Digital Transformation Key to Bridging Productivity and Efficiency Gaps

Ensuring supply continuity and combatting inflationary price increases are the top two priorities for procurement organizations 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, Inc. (NASDAQ: HCKT). But strategic priorities are driving procurement’s continued focus on reducing spend cost, and pursuing digital transformation remain critical, along with improving analytics and insight capabilities.

Talent management is the No. 1 planned improvement initiative for procurement organizations 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.

Procurement organizations 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 organizations 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 one-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.

A complimentary version of The Hackett Group’s 2023 CPO Agenda research is available, with registration, at https://www.thehackettgroup.com/insights/2023-procurement-key-issues-2301/.

“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 No. 2 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 10, 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 10 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 exceed the number focused on all other areas.

“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 organizations must build effective capabilities for continuous data acquisition and advanced analytics to provide both predictive and prescriptive insight and intelligence.”

The Hackett Group’s 2023 Key Issues research is based on results gathered from more than 350 executives in finance, procurement, supply chain, human resources, information technology, and global business services at a global set of midsized and large enterprises.

About The Hackett Group

The Hackett Group, Inc. (NASDAQ: HCKT) is a leading benchmarking, research advisory and strategic consultancy firm that enables organizations to achieve Digital World Class^™ performance.

Drawing upon our unparalleled intellectual property from more than 25,000 benchmark studies and our Hackett-Certified^® best practices repository from the world’s leading businesses – including 97% of the Dow Jones Industrials, 93% of the Fortune 100, 73% of the DAX 30 and 52% of the FTSE 100 – captured through our leading benchmarking platform, Quantum Leap^® and our Digital Transformation Platform, we accelerate digital transformations, including enterprise cloud implementations.

For more information on The Hackett Group: visit www.thehackettgroup.com; email info@thehackettgroup.com; or call (770) 225-3600.

The Hackett Group, Hackett-Certified, quadrant logo, World Class Defined and Enabled, Quantum Leap and Digital Excelleration are the registered marks of The Hackett Group.

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