Procurement strategies for 2023 amid economic uncertainty

Insights from the Hackett Group's 2023 Key Issues report outline procurement priorities amidst economic uncertainty, pointing to digital transformation

According to The Hackett Group's "2023 Key Issues" report, economic downturn and recession are the top concerns for two-thirds of organisations surveyed, driving the need for further transformation.

Procurement's main priorities for the year include ensuring supply continuity, combatting inflationary pressures and reducing spend cost.

While inflation has led to a shift in negotiation strategies, the current environment provides an opportunity for aggressive spend cost reduction.

45% of respondents believe that accelerating digital transformation is the best course of action to navigate the challenging economic environment.

This includes investments in supplier risk and performance management, supplier onboarding, contract lifecycle management, and spend analysis.

According to Alex Saric, Ivalua's CMO, businesses need to take a more collaborative approach to their supplier relationships in today's volatile economy.

Technology plays a crucial role in enabling greater transparency and engagement with suppliers, allowing procurement teams to insulate their organisations from external disruption and increase supply chain resiliency.

While most organisations feel positive about their maturity in strategic sourcing and talent management, they feel less confident about processes such as supplier relationship management, third-party risk management and supplier performance management.

Additionally, procurement teams' workload is predicted to increase by 10.6%, while procurement staff headcount and operating budget are expected to grow by just 3.2% and 2.8% respectively, highlighting potential productivity and efficiency gaps.

As a solution, procurement organisations plan to increase their technology spend by a median of 5.7%.

Agility Holds the Key to Digital Transformation

Digital Transformation is, of course, something which offers even wider benefits.

Simple digital transformation, existing in a silo and disconnected from other processes, is a fantasy.

Along with Digital Transformation, it is important for companies to implement agility, since without it, any attempts at digital transformation are sure to fail.

Agility will bring confer many advantages to businesses and procurement in general, including, but not confined to digital transformation.

A recent article by Lee JonesCEO of Worldline Merchant Services UK Limited, written for The European Business Review, outlined 5 steps business owners and/or decision-makers can take to implement agility, to secure further growth within their organisation, and why it matters.

1. Acceleration of digital transformation

"Driven by enhanced connectivity and extraordinary new data capabilities, organisations now have the wherewithal to benefit from real-time information and insights, enabling better decision-making.

"It is often said that agility is the key to survival in an increasingly globalised age full of constant technological twists and turns.

"According to KPMG, 81% of companies have identified agility as one of their most important initiatives, by beginning their own agile, digital transformation projects within the past three years."

2. A commitment to being better

"The most successful businesses are those which actually do embrace change, take risks, and embrace initiatives that hone their models and procedures.

"The past couple of years have been especially challenging for companies, across all sectors.

"And if there is one lesson that we have learnt, it’s that the key to ensure the survival of your business is having the will to constantly search for ways to improve. You simply cannot rely on legacy systems, stubbornness or an attachment to the past."

3. Making Customer Experience (CX) a priority 

"CX fuels digital transformation, by encouraging businesses to show agility and improve their customer journey.

"utting CX at the heart of their agility strategy is already a priority for many businesses.

"According to a recent survey by HBR, 72% of respondents said they were excited about the accelerating shift towards digital because of opportunities to create better relationships with customers."

4. Embracing failure

"One of the greatest challenges for organisations looking to become more agile is overcoming the well-established fear of failure which continues to be engrained in so many businesses across different sectors.

"In the end, agility is exactly that – a series of trials, testing something new, figuring out if something works well, benefits the organisation and achieves the expected outcome, i.e.  benefits your customers. But failure will always be a part of this progression.

"That does not however necessarily mean that the whole process is doomed. Quite the opposite; a temporary failure always brings lessons to help improve and move forward."

5. A willingness to learn

"Taking an agile approach means setting an ultimate goal, but not being tied to a methodology, the amount of time needed to implement it, or the cost involved in achieving it. In the end, change is inevitable and ongoing – there is always more to do.

"It’s this that makes agility so important in digital transformation. Brands must be smart and lean enough to stay ahead of the curve, no matter what size they may be."

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