CSCMP's Supply Chain Quarterly
Procurement
May 19, 2019
Forward Thinking

Study: Procurement needs a higher profile

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Companies must develop a stronger focus on purchasing in the digital age if they want to innovate and increase their business agility, Forrester/Ivalua study shows.

The procurement function must evolve alongside ePurchasing technologies if companies are to make the most of their digital transformation, according to a recently released study from Forrester Research and procurement software and technology firm Ivalua.

The study of more than 400 procurement leaders set out to evaluate the state of procurement and the maturity of the procurement function within their organizations. The researchers said they found that most organizations overestimate their procurement maturity and have much work to do if they are to take a larger role in their firm's digital transformation. Among the study's findings:

Leaders significantly overestimate their true procurement maturity level. A large majority of respondents said that their procurement organization was advanced and "creating a competitive advantage," but the study showed otherwise. "Our own assessment found the overall self-assessments to significantly inflate reality. Procurement leaders have much to do to be truly advanced, from driving much higher levels of digitization to driving greater value in areas beyond cost such as product innovation, revenue growth, and supporting business agility. A more realistic assessment is required if leaders are to drive the required improvements," the study authors said.

C-level support underpins success. Lack of executive support is a critical obstacle to successful transformation, particularly early in the journey, according to the study. "It impacts obtaining the necessary budget and launching the change management efforts required. Successful leaders think beyond their function to both gain support for initiatives and ultimately establish procurement as a more strategic department," the authors said.

Modern ePurchasing software is a vital enabler of transformation. More advanced organizations are empowered by superior technology and less mature ones encumbered by inferior tools, whether spreadsheets, homegrown systems, or ERP [enterprise resource planning] purchasing tools, according to the study. "Poor tools create a series of problems, including access to unreliable data, inconsistent adoption by employees, and inadequate adoption by suppliers. While the right talent is critical, successful transformation requires the right tools," the authors said.

Organizations often regret their technology choices. Despite the importance of technology, success with initial choices is mixed, the study concluded. "The vast majority of respondents switched or are considering switching technology. It is not enough to purchase modern technology. Leaders must be very diligent in their selection criteria, considering both current and future requirements to avoid technology becoming a roadblock in their transformation," the authors said.

Forrester Research conducted the April 2019 study, "Executing a Successful Procurement Strategy" on behalf of procurement software provider Ivalua.

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