Ensuring supply continuity and combatting inflationary price increases are the top two priorities for procurement in 2023, while talent management has jumped to the top of procurement’s list of planned improvement initiatives, according to new CPO Agenda research from The Hackett Group,
The Hackett Group’s 2023 Key Issues research is based on results gathered from more than 350 executives in finance, procurement, supply chain, HR, IT, and global business services at a global set of midsized and large enterprises.
But strategic priorities are driving procurement’s continued focus on reducing spend cost, and pursuing digital transformation remains critical, along with improving analytics and insight capabilities.
Talent management was the number one planned improvement initiative for procurement in 2023, The Hackett Group® found.
But it was surprisingly absent from procurement’s list of top priorities for 2023, in part because executives view talent management as a relatively mature capability. Several other priority improvement initiatives show lower maturity levels – including supplier relationship management, responsible procurement, third-party risk management, core procurement technology enablement, and supplier performance management.
Workloads on the up
Procurement will also need to find ways to do more with less in 2023, according to the research. An expected 10.6% increase in workload combined with smaller increases in procurement staffing and budgets will drive a productivity gap of 7.4% and an efficiency gap of 7.8%. An increase in technology spend of 5.7% indicates a growing reliance on technology to increase procurement productivity, efficiency, and effectiveness.
Procurement organisations have a high level of adoption of end-to-end and core procurement technologies, the research found, and projected growth rates are also high. Large-scale deployment of some technologies is still limited, but there is an exciting level of piloting for supplier risk and performance management tools, as well as tail spend management solutions. Procurement leaders are also recognizing that success requires a data- and insight-driven approach, with technology as a key enabler. Nearly half of all companies surveyed have large-scale deployments of spend analytics tools in place, and another 44% have pilots. Spend analytics is also among the technology areas with the highest growth rates for 2023, the research found.
Priorities being reordered
“We’ve seen a reordering of priorities in terms of procurement strategy for 2023,” said The Hackett Group Senior Research Director, Procurement and Procure-to-Pay Advisory Amy Hillcox.
“Ensuring supply continuity, the top priority is even more of a focus than it was two years ago at the outset of the pandemic, in part because of geopolitical turmoil and other disruptions. Combatting inflationary pressures has soared to the number two spot, which is to be expected.”
According to The Hackett Group Principal and Global Procurement Advisory Practice Leader Chris Sawchuk, “The biggest surprise for 2023 is that talent management isn’t in the top ten, which it has been for several years. Talent should be a foundational element for many of the things that procurement leaders are trying to accomplish. But for 2023, it’s fallen off the top ten list, in part due to the current and difficult economic environment as well as the perception that it’s a fairly mature capability. Even with that, the number of organizations with talent management improvement initiatives planned in 2023 exceeds the number focused on all other areas.
Reducing spend cost a priority
“Reducing spend cost not only remains a core priority for procurement but will be elevated further in 2023 as procurement organizations aggressively pursue opportunities to claw back cost increases that have occurred in the last couple of years,” said Sawchuk. “But more and more, procurement organizations will also be looking to augment their cost savings initiatives to create broader value and true competitive advantage for their companies. To do this, procurement must build effective capabilities for continuous data acquisition and advanced analytics to provide both predictive and prescriptive insight and intelligence.”