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Summary
This month we seem to have 2 main themes, Gen AI, its promise and trajectory, with the position on the annual hype cycle moving forward at a rapid pace. There may be disconnects in what these types of reports v practitioner application however with some reports stating the pace of change and adoption is a little slower due to data, and also risk aversion.
The other area is around SRM. The benefits have been made several times before, but the importance is interesting. I noted in this years Economist report the general falling of importance (I think due largely to the inflation issues still impacting many (when cash crunches come in, many other things go out!). But what’s fascinating to me is to get the suppliers view of this, and there are 2 stats which jumped out, from World CC 77% of suppliers don’t believe procurement when they talk about relationships being important, and from HICX where suppliers stated more than 10 systems are required to service a customer. It will be interesting to see how these are addressed if SRM is to deliver on its promise.
HICX Supplier Survey
Our first 2 reports look at the Buyer Seller relationship. First from HICX their study covered 1000 suppliers who supply mainly large enterprise customers. There were some very interesting findings. 48% said their most important customer could improve its communication significantly, and 31% have to log into 10 more systems to do business with them.
61% said their most important customer sends them too many information requests and 46% said their most important customer can be unpleasant to work with.
All in all, this identifies some areas about how easy some companies are to do business with as opposed to others and should give some ideas about either what goes into supplier surveys when procurement carries them out or areas to look into to see how they compare.
Speaking of which….
World CC Effective Relationship Management
This report covers some 400 organisations on both buy and sell side supplemented with interviews and discussion groups. As usual from World CC its an interesting read, and a well carried out piece of research.
According to the report there is broad consensus that effective Relationship Management and increased collaboration in B2B settings are key drivers for mutual success. 80% of suppliers and customers confirm that when Relationship Management is effectively executed, it yields substantial benefits.
In spite of clear benefits, there is a notable shortfall in the execution of Relationship Management. This is recognized by most of the buyer community and contributes to a high degree of scepticism in the supplier community, where 77% question the sincerity of customers truly wanting to collaborate.
77% - Wow. That is a concern, its basically saying 77% of suppliers don’t believe procurement when broader discussions around longevity and building the relationship is said, which ultimately leads to a lack of trust. This scepticism is driven by past experience, and it shows the work that procurement will need to do to continue to build that trust.
Its interesting that in a separate piece of research that SAP sponsored with the university of Tennessee the 5 dimensions of trust includes communication and recognising the differing viewpoints of both parties.
Some other key takeaways of the study include that 55% of respondents stated they actually carried out a voice of the supplier survey (see the HICX report for some ideas on questions to ask!) and 40% of buy side said they didn’t do any SRM activity.
CIPS Global State of Procurement
This is CIPS first global procurement study, and draws on information from 122 responses and whilst a little UK centric (45% of respondents) still some interesting findings.
Biggest spend influence areas are still the typical indirect spend with over 70% identifying Office supplies, FM, professional services, IT and MRO capital and travel as the major areas of spend influence. Interesting recruitment and contingent labour came close as well with about 65% identifying procurements involvement there.
From an operating model perspective, 68% stated that the function was either centralised or centre led, and headcount is forecasted to remain relatively static.
And as a lead into the tech section (!) 35% identified that their organisations planned to invest more in AI with 30% investing in cyber security measures.
Gartner Hype Cycle
This year’s hype cycle has been released and in surprising news (!) the continual rise of Gen Ai continues, in fact according to the cycle despite the hype, the plateau of productivity (the part at which it becomes mainstream and deployed fully) is achievable in 2 years.
Gartner’s Hype Cycle for Procurement and Sourcing Solutions evaluated more than 20 technologies impacting the procurement landscape in 2024. This year, many core procurement technologies, such as source-to-pay suites and supplier information management, are climbing the Slope of Enlightenment toward the Plateau of Productivity, or mainstream adoption. All of these technologies are expected to reach the plateau within two to five years.
Some notable changes including Conversational AI being identified as unable to reach the end stage as Gen AI will overtake it and deliver its use cases, and intake and orchestration being separated and identified separately on the cycle. Gartner defines orchestration “platforms are decision augmentation tools that prescribe and execute end-to-end source-to-pay process workflows to fulfill specific business outcomes” and intake as “improves end-user experience by navigating preconfigured process workflows”.
Overall, I personally think the hype cycle is a decent indicator of where broader tech deployment is heading.
Gartner Gen AI
IN the next few papers, we will look specifically at AI in procurement, especially as the hype cycle sees it as maturing within the next 2 years!
In this paper Gartner looks at the plans for use cases, benefits, and expected adoption of AI in procurement. A majority of procurement organizations have plans to implement at least one-use case of generative AI over the next 12 months. Despite concerns around data, risk, and unproven ROI, plans for pilots proceed with 15% of organizations having already implemented.
In terms of benefits the report identifiers that procurement leaders expect a 22.7% increase in productivity and 12.5% cost savings over the next 12-18 months from generative AI, with use cases planned for Sourcing and CLM, Supplier information discovery and management, and communications.
Procurement Leaders AI
Procurement leaders broadly agrees in terms of the progress made in deployment, with 53% having preliminary exploration, and just under 7% already deploying however a word of caution springs from the change with the report starting that the pace of change is slow, with many functions reporting they are being held back by problems with their data, funding and skills.
When they do change however, the benefits are lower (than Gartner’s thoughts) in terms of non-productivity, with 36% identifying no impact on effectiveness, and 56% a limited impact. The use cases differ slightly too, with Spend analysis, market intelligence and category management leading the way in terms of systems with an AI component.
AQPC RPA in Supply chain
In other non-Gen AI news now! APQC gathered insights from 310 supply chain professionals about RPA (robotic Process automation) within their supply chains and here is what they found.
Organizations are prioritizing the implementation of RPA across all areas in supply chain, 20% of sourcing and procurement organisations have already implemented with 62% likely to implement. Benefits include improved quality (61%), Improved efficiency (56%) and reduced risk (48%)
Hackett Gen AI & Operating Models
According to The Hackett Group’s analysis, Gen AI can yield a 47% reduction in procurement function costs and a 54% human productivity increase over five to seven years. With Gen AI being a driving force to rethink the operating model as this has the potential to remove manual tasks and transactional activity, freeing up resources to focus on more strategic, value-added activities.
Its this refocus, which according to Hackett makes those changes to the function costs and therefore productivity as well.
As always reach out to discuss more, and always happy to hear your thoughts!
