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 December’s global procurement research.
Save your own time reading research when you can get the key takeaways in one place!
Read on to learn about the changes that have occurred in contract management over the last couple of years, the actions that can be taken to incentivise suppliers to achieve sustainability goals, and the challenges and opportunities procurement could encounter over the next five years and beyond.
World Commerce & Contracting: CCM Benchmarking
In this new report, (comprising 756 responses) sponsored by Icertis, World CC looks at the changes that have occurred in contract management over the last couple of years. There are some interesting takeaways, as follows:
- There has been an increase in both agile (25%) and relational (14%) contract types, reflecting the changing shape of the world economy
- On average, contract data sits in 24 different systems in typical organisations, which will present a “challenge” to ensure a complete picture
- The top five most measured areas are:
a. cost reduction achieved (rather than just identified)
b. compliance to contract
c. cycle times
d. contribution to revenue
e. customer (external) satisfaction
- Post signature monitoring of compliance to terms is the top area of interest (also grown by 15% in technology which mirrors an earlier Economist Impact report), followed by obligation extraction
- Contract repository is the top deployed technology for 62% of respondents
- Visibility into (76%) and finding contracts and data (70%) are the top drivers of new technology
An interesting nugget that appeared was linked to the spread of contract management being no longer siloed in procurement (if, in fact, it ever really was). The survey tells us that, on average, 29% of the workforce is in some way involved in the contracting process.
MIT: State of Supply Chain Sustainability
The fourth instalment of this report (from 2300 responses) shows that commitment to supply chain sustainability appears to be resilient to certain types of crises, but vulnerable to others.
Large-scale network disruptions, like those precipitated by the COVID-19 pandemic and Russia’s invasion of Ukraine in 2022, are shown to result in increased commitment to supply chain sustainability amongst many firms.
On the other hand, in 2023 many firms’ sustainability efforts appear to have been especially sensitive to this year’s negative economic forecasts.
The gap is narrowing between the goals that are being set, and the investment needed to achieve those goals — though investment is not at the level where the set goals will be achieved.
What is interesting, is that each year there is a differing priority of importance.
Diversity, for example, appears to be in ascendancy over the last few years, whereas circularity has remained stagnant.
When looking at the current actual practices, supplier codes of conduct (80%), supplier audits, supply chain mapping and company codes of conduct lead the way, with the report calling these ‘table stakes’ for global sustainability programs.
This year’s report has a section devoted to net zero goals, with almost half of the respondents who have net zero goals reporting that their firm will not begin measuring or reducing Scope 3 emissions for five years or more.
At the same time, roughly half of responses show net zero deadlines of 2040 or earlier.
Scope 3 reporting appears to be especially vexing, and how to collect reliable data across firm boundaries is still tricky.
Gartner: Incentivise Suppliers for Sustainability
On the subject of sustainability, Gartner released a paper looking at the actions that can be taken to incentivise suppliers to achieve sustainability goals.
At the top of the list (linking nicely to the World CC and MIT reports) are including sustainability goals in contracts and ensuring those goals are measured in performance scorecards.
The list is largely as you would expect (linking business to performance, etc) but a particularly low area was the access to better payment terms for improved sustainability performance (65%).
It’s not clear if this is linked to the organisation’s ability to offer those terms, but it does seem like an opportunity missed.
In a nod to the earlier MIT study, only 16% of organisations are actively reducing Scope 3 greenhouse gas (GHG) emissions, while another 27% state that conflicting priorities hinder suppliers from prioritising efforts to reduce their emissions.
CIPS: Professional Challenges
There were a couple of interesting articles from the revamped CIPS communication platform this month.
First up, Dr John Glen discusses the forces shaping procurement and supply in 2024 in his article for CIPS, including:
- Geopolitical flashpoints (Middle East, Taiwan, Russia/Ukraine)
- Supply chain changes – logistics falling, reshoring increasing
- Inflation and interest rates
- Slow growth
In the second article, a survey of the CIPS member base identified the challenges keeping procurement up at night. Apart from the above, there was also:
- AI
- Sustainability
- Workload
- SRM and contract management
Procurement Leaders: Compass 2024
The read of the month.
This report looks ahead to the challenges and opportunities procurement could encounter, not just next year but over the next five years and beyond.
It’s a future focussed report that poses several ‘what if ‘questions…
What if GenAI becomes as used as spreadsheets are?
Report suggests that GenAI market value could be $36Bn by 2028 and that market intelligence is recognised as having the biggest impact from AI
What if regulators clamp down on AI?
See the recent issues surrounding OpenAI!
What if globalisation goes in reverse (i.e. will reshoring/nearshoring/regionalisation continue the current trends)?
