted to second place, the report said. The new top priority is improving cost efficiency and procurement operations, with the need to become a trusted advisor in third place.
Business leaders are increasingly recognising that the rise of digitalisation will change future business models, said Hackett, which surveyed an undisclosed number of procurement executives at global midsized and large enterprises.
Their responses identified five areas where procurement has critical capability gaps that need to be addressed in 2020.
These were: improving procurement’s agility; becoming a trusted advisor to the business; aligning skills and talent with business needs; modernising application platforms; and improving analytical and reporting capabilities.
More than half (55%) of respondents, when asked what steps procurement in their business was taking to enable advanced analytics, said they were improving data quality and accessibility.
Half (50%) said they were improving master data management, while 47% said they were enabling self-service analytics, and 45% said they were training talent in data analytics.
Other steps being taken included investing in advanced analytics technologies, hiring data analytics talent in procurement and establishing analytics centres of excellence.
The report also noted that outsourcing of procurement processes had traditionally been a means of reducing costs but more recently had changed to becoming a way to supplement skills.
When asked what their primary drivers were for outsourcing procurement in 2020, 26% said it was to free up in-house resources to make way for more value-added roles.
One in six (16%) said it was to increase flexibility of resources, while an equal proportion said it was to access capabilities externally, and 13% said it was to reduce costs.
“Companies are simply demanding that procurement deliver value in new ways. Economic uncertainty is pushing companies to be more agile, and procurement must do the same, becoming a more cost-effective and value-driven function,” said Hackett Group Research director Laura Gibbons.
“We also see digital transformation, including technology application modernization and analytics, as an avenue to drive cost efficiency and value to the top of the procurement agenda,” said Gibbons. “Procurement organizations have made significant investments in these areas over the past few years, and many are mid-way through their transformation. corporate leaders are now looking to see greater ROI.”
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