May 26, 2016 | Written by: Matt McGovern
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We make it a point to stay ahead of the curve and understand the critical challenges and priorities for procurement organizations at Fortune 1000 and Global 2000 companies.
The IBM Institute for Business Value (IBV) Chief Procurement Officer (CPO) Study is a prime example. The IBM IBV CPO Study surveyed more than 1,000 procurement executives across 41 countries to determine the specific procurement solutions and strategies that drive value and bottom-line impact.
We also host and attend dozens of conference each year — from SIG to ProcureCon — to help us understand the challenges faced by global procurement organizations. By gaining valuable insights into our clients’ priorities, we can help guide the direction for IBM procurement solutions.
Based on our research and client input, there are several notable trends poised to shape the future procurement landscape. Here’s my take on the top five trends:
#1: Connecting S2P processes and solutions — According to research by the Aberdeen Group, 86 percent of best-in-class procurement organizations report that they still have a corporate mandate to reduce costs and increase savings. 41 percent of these same procurement organizations report that they also have an objective to reduce the complexity, and improve the efficiency, of the source-to-pay (S2P) process. We consistently hear CPOs talk about various challenges they face when S2P procurement processes are not connected end-to-end. These CPOs are focusing on connecting upstream procurement processes and technologies, such as sourcing and contract management, with downstream procurement processes and technologies, such as expenses and invoicing, to connect the entire S2P cycle.
Aberdeen Group also offers a free online source-to-pay solution and process assessment.
#2: Integrating risk management — One of the key findings of the IBM IBV CPO Study was that top-performing procurement organizations, defined as the top 10 percent of those surveyed with the best savings and profit margins, have a much more aggressive view of managing risk than their peers. Top-performing procurement organizations have it on their agenda to integrate risk management across their supplier management processes. And 85 percent plan to integrate dedicated risk management solutions and capabilities with their procurement systems.
#3: Centralizing supplier intelligence — Most of the challenges CPOs face, of course, are rooted at the supplier level — whether it’s racing to onboard suppliers, evaluating performance, enforcing compliance, assessing risk, or developing a supplier. And much of the challenge of these tasks is related to managing the related supplier data or intelligence. With supplier data scattered across disparate and diverse systems, companies are often overwhelmed with the management of supplier information and applying this information to actionable supplier strategies. This explains why top-performing procurement organizations are focused on moving toward establishing a single, accurate source of supplier data – shared across supplier programs, geographies, and solutions.
In fact, more than eight out of 10 of top-performing procurement organizations see supplier intelligence technologies as critical to their success.
#4: Developing analytics capabilities — Use of predictive analytics in procurement is expected to increase steadily over the next few years. Currently about 19 percent of procurement organizations employ analytics, and that number is expected to rise to 31 percent over the next two years. The IBM IBV CPO Study found that top-performing procurement organizations are much more likely to embrace advanced analytics. In fact, 91 percent of top-performing procurement organizations say that leveraging analytics will be essential to their success.
Given the findings on analytics in the IBM IBV CPO Study, IBM commissioned a follow-up study by renowned supply management expert, Dr. Robert Handfield, who conducted extensive interviews with 24 of the world’s top procurement leaders regarding their analytics programs. The resulting report, Procurement Analytics: Enabling the Journey to Value, details the steps necessary to create a successful procurement analytics program.
#5: Driving innovation — Another key finding of the IBM IBV CPO Study was that top-performing procurement organizations put a focus on innovation — innovation in both applying technologies to procurement processes and introducing innovation to the enterprise from suppliers. 38 percent of top-performing organizations cited bringing in innovation to the enterprise as a top priority, which was second only to reducing costs and increasing profitability for the enterprise.
Looking to promote innovation — and continue to generate savings? It is possible! Check out the infographic below, and alight to the 6 Vexing Questions on the Minds of CPOs SlideShare.
Savings or Innovation? Use Technology to Do Both.