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GordonDonovan
Product and Topic Expert
Product and Topic Expert
Each month ill review articles, research papers and webinars, and provide you with a brief summary of the most important papers, what they contain, what they may mean and try to draw some parrels between them.

S&P Sourcing


This was a “special” from supply management, authored by S&P global, and had some interesting insights around how technology can be used to drive better data driven decisions for sourcing. Sourcing as many reports have indicated is increasing as organisations both need to manage cost increases, but also seek to increase numbers of suppliers to mitigate risk. This article goes to understanding how up to date information, helps to formulate and change strategies.

According to the study only 52% of respondents felt their organisation ranked medium or low in sourcing performance. The report states that failing to address the entire spend of an organisation is one issue, with many organisations overlooking indirect or ‘tail-end’ spend in their sourcing management activities, where significant potential savings can be achieved using tools such as reverse auctions.

One factor that could hold businesses back here is their technology. According to S&P Global’s research, just 31% of organisations say their sourcing functions make full use of sourcing technologies for all types of spend. This means many may have sophisticated platforms and technologies which they are failing to use to their full functionality, in some cases using them for no more than a platform on which to share spreadsheets or Word documents.

VIZIBL – Procurement Decarbonisation


This report identifies that most companies despite having pledges to reduce scope 3 emissions may not be ensuring that these are capable of being achieved. In fact, only about ¼ feel confident that they will happen. The reasons the report gives are that many responders are struggling with education (only 6% feel well educated) , understanding the strategies (around half feel that strategy has been well communicated)  and appropriate incentives, according to this report, only 8% feel that they are full incentivised to achieve them, and as we know incentives drive actions.

 

BCG 7 Forces in procurement


This was a really interesting article covering some key forces reshaping procurement. From geopolitical tensions to sustainability to mining the market for risks and opportunities, it is a very thought provoking read. The article suggest that procurement leaders must understand these trends and be prepared quickly to adapt. These trends are:

  • Geopolitics elevating risks.

    • Procurement leaders must actively monitor and manage their exposure to geopolitical risks.



  • Natural Disasters occurring more often.

    • Natural disasters can severely harm commercial property, assets, and raw materials. Procurement functions must help to mitigate the associated risks to resource availability, shipping, and the speed and quality of production.



  • Inflation & recession cause uncertainty

    • An inflation-ready procurement function comprehensively considers categories of all sizes, utilizes strategies like hedging and price-indexing, and scrutinizes every price change.



  • Adoption of climate & sustainability is accelerating.

    • Procurement functions play an essential role in helping companies achieve their climate goals. For example, a company must involve strategic suppliers in its sustainability initiatives. This includes requiring suppliers to commit to implementing green practices and reducing Scope 3 emissions as part of the tender process.



  • Companies strengthening commitment to social equity.

    • Procurement strategies should include goals for giving opportunities to diverse suppliers—that is, businesses that are majority owned and operated by individuals or groups who are traditionally underrepresented or underserved. This might entail, for example, asking for information about a supplier’s diversity in RFPs or setting a target for the percentage of diverse suppliers used by the company.



  • Next Gen Tech promotes efficiency.

    • In a 2022 survey, IDC asked more than 1,100 procurement leaders which technologies they planned to implement during the next 12 months and three years. AI and blockchain showed the biggest increases in implementation over three years versus 12 months.



  • Procurement faces talent shortage.

    • Procurement leaders must assess their operating model and create a talent development plan that can support the overall procurement strategy. A well-balanced procurement team focuses on category management while striving to automate routine tasks, such as buying and contracting.




Ardent Partners – State of Procurement


This annual report is a mainstay of procurement strategy. Now in its 18th year, this year’s report is as insightful as ever and provides insights from over 300 respondents.

For 2023, the report identifies that Cost savings (46%), managing risk (43%), digital transformation (38%) as key priorities, with complimentary strategies of pursuing digital transformation (39%), collaboration internally (38%) and cash – liquidity management (33%) as key strategies to deliver against the priorities.

Also in the report was the state of procurement performance, showing that whilst spend under management on average at 65% was trending down, targeted savings at 6.6% was trending up (though delivery was flat at just over 6%).

Chapter 4 is really worth a read, as it states on multiple occasions that procurement is at a crossroads on many things from data strategy to digital transformations, change management strategies. Its these insights for me that really make the report a must read.

High Performance Procurement – Procurious


I enjoyed reading this report where it looks at what is it that makes high performing teams in procurement and uncovers some concerns, especially if you read alongside either of the Deloitte or Ardent (or Economist Impact) reports.

Some startling numbers – 75% of respondents dount the accuracy of the data they present, which means that nearly 80% of non-procurement leaders are not confident in using data that comes from procurement, which will clearly negatively impact our credibility internally.

In the recent economist report (decoding confidence in procurement) it states that whilst many C suite recognise the importance of procurement, only around half believes that procurement collaborates well internally. This report confirms that with 43% don’t collaborate with manufacturing, and even less with sales.

When it comes to reporting, its still cost savings that dominate the reporting with over 70% saying negotiated or realised savings are KPI reported, with other areas such as sustainability under half.

Perhaps a driver for both, is that spreadsheets still dominate the tools used to track and manage procurement performance with nearly ¾ of respondents still using them.

 

Deloitte CPO Report


The 12th edition of this report was published recently.

Some really interesting takeaways which in many ways confirm the Ardent report, as well as the Economist reports. Procurements remit is broadening, with not much to choose between the top priorities from driving efficiency, ESG, cost, digital transformation and risk all within 5% of each other in terms of priorities.

However, it does identify that procurement performance is dropped. Under 70% hit their targets last year and self-perceived performance in partnering with other areas (i.e. collaboration) dropped by up to 11%

So it makes sense that in terms of top strategies being employed to achieve these priorities is collaboration (#1) – both internally and externally with suppliers and a renewed focus on category management renegotiation at number 4. Demand management and digital transformation make up the top 4.

 

There is a detailed discussion on operating models, which most reports identify as evolving as organisational operating models change, as well as a focus on Supplier Management as a key part of value delivery.

 

Like Ardent, the report shows a marked difference between top performers (in this report called orchestrators of value) and the rest. Some areas where these top performers concentrate include SRM, market intelligence, scenario planning, digital deployments, and standardisation of approaches.

I have linked to each of the reports mentioned for you to download and consume on your own, but hopefully this has given you a taste!

 

If you want to discuss further, please reach out!