10 major challenges for procurement in 2020

procurement department
April 14th, 2020
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In the age of the digital revolution, procurement departments must reinvent themselves in order to adapt to changes and remain competitive, just like a company. In its latest study, the Hackett Group reveals the 10 major challenges facing procurement in the year ahead, from cost reduction all the way to value creation.

Challenge no. 1: Improving profitability

Optimising the relationship between the resources used and the results achieved is a procurement department's main priority. Undoubtedly, the beginning of an economic downturn will only compound this issue. To achieve this, procurement departments need to recruit and train highly skilled individuals and optimise their operation.

Challenge no. 2: Reducing purchasing costs

Reducing the total cost of ownership, from strategic to tail spend, has consistently remained a top priority for procurement departments. For the tail spend procurement category, six key levers can generally be employed to optimise management and reduce costs.

Challenge no. 3: Becoming a trusted partner

Procurement departments must strengthen their links with various stakeholders (both internal and external) to raise awareness about procurement policy and expand their influence. To become a trusted partner, procurement departments need to take a proactive and collaborative approach.

Challenge no. 4: Modernising technology

By boosting their platforms with the latest technologies, such as Artificial Intelligence or the Cloud, procurement departments can respond to any challenge they may face, in particular by becoming more agile, improving processes and reducing costs.

Challenge no. 5: Increasing spend influence

By using their influence to better control expenditure, procurement departments can help reduce purchasing costs, improve quality and achieve better strategic results, such as product innovation. Influence over expenditure is a major criterion which can be used to measure a procurement department's performance.

Challenge no. 6: Improving analytical and reporting capabilities

The potential of analytics is growing rapidly. In this sense, it is very much in the interest of procurement departments to make full use of external data, optimise their dashboards and begin using predictive analysis to help make decisions based on concrete information.

Challenge no. 7: Aligning skills with business needs

The skills of the procurement team must be developed in line with business needs. To do this, training should be multi-faceted, with a focus on both soft skills (strategic thinking, business sense etc.) and knowledge (understanding of indicators, technological tools etc.).

Challenge no. 8: Improving procurement agility

Agile procurement departments are able to successfully combine the tools, resources and expertise required to meet constantly changing business needs. A combination of planning, flexibility and team spirit allows them to be more efficient.

Challenge no. 9: Adding value through category management

Thanks to category management, procurement departments can identify opportunities and innovations in the market more easily, enabling them to reduce internal costs and boost sales. This is a really good approach to strengthen relationships with business partners and create even more value for customers.

Challenge no. 10: Improving performance assessment

The ability of procurement departments to better measure their performance enables them to maximise their value chains and optimise communication with various stakeholders.

These 10 challenges are currently a priority for procurement departments, with some being especially pertinent during the ongoing crisis (agility, analytics, technologies etc.). However, many other topics also feature on the procurement agenda and could take even greater precedence given the current situation, with supplier relationships being a top priority.

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