Gordon’s Window: August research

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!

Read on to find out how organisations are handling sustainability imperatives in the face of disruptions and cost pressures, the benefits realised for those who have already implemented AI, and how procurement functions can operate with agility and speed.

Hackett: Digital World Class Procurement

The Hackett Group’s annual report reviews and quantifies the impact that Digital World Class®  procurement functions have over their peer group. 

Hackett defines Digital World Class organisations as those that achieve top-quartile performance in business value (a composite of stakeholder experience, digital enablement and traditional effectiveness metrics) and operational excellence.

The report states that Digital World Class procurement organisations run at a 21% lower cost than their peers – a $6 million advantage for a typical $10 billion enterprise – with 32% fewer full time equivalent (FTE) staff. 

Just as significant, they deliver greater value – for example, 96% higher spend cost reduction savings. As a result of this, they are 86% more likely to be perceived as a valued business partner.

When it comes to operating costs, most of the reductions sit in the labour element, whereas the increase is in technology. 

As for the labour element, there is less in operations, compliance and sourcing as teams have automated and let their digital solutions deliver the value. However, there is an increase in planning and strategy FTE.

So, what do you get for digitising beyond operating with a 21% cost and 32% FTE advantage?

Hackett dissects this into these five areas:

• Effectiveness – from cost savings to lower saving leakage
• Experience – nirvana for procurement is to be considered a business partner and be aligned to organisations – 86% are more likely to be viewed as a business partner
• Enablement – 7x higher use of auctions
• Efficiency  – lower costs per order, quicker transaction and sourcing times
• Automation – greater use of electronic invoices, transactions processed electronically

North Carolina State’s Sustainability Survey

This study from North Carolina and GEP in the US looks at how organisations are handling sustainability imperatives in the face of disruption and cost pressures. 

The pressure for ESG improvements is increasing and is unrelenting, despite the economic pressure companies are experiencing. 

However, balancing these seemingly competing demands, even during the best of times without disruption, is immensely complicated. 

Even the companies that are leaning into implementing sustainability initiatives and goals into their supply chains are struggling.

The study considers supply chain resiliency, diversity and sustainability as complementary capabilities.

The most compelling takeaways, which are interesting to compare to ANZ perspectives, reveal:

• Chief Supply Chain Officers (9%) are now more responsible for sustainability than Chief Sustainability Officers (4%) or Chief Financial Officers (6%). CEOs are primarily responsible overall (32%) 
• Today, only one-quarter are focusing on Scope 3 emissions, which account for 80% of total emissions whereas 38% are focusing on recycling
• Many are not prepared for the arrival of new regulations, as they fall into the bottom half of the drivers with operational improvement and cost reduction sitting at the top
• Reflecting the current economic situation, cost is king. Cost reduction is driving supply chain investment and KPIs for environmental performance

World Commerce & Contracting: AI In Contracting

In this survey of over 400 international organisations, World Commerce and Contracting sought to uncover the status of AI adoption in contracting, reveal the benefits realised for those who have already implemented the technology, expose the barriers to adoption and unveil the true nature of attitudes.

The survey reveals some interesting findings, including:

• 31% had or were planning to implement AI
• 61% had not implemented AI and 17% had banned its use
• The biggest barriers were security (25%) and low priority (18%), as well as many others awaiting policies to be developed (which is high up in the usage charts)

In terms of where the value sits, Metadata extraction is leading the way with a 44% implementation rate, underscoring the value that can come from streamlining data collection.

Clause extraction follows closely at 39%, indicating a focus on leveraging AI for more efficient contract review and understanding. 

Meanwhile, contract analytics and automation, adopted by 38% of respondents, shows the burgeoning interest in capitalising on AI’s predictive and automation capabilities.

Previous Economist data has identified improving efficiency as a major benefit of deploying emerging tech (like AI) and this particular report concurs, with 68% identifying time reduction of contracting lifecycle being the biggest benefit and 38% identifying cost savings.

Everest: The Future of Supplier Management

This intriguing webinar and report examines the future of supplier management, which identifies that organisations are wanting to transform not only their relationships with suppliers themselves but also the way they measure and manage them. 

SAP initially identified this in the Economist Impact survey (there is a separate supplier management paper coming soon) but this webinar revealed some interesting research points.

Namely, technology has not been uniformly deployed across all parts of supplier management, notably more frequently deployed on onboarding, supplier information and supplier data, but missing largely on performance, relationships and risk. 

In fact, according to the research, 85% of respondents use spreadsheets or nothing for relationships, and 77% the same for performance. 

The report goes on to say that many organisations use ratings providers (69%) to manage supplier financials, but two-thirds don’t use a tool to gather environmental or diversity information.

The main reason provided for this, apart from budget (69%), is lack of integration with ERP.

Procurement Leaders: Speed and Agility

This recent report from Procurement Leaders looks at how procurement functions can operate with agility and speed, what would stop this and what are leaders planning to do to overcome it. 

One of the difficulties in procurement is how long activities take, which can lead to a reluctance from the business to engage. 

According to the report, the three main activities that can cause bottlenecks include:

• Onboarding (all respondents identified this) 
• Contracting (93%)
• P2P (89%)

During onboarding, the research identified that 60% of strategic suppliers took up to 30 days, while 40% took more than 30 days.

The report identifies that missing data (59%), organisation silos (43%) and technology gaps (37%) are the top three drivers of these blockages and, perhaps unsurprisingly, automation (68%) is the biggest strategy for alleviating this.

Watch this space for Gordon’s Window on September’s research, coming soon!