THE HACKETT GROUP RESEARCH ALERT
- As Business Uncertainty Rises, Procurement Faces 2016 Balancing Act: Reduce Costs While Becoming a Better Strategic Business Partner
- Key Issues Research Shows Budgets and Staff Expected to Rise Slightly in 2016; The Hackett Group Recommends That to Improve Agility and Reduce Cost, Procurement Harness the Value of “Big Data” and Control Tail Spend
Procurement leaders expect operating budgets and staffing to increase slightly in 2016 as they attempt to balance the need to reduce costs with the desire to become a better strategic business partners and other priorities, according to new Procurement Key Issues research from The Hackett Group, Inc.
Increased business uncertainty and risk are driving a resurgence in traditional cost reduction strategies, according to The Hackett Group’s research. At the same time, the research identified critical development gaps in four key procurement strategy areas: becoming a better strategic partner to the business; increasing spend influence; improving agility; and tapping supplier innovation. These are seen as important targets for capability development.
To improve agility, The Hackett Group’s research recommended that procurement organizations become more information-driven and harness the value of “big data.” Unfortunately, the research found that over half of the study respondents currently lacked a formal market intelligence program or were only in the earliest stages of adoption. Study respondents also identified predictive analytics and forecasting as the trend with the greatest transformational impact for procurement over the next decade.
Finally, The Hackett Group’s research recommended that to unearth new sources of savings, procurement examine tail spend – the 20 percent of spend that is spread thinly across up to 80 percent of its suppliers. This is an area where most procurement organizations have not focused heavily. But with effort, The Hackett Group estimates that savings of 3-5 percent for less mature sourcing organizations is possible, in part by identification of high-dollar maverick spending that should have been strategically sourced.
A complimentary version of the research is available for download, following registration, at this link: http://bit.ly/1VViQ6v.
According to The Hackett Group Global Procurement Advisory Practice Leader Chris Sawchuk, “For 2016, companies are expecting to see business uncertainty and risk increase, along with greater struggles to grow revenue.
So the pressure to reduce costs is increasing. At the same time, procurement leaders need to balance this with other more strategic priorities, like becoming a better strategic business partner. This is challenging, because for 2016, procurement operating budgets are expected to increase by just 1.1 percent, and staffing will only grow by 2.2 percent. So procurement can only afford to fund its highest-priority initiatives.
“One clear differentiator we saw in the research this year was the recognition of the value of improved market intelligence,” said Mr. Sawchuk.
“Procurement leaders are realizing that higher-quality information can help them drive greater business value. Big data has been a game changer when it comes to customer analytics, offering an unprecedented ability to quickly model massive volumes of structured and unstructured data from multiple sources. But procurement’s lack of maturity in market intelligence is a significant obstacle that must be overcome.”
The Hackett Group’s 2016 Procurement Key Issues research is based on results gathered from executives from nearly 180 large companies in the US and abroad, most with annual revenue of $1 billion or greater.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy recognized as the leading enterprise benchmarking and best practices implementation firm to Global 2000 companies. Services include business transformation, enterprise performance management, working capital management, and global business services. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement, and information technology, including its award-winning Oracle and SAP practices.
The Hackett Group has completed more than 11,000 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 86% of the Fortune 100, 87% of the DAX 30 and 51% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm’s benchmarking metrics, best practices repository, and best practice configuration guides and process flows, which enable The Hackett Group’s clients and partners to achieve world-class performance.