Procurement's Shifting Priorities

If your supply management priorities are shifting, you are not alone. Research into supply chain leaders’ priorities for 2014 shows that expanding the scope of supply management’s spend influence and tapping into supplier innovation are now top issues, signaling a change from the emphasis on cost reduction/avoidance of previous years.

More than three-quarters of executives who participated in The Hackett Group’s 2014 Procurement Key Issues research placed expanding spend influence as their top priority. Increasing and supporting supplier-led product innovation was cited as a major priority by 69 percent of global supply chain executives.

While cost reduction is still a concern, Chris Sawchuk, global managing director and procurement advisory leader, says he believes many organizations have reached the upper limit of cost reductions possible in many sourcing categories. “So they are looking for ways to reinvent their value proposition,” he says. “A key part of this is expanding their influence and taking a life-cycle approach to category management. This requires working effectively with spend owners, executives, suppliers and other stakeholders.”

Sawchuk suggests supply management practitioners focus transformation efforts on three areas: rebalancing supply risk, recalibrating technology and tools and reinventing procurement’s value proposition.

Risk. Ensuring that suppliers are able to keep sensitive data private is one supply risk area procurement organizations should focus on more strongly this year. “Organizations are seeking to balance an expanded risk management role with the need to foster supplier innovation, better understanding trade-offs between supplier risk and innovation potential,” the study finds.

Technology and tools. Because new technology spending is limited, procurement leaders are reconfiguring or extending existing application to improve value. A technology focus this year is implementing business intelligence and analytic applications to increase automated spend analysis.

Value proposition. The study notes that monitoring, measuring and reporting on supply management’s value contribution are on the rise. Seventy-five percent of all companies ranked value contribution visibility as a key area, and 69 percent ranked investments in measuring and monitoring their value as a key objective.

“To bring clarity to the discussion, procurement must know how to document its own innovation and the impact it has on enterprise growth and be able to convince the rest of the organization that procurement’s expanded value proposition is real,” Sawchuk says.