By Freya Purnell
With the help of collaboration, technology and big data, procurement is shaking off its tactical, back-office image, in favour of being seen as a strategic resource and key driver of business value.
That’s the key finding of The Future of Procurement, a new survey and series of reports from Oxford Economics, conducted with support from SAP company Ariba.
“Procurement has undergone dramatic changes in recent years, becoming more collaborative and technology-driven than ever before,” said Edward Cone, deputy director of thought leadership, Oxford Economics. “And this is fuelling greater payoffs not only in terms of the cost savings and efficiency that the function has traditionally been on the hook to deliver, but also innovation and overall financial performance.”
The survey, which canvassed the views of over 1000 procurement executives and daily practitioners from 18 countries around the world, uncovered three major trends – collaboration, technology and big data.
Sixty-three per cent of respondents said procurement is more tightly aligned with other parts of the business, and 51 per cent said the function was working more closely with suppliers – and these closer connections are effectively “remaking” procurement.
Cone pointed to the example of Las Vegas Sands, an owner of casinos around the world. While it needs a large supply of light bulbs to illuminate its casinos, it also needs to reduce its energy footprint. Rather than simply negotiating a better bulk price with its lighting supplier, the procurement team worked with them to custom design more energy efficient bulks for fixtures. Not only did this provide Las Vegas Sands with an opportunity to drive energy efficiency and cost savings, but its supplier had a new product to sell to other customers.
“This kind of strategic collaboration with a supplier represents a big leap forward for the procurement function and provides a sense of where it can go in the future,” Cone said.
The second, perhaps more obvious trend is in technology, with the digitisation of previously paper-based processes and automation providing improved performance and productivity. However, the survey showed there are still gains to be made in this area.
A third of respondents said investments in procurement/supply chain technology are a priority, with nearly half intending to fund supplier innovation programs.
In fact, when asked which areas they expected to be completely or mostly automated within two years, 70 per cent of executives nominated invoice management, 69 per cent strategic sourcing, 68 per cent contract management, 64 per cent supplier collaboration, and 63 per cent supplier risk management.
Having implemented more technology solutions, the procurement function is now increasingly utilising the transaction data it has gathered from its supplier, customer and partner relationships.
Sixty per cent of practitioners said procurement data is being used across their organisations to drive more strategic decision-making, and 66 per cent said procurement is playing a more strategic role within the organisation, becoming less a service and more a function.
A copy of the Future of Procurement is available here.
