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With the second quarter of the year well underway, procurement leaders are reflecting on what took place over the last few months and looking ahead to the rest of the year. While at least the raw material shortages that dominated headlines over the last few years may be waning, the labor shortage, inflation, rising business costs and recessionary fears continue to impact organizational bottom lines. And this, in turn, affects how procurement professionals tackle their day-to-day responsibilities.
Wanting to learn more about what procurement teams are prioritizing this year, The Hackett Group recently surveyed leaders of finance, human resources, information technology, procurement and global business services (GBS) organizations to understand the overall business context shaping these leaders’ priorities right now. When conducting its 2023 Procurement Agenda and Key Issues Study, the company also presented a set of procurement specific questions with the goal of better understanding that particular group’s strategic priorities and initiatives.
One of the most interesting aspects of The Hackett Group’s latest survey is a slide that reflects on the changes in procurement priorities over the last four years. In 2019, for example, respondents’ top priority was becoming a strategic business advisor, followed by reducing spend cost and improving “stakeholder-centricity.” They were also centered on improving procurement agility and enhancing process efficiency.
Fast-forward to 2021, when most of the world was in the depths of a global pandemic, and procurement leaders ranked reducing spend cost and reducing risk to ensure supply continuity as their top priorities. Becoming a strategic business advisor dropped to third place, followed by accelerating procurement digital transformation and improving procurement agility.
For 2023, the list of procurement priorities was once again reordered, with two entirely new priorities making the list. Ensuring supply continuity is now the top concern, followed by combatting inflationary price increases (2023 is the first time this was mentioned in the top 5 listing) and reducing spend cost. This year, procurement leaders are also pursuing digital transformation and working to improve their organizations’ analytics and insights capabilities (also a new “top 5” concern for 2023).
“Supply continuity has retained the top position for the second year in a row. Supply issues have remained top of mind for many teams due to the additional disruption caused by the Russia-Ukraine conflict in 2022. Reducing supply disruption is critical to [protecting] revenue and profitability,” The Hackett Group points out in the report. “Against the current inflationary economic environment, it is not surprising to see combatting inflationary price increases, high on the priority list. While inflationary pressures have eased in some spend categories, they remain a concern in other areas.”
According to the survey, 2023 is also the first year that procurement departments are making analytics a high priority. “Procurement recognizes that success requires a data and insight-driven approach,” The Hackett Group notes. “[And that a] critical enabler is providing reliable and forward-looking data and intelligence to end users, including capabilities such as modeling and projecting the impact of inflation.”
These priorities rounded out the list of top 10 concerns that procurement is focused on right now:
- Strengthen third-party risk management visibility and capability. The Hackett Group says that the focus on third-party risk management remains high for procurement teams. One reason for this can be traced to procurement’s struggle to gain sufficient visibility into risk in today’s rapidly changing business environment.
- Act as a strategic advisor to the business. “Procurement organizations continue to view becoming a strategic advisor to the business as an enabler to achieving performance goals and delivering on an expanding list of enterprise and functional objectives,” the company reports.
- Improve stakeholder-centricity. Being a strategic business-enabling function requires a focus on the needs and expectations of stakeholders (e.g., customers, internal business, suppliers), and procurement’s operating model works optimally when it’s designed through the lens of these groups.
- Improve procurement agility. “Becoming an agile enterprise is increasingly important for businesses, but it requires developing agile behavior at the process level,” The Hackett Group states. “Being able to pivot to support new stakeholder requirements is critical to effectively support business objectives and stakeholder satisfaction levels.”
- Embed responsible procurement. Employees, customers, governments and other stakeholders are all demanding more sustainability from the companies they work with and/or buy from. Procurement departments are well positioned to help their organizations achieve these goals.
