In a new report, Levvel Research highlights some of the key trends taking place in procurement this year, shows how they’re impacting the sector, and then makes predictions about what could lie ahead in 2020. In “2019 Procurement Insight Report: Highlighting Trends and Innovative Spend Management Strategies for Today's Procurement Teams", the research and advisory firm discusses some of the major shifts taking place within the sector, the adoption of e-procurement technology, the preferred procurement team structures, and how those teams place orders.
Here are six trends that all buyers should be watching:
- The holistic procurement approach is gaining traction. Procurement functions continue to shift from basic supply management and the overseeing of transactional activity to more holistic and expansive participation within the business. For example, procurement teams are being asked to produce more intangible and business critical products (i.e., contingent labor for IT functions, legal services, and investment-heavy technology systems). “In effect, procurement leaders’ goals have evolved from simply controlling spend to strategically executing procurement functions that support the business’s financial and operational decisions, protect its bottom line, and mitigate risk to the company’s competitive advantage,” Levvel Research points out in its report.
- Procurement technology is diversifying and innovating. E-procurement technology providers are offering tools that enable more strategy, risk control, and supply-chain-centric management to align with the shifting values of procurement leaders. Providers are also embracing digital transformation strategies, such as enabling a holistic technical environment (e.g., creating a fully digital and collaborative Procure-to-Pay process via multi-network business platforms); delivering products that mirror consumer applications (e.g., eCommerce-style marketplaces for procuring goods and services); and leveraging emerging technologies (e.g., artificial intelligence to process POs and detect possible fraudulent spend, etc.), the firm notes.
- Within organizations, actual procurement structures can vary. Overall, organizations tend to have centralized procurement departments, but decentralized procurement processes become more prevalent with increased size—most likely due to more widespread purchasing activity and disparate processes across a higher number of locations. By contrast, Levvel Research reports that small organizations are most likely to have no procurement department at all. SMEs with a procurement department, it adds, are more likely to be centralized than any other revenue segment. “Centralized departments are most likely to use a procurement manager, while organizations with multiple procurement departments are most likely to direct POs to managers in individual departments,” Levvel Research explains. “Enterprises use a combination of methods, which reflects the higher degree of variance in purchasing methods with their increased size and decentralized procurement.”
- E-procurement adoption increases as companies grow. Through its research, the firm found that 73% of SMEs use procurement tools that are built into their accounting tools or enterprise resource planning (ERP) systems. It says enterprises are more likely to use an e-procurement solution than any other segment, and that e-procurement is also their most common method of placing orders (on par with directly ordering through e-commerce platforms).
- Top procurement pain points are fairly consistent across organizations, and include (but aren’t limited to):
- Inconsistent procurement process throughout organization
- Matching POs to invoices
- Unclear or lengthy requisition or approval process
- Onboarding vendors
- Poor communication or transparency between procurement and AP
- Data inaccuracies for suppliers, orders, payments, etc.
- Lack of visibility/control over spending
- High maverick spending
- Disjointed/non-integrated procurement systems
- Paper-intensive process
- Outdated/inadequate technology
- Procurement plays an important role in today’s organizations (and knows it). Although procurement’s place is never fixed—it naturally shifts in importance, function, and operation as a company grows—for the majority of organizations, procurement operates as a strategic arm within a tactical back office. “Many procurement departments see themselves as crucial to ensuring financial stability for their company,” Levvel Research concludes, “by maintaining competitive and controlled purchasing, strong supplier relationships, and low maverick spend.”