Hackett: Procurement Renews Focus On Cost Reduction as its Top Priority
Procurement Targeting Technology, Including Gen AI, To Help Close Efficiency Gaps and Improve Effectiveness
Procurement is once again anticipating an efficiency gap in 2024 as workload is expected to increase by 8% in 2024, while budgets are expected to rise by only 1.6%. Procurement organizations are hoping to use technology, including Gen AI, to make up some of the gap, and technology spend is one area likely to be spared potential cuts, with an expected 4.6% spending increase.
Data analytics and reporting topped the list of planned improvement initiatives for 2024, followed by talent management. Data analytics was one of several improvement initiatives deemed to be of high importance but low maturity, making it a critical development area. Other critical development areas include category management, sustainable procurement, third-party risk management and supplier relationship management.
Procurement organizations have a high level of adoption for end-to-end core procurement technologies, with projected double-digit growth in 2024 to support continued digital transformation efforts. Current adoption of supporting and emerging technologies is not as extensive as for core technologies, and growth projections are more modest, ranging from 2% to 13%.
Although Gen AI remains an emerging technology, 28% of procurement organizations have already added it to their portfolio of procurement technology solutions. The most promising opportunities are spend analytics and contract life-cycle management, both areas where easy access to accurate data can greatly enhance effectiveness of procurement personnel. Category management is another area for Gen AI adoption highlighted by 50% of respondents who can envision the power of being able to pull together category-specific expertise, historical spend data, planned expenditure, and supply market data to automatically create category strategies and thus freeing up time to allow procurement personnel to focus on collaborating more closely with business stakeholders.
A complimentary version of The Hackett Group’s 2024 Procurement
“Spend cost reduction is perennially a high priority for procurement. But economic concerns have propelled it back into the top spot this year. In addition to the array of global economic challenges, companies are concerned about their ability to grow revenue, so cost focus and margin expansion are key. Many companies are even hoping to claw back some of the inflationary cost increases to support margin growth,” said The Hackett Group’s Principal and Global Procurement Advisory Practice Leader
According to The Hackett Group’s Senior Research Director of Procurement and Purchase-to-Pay Advisory
The Hackett Group’s 2024 Key Issues research is based on results gathered from more than 375 executives in finance, procurement, supply chain, human resources, information technology, and global business services at a global set of midsized and large enterprises.
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