However it is regarded as more strategic than four years ago, according to Jaggaer ©  Westend61/Getty Images
However it is regarded as more strategic than four years ago, according to Jaggaer © Westend61/Getty Images

Procurement 'heavily weighted towards operational functions'

posted by Andrew Allen and Will Green
16 March 2021

Procurement is still largely operational in nature but is increasingly shifting towards becoming a strategic function, according to a survey of CPOs.

The report, by consultancy IPG Group and spend management technology company Jaggaer, surveyed 290 CPOs, directors of procurement and other senior executive-level decision makers between July and October 2020.

The report found that there were more than three times as many procurement employees engaged in operational functions as in strategic tasks.

Overall responses indicated that procurement was becoming increasingly strategic, even though operational concerns dominated the day-to-day lives of procurement executives.

“Procurement remains heavily weighted towards operational as opposed to strategic functions,” said the report, but it “identified an ongoing shift towards the strategic”.

When it came to costs 7% of participants were achieving annual cost reductions of 5% or more. Nearly half the panel was seeing year-on-year price increases.

Half (55%) of participants said they had digitised key processes, 43% had developed big data applications and 68% had implemented SRM.

Two-fifths (43%) said they had not implemented e-sourcing. Two-thirds had digitised order management while 70% had implemented or partially implemented procure-to-pay (P2P) technology. Two-thirds said they carried out spend analysis.

Jaggaer CEO Jim Bureau said: “The main positive from this report, in my opinion, is that procurement is viewed more strategically than four years ago. Heads of procurement have moved up the hierarchy. This gives procurement the visibility and proximity to the leaders of the stakeholder functions that they need to push for change, for investment, and for project sponsorship.”

The average number of suppliers managed by a strategic procurement professional increased from six in 2016 to 16 in 2020, said the report.

“This would seem to be a blip caused by Covid-19 because it is unsustainable for any length of time,” said Carsten Vollrath, founder of IPG Group.

“2020 was of course an exceptional year, consequently some of the results have been influenced by the Covid-19 effect.

“One likely impact is that more strategic approaches to procurement technology may have had to take a backseat while companies digitalise those functions that enable them to weather the storm.”

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