Global trade has basically plateaued. In fact, it has shown a decline since 2008. The biggest barrier to the reshaping of supply chains is cost (45%) but, as other reports have noted (such as the Deloitte reshoring article last month), these cost prohibitors are shrinking to almost nothing.
What if economic turbulence erodes enthusiasm for ESG?
As discussed in the earlier MIT report, the one area that did slow down the ESG impetus was the economic realities of 2023.
All in all, a great report. One that asks some great questions and gets you thinking about future strategies & the impacts on procurement.
State of Flux: Annual Survey 2023
This is the 14th iteration of the Supplier Relationship Management (SRM) study, and it paints an interesting picture.
The report starts off by stating that many organisations haven’t progressed in the maturity of their SRM programs (if, in fact, they have them) which is an issue, as according to the report, 50% of their workforce isn’t employed by them but by their suppliers.
There are lots of good case studies and plenty of thought leadership in the report. For those wanting to know more, the first half of the paper is dedicated to this.
The second half looks at the actual data from the study, segmented into the six pillars of SRM.
Headline stats include:
Value: 87% believe improved risk management is a key deliverable from SRM programs with 75% reporting measurable (non-financial) benefits. 42% have seen measurable financial benefits of cost reduction programs through SRM
Engagement: 55% of organisations gather supplier feedback by ad hoc conversations
Governance: 22% of companies use third party supplier due diligence services, while 89% segment their suppliers on business criticality
People: 69% of leaders have a dedicated supplier management role and 83% have developed specific competencies for supplier management. 52% identified that SRM sits in centralised procurement functions
Technology: 80% of leaders have dedicated contract management systems. 76% identified improved supplier performance as a benefit from using technology, with 62% identifying centralised supplier information as a key problem they are looking to technology to solve
Collaboration: 92% of leaders use 360 collaboration assessments, while 72% report improved levels of trust from collaborative relationships
SSON: Accounts Payable
In many stats, this report echoes the findings from the Ardent Partners State of AP report from last month, in detailing the opportunity for greater efficiency from AP.
The lens is slightly different with a shared services context, but shares a similar output that the automation and maturity within many could be improved.
The findings include:
- 59% do not have a designated owner for end-to-end P2P
- 78% identify increased speed of processing and cycle time reduction as a top benefit of automation
- 56% cite exception handling as the biggest barrier from AP delivering on their brief. This was also identified as the activity that will be prioritised in terms of automation next
- Suppliers identified PDF as their preferred method of invoice submission, though how automated this allows the process to be is interesting. The report makes the point that this will be due to the low levels of automation
- 40% identified e-invoicing as a technology to be implemented in the next two years, with budget (56%) and competing priorities (54%) being the biggest barriers
Amazon: State of Procurement 2024
This was a pretty comprehensive study, with the most interesting stats including:
- 95% state that their organisation has to outsource procurement activities to third parties, with 72% stating that strategic activities are the ones they outsource
- 53% state their procurement budgets will increase in 2024
- The top internal challenge is complexity in process/systems, while the top external challenge is costs
- 86% cite retaining and developing talent as a top priority, while 84% cite attracting new talent
- 36% want to invest in tools or technology in order to increase efficiency
Beroe: Digital Procurement Survey
Within its community of members, Beroe conducted a survey on the digital procurement landscape.
53% of respondents identified that the demand for cost reduction and greater efficiency is the main driver of innovation in procurement, with technology coming in second at 22%. This is supported by recent technological innovations in the procurement sector that are perceived to have most significantly improved the efficiency of processes, as reported by 44% of respondents.
28% expressed concerns about the integration of new technologies with existing systems, while training and change management pose challenges for 24% of respondents. This highlights the importance of addressing the human factor in technology adoption.
The survey reveals diverse interests within the procurement community regarding the exploration of new digital solutions, with AI-enabled market/supplier/commodity intelligence, Supplier Relationship Management (SRM) and spend analysis each garnerning the interest of 10% of respondents. AI-driven insights and data-driven decision-making are evidently key areas of focus.
Additionally, tendering/RFP and contracting attract 9% and 7%, respectively. This showcases the importance placed on optimising procurement processes.
PWC: CEO Survey
In PWC’s 26th annual global CEO survey, over 4000 respondents identified the top areas for organisations to consider, as follows:
- Surprising no one, inflation and macro uncertainty is the biggest threat over the next 12 months, but recedes over the next five years
- Cost cutting is the order of the day, with 52% stating cutting operating costs but only 16% stating reducing workforce
- 48% identified increasing investments in cyber security, while 46% identified adjusting supply chains (reshoring/nearshoring) in response to global conflicts
- 76% are investing in automation of processes and systems, while 69% deploy cloud, AI and other advanced tech
Watch this space for Gordon’s Window on January’s research, coming soon!
