The role of the procurement professional in the supply chain is changing. What used to be a discipline focused exclusively on cost savings has become an integral and strategic part of the larger organization. In this conversation with SupplyChainBrain editor-in-chief Bob Bowman, Hackett Group research director Laura Gibbons discusses the findings of the firm’s 2020 Procurement Key Issues report, and how it might offer a glimpse into the future of procurement.
SCB: What was the biggest takeaway that came out of this year’s research on procurement?
Gibbons: The biggest takeaway was around the increased importance of cost. Typically, we’re honed in on reducing purchasing costs, but now we’re broadening that to include operational costs, and that’s really telling. We look at it in two ways. One is that we’re looking for an ROI now from all those technology investments that organizations have been making over the last five to 10 years. At the same time, we want to improve cost efficiency. That doesn’t just mean driving costs down. For some organizations, it means reallocating costs. It could take the form of continued investment in technology, or spending more on top talent and more strategic skill sets. That’s a notable shift from the focus that procurement has had in past years.
SCB: Given that procurement has always been about cost, do you interpret these findings as a regression, with respect to the larger role of procurement in the organization?
Gibbons: No, I wouldn’t look at it as regressing at all. The emphasis on reducing purchasing costs is still critical. It’s still something stakeholders are looking for procurement to deliver on. But focusing on those operational costs, I think, is a new element. It speaks to how stakeholders are looking for procurement to deliver value in a number of different ways.
SCB: What types of technology are being brought to bear on procurement today?
Gibbons: Anything in the automation space is key right now. That’s going to help procurement with delivering its services. There’s a big focus on customer centricity. That’s been a big trend over the last five-plus years. Lots of folks are investing in analytics. They’re learning to pull in massive amounts of data. Procurement organizations are now looking to leverage external data, which definitely wasn’t on the radar as much in years past. Cloud-based procurement applications are critical right now, too.
SCB: Given this trend, why did technology efforts fall short of expectations in 2019, as revealed by your research?
Gibbons: There were lots of reasons. Organizations were moving too fast, not setting expectations. A number of them are struggling with the change-management aspect. They’re implementing the technology but not communicating it to the users, and that tends to cause a lot of problems. There’s a misalignment of objective and capabilities between procurement and technology vendors. That tends to cause some issues, too.
SCB: How can procurement become a trusted adviser to the business, as suggested by your research results?
Gibbons: Becoming a trusted adviser is critical for procurement. But organizations tend to approach this the wrong way. They say, “I’m going to do this for my stakeholders because that’s what they need.” But the really successful ones are those that start with communication with stakeholders. They might be putting procurement people to work in the business, just to form that line of communication. The first step to becoming a trusted adviser might mean something different in every organization, but the critical piece is to open the lines of communication and start working together. It even means doing things like running stakeholder surveys and setting up regular monthly or quarterly meetings as check-in points.
SCB: Do you see a trend toward incorporating procurement into overall risk management strategies, or thinking of it in terms of supply-chain risk?
Gibbons: Absolutely. That speaks a lot to procurement’s investment in analytics. The more forward-looking organizations are drawing on external and unstructured data to make better real-time decisions in areas that include supply risk management. Procurement definitely has a role in that area.
SCB: Your research also reveals an organizational resistance to change. How serious is it in procurement, and how can it be overcome?
Gibbons: As far as hurdles go, organizational resistance to change is the number-one issue that’s preventing procurement from transforming. And when we say transforming, we’re usually talking about technology. That goes back to what I said about the reasons that technology tends to fall short. It’s around that cultural change. But it doesn’t have to be that serious of a factor. If you address it early on, it’s becomes doable — it’s something you can tackle. Typically, the reason you run into this type of organizational resistance is that you forget to communicate.
SCB: To what extent did your research reveal a skills gap in procurement, and what form is it taking?
Gibbons: We definitely see a skills gap in procurement. Historically, procurement has been a very tactical organization. The skills we looked for in procurement staff weren’t really on the strategic side. What we’re seeing now is that procurement is being asked by stakeholders to do predictive analytics. It’s getting involved with the business in areas such as strategic category management. That’s changing the skills profile. It doesn’t necessarily mean you need to bring in new people. But for a lot of organizations, they need to invest in existing talent to help expand those skills and drive them in a different direction. Technology adoption is freeing up a lot of time and resources that were being spent on more tactical activities. What the best organizations are doing with that freed-up time is shifting it, and redirecting it into more strategic activities.
