By Dr Jona than Be t t s Our latest Procurement TrendsSurvey shows positive progressionset against a backdrop ofcontinued cost and resourcepressure. Leading procurementprofessionals are disrupting thestatus quo and delivering tangibleresults in spite of disruptioncaused by economic andtechnological factors.

The survey, in collaboration witheWorld Procurement and Supply,is in its fifth consecutive year. Thisallows us to analyse trends andunderstand what is on thecollective procurement mind inplanning for the year ahead. Thereis an encouraging rise in indicatorsof a more strategic approach.However, a lack of resources andinvestment is the biggestchallenge in 2016.

And, whilst there has been animprovement in bread-and-butteractivities, such as increasingspend under management, therewill be no let-up in the pressure oncost reduction.

Most surprisingly, theprocurement surge of the last twoyears with increased investmentin procurement capability hasreceded. There seems to be anattitude of making do with whatwe have, albeit at presumablybetter levels of resource thanprior years.

Our sense is that the outlookdepends very much on whereyou sit – whilst the UK economy isdoing well, manufacturing hasbeen hard hit this year and thepublic sector is still grapplingwith austerity. A combination ofsector and approach – to disruptor be disrupted – will determineprocurement outcomes duringthe year.

A significant push in the profession overrecent years has been to disrupt thecommon view that procurement is justabout cost reduction. Having beenconsistently selected by 80% ofrespondents over the last four years, costreduction as a priority fell to 69% this year.So this feels significant but we will have tosee whether it is a sustained shift beforereading too much into it (and it remains byfar the highest priority). The next tier ofpriorities selected by more than a third ofrespondents is:

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Last year, sentiment across the professionwas particularly bullish – so much so thatwe entitled our survey report “ProcurementSurge.” This year a retreat is being drivenas all investment indicators have turnedred. Worryingly, investment in people willbe reduced with only a little over a quarter(26%) investing in procurement training (afall of a third from previous years). Inaddition, fewer than a quarter are planningto recruit to new roles (23%) as opposed tothe 30% last year who were in expansionarymode. Fewer than one in 20 see talentacquisition and development as asignificant challenge this year – a massive76% drop since last year.

Other investment indicators, includingplans to invest in technology also declinedbut not as dramatically. The number whowill retain the same capability as last yearincreased by 30% (to 41%) whilst one ineight will reduce investment in 2016.

Both public and private sectors are beingseen as tough environments to operate in.Local authorities and manufacturing areseen as the two sectors facing the biggestchallenges over the coming year. Whilstcost pressures in healthcare continue tofigure highly in the news, it’s possible wehave become inured to it as there was a 46%

drop in those selecting it as the sector facingthe greatest procurement challenges.

Taken in the round, the results suggest thatlast year’s surge upped procurementcapability to a level that chief procurementofficers (CPOs) feel will fulfil theirrequirements over the coming year.

Bottom of the pile were tackling fraud andearly settlement financing. Whilst both ofthese might be deemed to be more financeactivities than procurement, we weresurprised by how low they figured(selected by just 4% and 2%, respectively),particularly as many see supply chainfinancing (SCF) as the next disruptive force.There may be an element of waiting to seehow things pan out in the dynamic SCFmarket before taking the plunge.

Reducing supply risk.Becoming more strategic.Improving contract management.Effectively elating to controlling spendand efficient purchasing.

Financial control, saving time and P2Pautomation are relatively low on theagenda with between a fifth and a quarteridentifying them as priorities. Whilstundoubtedly important, we would expectthe majority of organisations to have theseaspects well sorted already.

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Despite the fact that the supply base has endured manyyears of cost pressure, procurement savings targets remainas aggressive as ever. Most CPOs (38%) have a target ofbetween 6 and 10% whereas a quarter must achieve 10%

savings or more. Based on the results delivered in previousyears, we can be confident that procurement will deliverthe numbers – over the last three years about two-thirds ofrespondents recorded savings of up to 10% with more thana quarter achieving over 10% (included one in 20 above20%).

How will this be delivered? One area that stands out isdriving more spend under management as a key source ofvalue liberation. As over half of organisations have lessthan 60% spend under management, there remainssignificant headroom for additional value to be captured.Collaborative procurement – a common approach todriving standardisation and reducing costs – is a key areafor development for almost a third of organisations.More than half of organisations (57%) are also prioritisingspend analysis in the coming year. This will identifysources of value – both immediate cash savings and longerterm opportunities for releasing value (e.g. supplierrationalisation, category management and negotiationopportunities).

We would also suggest that implementing a P2P solutioncould help. Although an improvement from three years agowhen 58% of respondents had no P2P solution, 43% oforganisations are still lacking in this regard. The 57% with asolution includes both dedicated/best-of-breed solutionsas well as finance/ERP system-based ones.

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Respondents now rank ease-of-use and data accuracyahead of customer service as the most important factors fora procurement solution. This shift signifies a growingawareness of the factors driving adoption.

There is also a much higher recognition of the importanceof security – perhaps driven by high profile cases in themedia (albeit not procurement-related) – with theproportion of respondents selecting it more than doublingsince 2015. Similarly, the immediacy of insight throughreal-time reporting has increased significantly.

In respect to technologies that will impact on procurementover the next five years, cloud-based solutions and big dataremain top of the list. Technologies such the Internet ofThings (IoT) and 3D printing are seen as playing a muchlesser role.

This is perhaps down to the lack of case studies showing adirect impact on procurement or their application beingrestricted to relatively specialised areas (e.g. 3D printing ofMRO components). On the other hand, the identification ofartificial intelligence (AI) was surprisingly low with just 6%

of respondents selecting it. AI is already widely used,underpinning big data applications and having asignificant impact in areas such as spend analysis, dataprocessing and search tools. We expect AI in all its forms tohave an increasing impact in coming years and predict thatit is the area most likely to disrupt procurement.

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Indeed, a third only tackle supplierperformance when something goeswrong – they collect the data but areoften too busy to do anything with it!That said, although there has been amove away from enforcing mandatorysupplier contract compliance, wehave seen an increase in measuringcontract compliance.

Interestingly, moving from a tactical toa strategic function is seen as one ofthe key challenges for procurementthis year (63% growth from last year).Supply chain collaboration is a keyroute through which this will beaffected and this was selected as themost important area for developmentof procurement this year with 39%

prioritising it.

If strategic procurement is aboutleveraging procurement capabilities todeliver value in support of theorganisation’s strategic objectives thenthere has been a clear advance in the lastfew years.

In particular, supplier engagement hasincreased and the proportion saying thatprocurement “is left to do its own thing” –

the “lone wolves” – has dropped by 76%.At the same time, those that say theirprocurement strategy and resultingactions are well-defined on the basis ofbusiness priorities increased by 83% toover 40%.

However, work remains to be done as just6% rate supplier performancemanagement (SPM) as excellent (whereSPM is a key source of value for thebusiness and suppliers are rigorouslymeasured and managed against theirobligations).

In summary, we have detected some significant shifts in both actuality andsentiment this year. There is a sense that the bullishness of the last two years hasdeflated somewhat and that procurement departments are making do with whatthey have. However, capability levels and resources have gone up a level in thattime so what we have is substantially better than a few years ago.

There are a number of certainties or hard predictions that all procurementprofessionals can plan against – data capabilities will become increasinglyimportant (get these into your setup now), delivering cost reduction will not goaway (better data will help with this), and limited resources will be a constant.

The very nature of progressive professionals is that we will always be looking to domore – the successful are those that can start to deliver tangible results from withincurrent resources and become the disruptors rather than the disrupted.

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