Four major issues for procurement today

procurement today
February 26th, 2019
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Buyers, what issues are you tracking as the profession changes with the arrival of the digital revolution?

Based on various sources, we have created an overview of the main concerns for procurement, both at present and in future, amplified by the digital transformation.

1. Cost reduction

Unsurprisingly, cost reduction remains an unavoidable subject in procurement. This is why:

  • Cost reduction will remain the top strategy for 78% of global companies over the coming year[1].
     
  • 75% of French procurement decision-makers say that cost reduction will remain the primary objective for their Purchasing Department in 2019[2].

For most companies, optimising costs is the main priority for procurement departments. However, the image of a "cost killer", slashing prices during negotiations, continues to fade. By adopting new methods, such as adjusting technical specifications, pooling and globalising purchases, changing suppliers and taking a TCO (total cost of ownership) approach, (link: https://www.manutan.com/blog/en/streamlined-procurement-solutions/understanding-tco-total-cost-of-ownership) procurement is becoming increasingly professional with "intelligent" cost reductions.

2. Corporate social responsibility

Companies seem to be increasingly concerned about the social, environmental and ethical effects that they have on society. In this respect:

  • 77% of procurement decision-makers across the world have objectives involving CSR, sustainability or diversity[3]

In France, the figures vary depending on the study:

  • 46% of French procurement decision-makers say that they have objectives related to sustainable development and CSR[4].
  • Nine out of ten organisations have a responsible procurement policy, almost half of which have been in place for over five years. Furthermore, implementing and improving this policy is a priority for almost 50% of the organisations surveyed[5].

In just a few years, social responsibility has become a real strategic focus for companies. Procurement departments are starting to incorporate CSR criteria (environmental, human rights, working conditions) into their mission statements and increase knowledge in this area throughout their teams.

CSR is becoming increasingly relevant. For example, the international ISO 20400 standard for sustainable procurement has been developed, as has the French PACTE project (Action Plan for Business Growth and Transformation). In particular, these initiatives seek to redefine the role of companies in society, encouraging them to consider social and environmental issues relating to their stakeholder activity.

3. Relationships with stakeholders

One of the major concerns for procurement professionals is the relationship between procurement departments and their stakeholders (particularly internal stakeholders). This can be demonstrated through several statistics:

  • Improving collaboration with the company and communication with stakeholders remain the main strategies for procurement officers (41% and 34% respectively)[6].
  • For 34% of procurement officers, the main challenge is better communicating their values and performance.[7] 
  • Improving the employee experience also remains one of the top priorities for 63% of procurement decision-makers[7] 

The challenge for procurement is to present itself to various stakeholders as a genuine business partner. However, there seems to be room for improvement. 70% of professionals consider themselves to be good business partners (with a certain influence over internal customers and fairly strong relationships depending on the department). However, in time, 86% hope to achieve levels of excellence, in order to become a department that is widely considered and perceived as a genuine business partner within the company, which adds significant strategic value[8].

4. Creating value

The digital revolution (link: https://www.manutan.com/blog/en/360-procurement-view/reinventing-the-procurement-role-in-the-digital-age) will allow procurement departments to save valuable time to focus on tasks with greater added value, such as creating value for their stakeholders.

  • Creating value is the main priority for indirect procurement professionals[9]

This topic is all the more significant as it is intrinsically linked to the value proposition of each procurement department, on which the purchasing strategy is also based.

There are multiple strategies that enable the procurement profession to create value for its stakeholders, echoing the previously mentioned cost reduction levers. These notably include expense consolidation, the TCO approach, increased competition, improved specifications and collaboration with suppliers.

If they are not already, these issues will most likely be your next priorities over the coming years, alongside digital transformation. In addition, other major areas such as supplier management, innovation and talent development will certainly become increasingly important within the profession.

 


[1] Deloitte

[2] AgileBuyer and the French National Procurement Council (CNA)

[3] SAP Ariba

[4] AgileBuyer and the French National Procurement Council (CNA)

[5] ObsAR (French observatory for responsible procurement)

[6] CPO Rising 2018

[7] Forrester Consulting

[8] Deloitte

[9] WBR Insights

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