This month in his exclusive PASA column ‘Gordon’s Window’, Gordon Donovan, VP of Global Procurement Research at SAP, provides a handy expert summary of August’s global procurement research.
Save your own time reading research when you can get the key takeaways in one place!
This month, we seem to have two main themes: Generative AI (Gen AI), its promise and trajectory, with the position on the annual Hype Cycle moving forward at a rapid pace.
There may be disconnects in these types of reports vs. practitioner application, with some reports stating the pace of change and adoption is a little slower due to data and also risk aversion.
The other area is SRM. The benefits have been stated several times before, but the importance is interesting.
I noted in this year’s Economist report the general falling of importance, which I think is due largely to the inflation issues still impacting many (when cash crunches come in, many other things go out!).
But what’s fascinating to me is the supplier’s view of this, and there are two stats which jumped out:
- From World CC: 77 percent of suppliers don’t believe procurement when they talk about relationships being important
- From HICX: suppliers stated more than 10 systems are required to service a customer
It will be interesting to see how these are addressed if SRM is to deliver on its promise.
HICX: The Supplier Experience Survey
Our first two reports look at the buyer-seller relationship.
First, from HICX, their study covered 1000 suppliers who supply mainly large enterprise customers. There were some very interesting findings.
- 48 percent said their most important customer could improve its communication significantly
- 31 percent have to log into more than 10 systems to do business with them
- 61 percent said their most important customer sends them too many information requests
- 46 percent said their most important customer can be unpleasant to work with
All in all, this identifies how easy some companies are to do business with, as opposed to others. It should give some ideas about what goes into supplier surveys when procurement carries them out or areas to look into to see how they compare.
Speaking of which….
World CC: Enhancing Collaboration Through Effective Relationship Management Report
This report covers some 400 organisations on both the buy and sell side, supplemented with interviews and discussion groups.
As usual from World CC, it’s an interesting read and a well carried out piece of research.
According to the report, there is broad consensus that effective relationship management and increased collaboration in B2B settings are key drivers for mutual success.
80 percent of suppliers and customers confirm that when relationship management is effectively executed, it yields substantial benefits.
In spite of clear benefits, there is a notable shortfall in the execution of relationship management.
This is recognised by most of the buyer community and contributes to a high degree of scepticism in the supplier community, where 77 percent question the sincerity of customers truly wanting to collaborate.
77 percent…wow! That is a concern. It’s basically saying 77 percent of suppliers don’t believe procurement in regards to broader discussions around longevity and building the relationship, which ultimately leads to a lack of trust.
This scepticism is driven by past experience, and it shows the work that procurement will need to do to continue to build that trust.
It’s interesting that in a separate piece of research that SAP sponsored with the University of Tennessee, the five dimensions of trust included communication and recognising the differing viewpoints of both parties.
Some other key takeaways of the study include 55 percent of respondents stating that they actually carried out a voice of the supplier survey (see the HICX report for some ideas on questions to ask!) and 40 percent of buy side stating they didn’t do any SRM activity.
CIPS: Global State of Procurement & Supply 2024
This is CIPS’ first global procurement study and draws on information from 122 responses. Whilst a little UK centric (45 percent of respondents), it still presents some interesting findings.
Biggest spend influence areas are still the typical indirect spend, with over 70 percent identifying office supplies, FM, professional services, IT, MRO capital and travel as the major areas of spend influence.
Interestingly, recruitment and contingent labour came close as well, with about 65 percent identifying procurement’s involvement there.
From an operating model perspective, 68 percent stated that the function was either centralised or centre-led, and headcount is forecasted to remain relatively static.
35 percent identified that their organisations planned to invest more in AI, with 30 percent investing in cyber security measures.
Gartner: Hype Cycle
This year’s Hype Cycle has been released and the continual rise of Gen AI continues. In fact, according to the Cycle, the Plateau of Productivity (the part at which it becomes mainstream and deployed fully) is achievable in two years.
Gartner’s Hype Cycle for Procurement and Sourcing Solutions evaluated more than 20 technologies impacting the procurement landscape in 2024.
This year, many core procurement technologies, such as source-to-pay suites and supplier information management, are climbing the Slope of Enlightenment toward the Plateau of Productivity, or mainstream adoption.
All of these technologies are expected to reach the Plateau within two to five years.
Some notable changes include Conversational AI being identified as unable to reach the end stage as Gen AI will overtake it and deliver its use cases, and intake and orchestration being separated and identified separately on the Cycle.
Gartner defines orchestration as “platforms are decision augmentation tools that prescribe and execute end-to-end source-to-pay process workflows to fulfil specific business outcomes” and intake as “improves end-user experience by navigating preconfigured process workflows”.
Overall, I personally think the Hype Cycle is a decent indicator of where broader tech deployment is heading.
Gartner: Procurement Moves Quickly to Experiment with Generative AI
In the next few papers, we will look specifically at AI in procurement, especially as the Hype Cycle sees it as maturing within the next two years!
In this paper, Gartner looks at the plans for use cases, benefits and expected adoption of AI in procurement.
A majority of procurement organisations have plans to implement at least one use case of Gen AI over the next 12 months. Despite concerns around data, risk and unproven ROI, plans for pilots proceed with 15 percent of organisations having already implemented.
In terms of benefits, the report identifies that procurement leaders expect a 22.7 percent increase in productivity and 12.5 percent in cost savings over the next 12-18 months from Gen AI, with use cases planned for sourcing and CLM, supplier information discovery and management, and communications.
Procurement Leaders: AI-Powered Procurement: Decode, Deploy, Deliver
Procurement leaders broadly agree in terms of the progress made in deployment, with 53 percent having preliminary exploration and just under 7 percent already deploying.
However, a word of caution springs from the change, with the report stating that the pace of change is slow, with many functions reporting that they are being held back by problems with their data, funding and skills.
When they do change, the benefits are lower (than Gartner’s thoughts) in terms of non-productivity, with 36 percent identifying no impact on effectiveness and 56 percent reporting limited impact.
The use cases differ slightly too, with spend analysis, market intelligence and category management leading the way in terms of systems with an AI component.
AQPC: Robotic Process Automation in Supply Chain: 2024 Quick Poll
In other non-Gen AI news, APQC gathered insights from 310 supply chain professionals about RPA (Robotic Process Automation) within their supply chains and here is what they found.
Organisations are prioritising the implementation of RPA across all areas in the supply chain. 20 percent of sourcing and procurement organisations have already implemented, with 62 percent likely to implement.
Benefits include improved quality (61 percent), improved efficiency (56 percent) and reduced risk (48 percent)
Hackett: Gen AI & Operating Models
According to The Hackett Group’s analysis, Gen AI can yield a 47 percent reduction in procurement function costs and a 54 percent human productivity increase over five to seven years.
With Gen AI being a driving force to rethink the operating model, this has the potential to remove manual tasks and transactional activity, freeing up resources to focus on more strategic, value-added activities.
It’s this refocus, according to Hackett, that makes those changes to the function costs and, therefore, productivity as well.
As always, reach out to discuss more. I’m always happy to hear your thoughts!
