Hackett Group: Procurement Cost Reduction is Top Priority

The CPO Agenda - The Hackett Group Report   (Credit: The Hackett Group)
The CPO Agenda - The Hackett Group Report (Credit: The Hackett Group)
Research from The Hackett Group indicates cost reduction is the key priority for procurement executives

The Hackett Group’s 2024 Key Issues research found improving cost reductions is the highest priority for procurement leaders.  It comes as businesses work against a climate of high interest rates, labour shortages, and the challenges of growing revenue.  

The ability to maintain supply continuity was the key concern in the 2023 version of the survey, but that issue has now fallen to second place in the survey.  Other significant priorities included combating inflationary pressures, acting as a strategic advisor, increased expectations of the procurement function, and transforming the procurement operating model.  

2024 Procurement Priorities Source: Key Issues Study, The Hackett Group, 2024

Planned improvements to procurement technology

The Hackett Group’s 2024 Key Issues research is based on results gathered from more than 375 executives at a global set of mid-sized and large companies. One area covered in the data is planned improvement initiatives in the next calendar year.  Data analytics and reporting is at the top of the list of planned improvement initiatives, followed by talent management. 

Other development areas listed in the research include category management, sustainable procurement, third-party risk management and supplier relationship management.

Top 10 Improvement Initiatives in 2024 Source: Key Issues Study, The Hackett Group, 2024

Spend reduction in 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 Chris Sawchuk.

“Procurement teams are projecting higher levels of savings in 2024 for both purchase cost reduction and cost avoidance. But most procurement organisations have a significant opportunity to drive improved value on lean procurement cost structures. The Hackett Group’s benchmark analysis quantifies the opportunity – Digital World Class® procurement organisations deliver nearly double the spend cost reduction savings of their peers, while expending 21% less on procurement overall, translating to a 2.5X higher return on investment.”

Chris Sawchuk Principal and Global Procurement Advisory Practice Leader at The Hackett Group

According to The Hackett Group’s Senior Research Director of Procurement and Purchase-to-Pay Advisory Amy Hillcox, “Supply chain disruption risk remains top of mind for many procurement teams due to ongoing geopolitical conflicts. Managing supply disruption is critical to protecting revenue and profitability, and several capabilities key to supply continuity – including supplier relationship management and third-party risk management – were identified as critical development areas in our research. Procurement must continue to enhance its capabilities in these areas, engaging in upfront risk monitoring across a broader set of risk domains, and continuing to monitor and mitigate risks using real-time data and insights through the full supplier life cycle. Teams also must stay abreast of the developments in digital tools – such as AI and generative AI – to maximise visibility throughout the supply chain, while leveraging market intelligence data from multiple internal and external sources.”


Make sure you check out the latest edition of Procurement Magazine and also sign up to our global conference series - Procurement & Supply Chain LIVE 2024 


**************

Procurement Magazine is a BizClik brand 


Share

Featured Articles

Beko: Supplier ESG Plan Delivering Sustainability Success

How is home appliance giant Beko using their sustainable supply chain management and Supplier ESG Programme to deliver sustainablity success?

Four Speakers Announced for P&SC LIVE London

Executives from Vodafone, Unipart, Mastercard and SAP will join Procurement and Supply Chain LIVE when it returns on September 24 & 25

We’re LIVE: Procurement & Supply Chain LIVE New York – Day 2

Join us for day two of Procurement & Supply Chain LIVE New York, the ultimate virtual event for leaders in North America and Canada

We’re LIVE: Procurement & Supply Chain LIVE New York – Day 1

Procurement Strategy

Four New Sponsors join P&SC LIVE London in 2024

Digital Procurement

P&SC LIVE London Welcomes Four New Sponsors

Procurement Strategy