The Priorities And Trends Shaping Procurement Strategy
A new survey from Oliver Wyman, The Priorities And Trends Shaping Procurement Strategy, has given a snapshot of the priorities from a range of top procurement executives.
The survey included divisional directors and managers all the way up to the C-suite level, representing a range of industries, with the largest proportion coming from financial and professional services – with their organisations varying in size from less than US$1m in annual revenue to more than US$1bn.
Across different sectors, companies are facing a range of constantly increasing and evolving supply chain challenges. Procurement leaders are facing unrelenting pressure to alleviate short-term sourcing challenges, while also getting ready for new conditions that could arise in the future.
These leaders are well aware that any decision they make now could have far-reaching consequences across their business.
In this survey, Oliver Wyman, a global leader in management consulting, looked to get the views on the most important issues for these leaders and the tactics they are employing to tackle them effectively.
Taking on their insights, this survey gives a comprehensive analysis of priorities and trends in procurement.
The discoveries are based around four key findings that were uncovered: the leaders' strategic priorities, the utilisation of generative artificial intelligence (Gen AI) in procurement, nearshoring and risk resilience.
Strategic priorities for procurement leaders
There is a focus on multiple value sourcing priorities in 2024. Taking priority was unlocking the value in strategic supplier relationships, which half of them cited as critical. Under pressure to be more competitive, leaders view the strategy as particularly important to create sustainable resilience, limit customer price increases and protect margins.
Other priorities include talent retention, refinement of their processes and strategy adjustments.
Within the full report, Paul DeLaRosa, CPO at Teledyne, says: "Further maturing and developing strategic supplier relationships with our top manufacturers is one of our top priorities. Manufacturers want to be closer to their design customers, while we want better commercial arrangements with supply resilience — it's a win-win."
Use and challenges of AI in procurement
In the recent report, The New Growth Agenda, the Oliver Wyman Forum found that 96% of CEOs view AI as an opportunity, not a risk.
The executives in the survey seemed optimistic and are especially focused on Gen AI.
Most of those asked are already using it in their procurement operations, or are making plans to do so in the future. However, there are also reports encountering a host of challenges with the adoption of new tech and are seeking partners that can provide the right expertise to implement it successfully.
Those making early forays into the use of Gen AI, the most common is contract management, where nearly 40% of organisations across industries have leveraged the technology's language processing capabilities.
What to consider about strategic nearshoring
Nearshoring, or shifting procurement of either direct or indirect material to nearby countries, was a major trend uncovered in the survey.
Through this, there are hopes to reduce transportation costs, gain better control of manufacturing processes and achieve greater resilience against disruptions such as trade tensions and the COVID-19 pandemic.
Close to 60% of respondents said they have already implemented nearshoring activities or are at least considering them.
Risk resilience in procurement
Leaders are continuing to be supported by the risk measures already in place to mitigate those supply chain risks and enhance their resilience. There are plans to take new ones in certain areas.
The leader was contract management, with 73% of survey respondents saying they have prior contract management initiatives in place and plan to improve them in 2024, while another 20% expect to implement initiatives for the first time this year.
Leveraging the four procurement strategy themes
The four themes provide a road map for creating a winning procurement strategy.
Organisations need to bear all of these in mind as they proceed in crafting and executing their plans.
By following this advice diligently and skilfully — and enlisting the right guidance where needed — leaders will see tangible and even transformative results in their procurement functions.
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