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Procurement needs to double down on digital transformation – Hackett

Last week, the Hackett Group’s renowned Key Issues 2022 study was released highlighting (with no surprise) the hot topic of Digital Transformation. 

The study, formulated from the responses of procurement leaders, positioned digital transformation in one of the three key themes of the document.

”Digital transformation remains a front and centre enabler, but now refreshed with increased rigor,” Hackett said on the outlook for 2022. 

But while digital transformation in procurement is known to streamline operations and improve performance for companies which have taken the leap, organizations which are lagging in digitization express concerns in several critical areas. Concerns relate to (but are not limited to) factors such as access to suppliers, exposure to risk, shortcomings (and costs) of legacy systems and teams not being equipped to “lean in” to digital transformation.

Of the top 10 procurement priorities for 2022, Digital transformation is listed as number five by Hackett, (more on the top 10 below), and encourages businesses to “double down” on digital transformation. 

Why procurement should double down on digital transformation

It’s a given that the pandemic has propelled procurement digital transformation forward. Hackett suggests keeping the momentum going will be essential. 

“With return to growth mode and more funding available, organisations must sustain the momentum and invest wisely based on rigorous analysis of value, considering the potential opportunities, as well as limitations of technologies at different stages of maturity,” Hackett says. 

The study also highlights the need to manage change must not be neglected. 

“It will be important to work with technology function business partners and design intentional information architecture, as well as to carefully manage expectations around tool implementation timelines, speed to value, and return on investment,” Hackett said. 

Of the enterprise priorities aligned to procurement businesses reported to Hackett, enterprise digital transformation retains top spot with 61 % of companies reporting a major initiative for the 2022 agenda. 

On procurement technology adoption and growth, cloud-based procurement application suites, data visualisation tools, advanced analytics and master data management tools had all surged on 2021 projections. 

Hackett’s 2022 procurement priorities

1. Reduce supply risk to ensure supply continuity 

Enhancing business resilience and minimizing the impact of supply disruption to protect revenue and profitability have become the top priority for the first time in our annual Key Issues Study. We expect procurement organizations will continue to enhance visibility, agility and capability. 

2. Reduce spend cost

Reducing the cost of supplier spend remains a core priority, though the focus has shifted to mitigating the cost effects of the current inflationary environment, whether through supplier relationships, contract terms or even hedging.

3. Act as a strategic advisor to the business

Procurement organizations continue to view becoming a strategic advisor to the business as a key enabler to achieving performance goals and delivering on an expanding list of enterprise and functional objectives. 

4. Enable corporate responsibility 

The expectations and demands of procurement’s stakeholders (e.g., employees, customers, governments) around supplier sustainability (e.g., environment, social, governance) have elevated this priority more than any other on procurement’s agenda – from No. 8 in 2021 to No. 4 in 2022. 

5. Accelerate digital procurement’s digital transformation 

Digital transformation has become an essential enabler of procurement organizations’ ability to deliver new services amid constrained budgets, with better intelligence and increased speed, customer-centricity, and competitive advantage.

6. Improve analytical, modelling and reporting capabilities 

Procurement now recognizes that success increasingly requires a data and insight-driven approach to value identification. A critical enabler is making ever-expanding sources of reliable, up-to-date and forward looking data and intelligence available to end users. 2022 will require specific focus on modelling and projecting the impact of inflation. 

7. Align skills and talent with the changing business needs

The modern vision of procurement requires strengthening skills and competencies, whether to improve stakeholder engagement, meet raised business expectations, or develop new capabilities in areas like sustainability, supply risk, and data intelligence. The Great Resignation has exacerbated this challenge, requiring specific focus on retention.

8. Modernize procurement application platforms 

Procurement continues its shift from on-premises legacy systems to cloud-based suites, while filling functionality gaps in the suite and/or substituting some suite modules with cloud-based point solutions.

9. Improve procurement agility 

Agility is about more than being flexible and change-ready; it also includes the ability to anticipate, predict and rapidly react to shifts in the external marketplace. This in turn is critical to rapidly changing business priorities, supply markets and a robust supply risk management capability.

10. Improve stakeholder-centricity

Study respondents understand that being a modern, strategic, business-enabling function requires a focus on the needs and expectations of stakeholders (e.g., customer, internal business, supplier), as well as procurement itself. The function’s operating model must be designed through the lens of these groups.  

Get your copy of Hackett’s Key Issues Study 2022. 

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