The Future of Procurement -...

The Future of Procurement Spotlight on the consumer products industry February 2016

A global survey of executives and practitioners

In collaboration with SAP Ariba, Oxford Economics conducted a large-scale global study to discover emerging and enduring trends in the procurement function. We surveyed 500 procurement executives and 500 procurement employees around the world.

Respondents represent a range of industry segments, including a significant sample from consumer products:

11%

11%

11%

10%

58%

Financial services

Retail

Consumer products

Energy and regulated industries

Other

11%

11%

12%

10%

56%

Financial services

Retail

Consumer products

Energy and regulated industries

Other

Executives Practitioners

Procurement gets collaborative

Executives and practitioners see collaboration differently—and differ from professionals in other industries, too. §  Energy executives are less likely than their

peers in other industries to say they would like their employees focused on strategic collaboration with suppliers (28%, vs. 42% of other executives).

§  Despite the lack of emphasis on work with suppliers, energy executives say supplier quality and performance is a top KPI (62%, vs. 48% of other executives), and that suppliers are helping them transform their business model (60% vs. 50%).

§  Collaboration with functions across the business is a focus among energy executives (78%, vs. 66% of other executives)—but practitioners in the energy industry are less likely to emphasize internal collaboration.

78% 59%

60% 57%

50% 69%

Procurement is becoming more collaborative with other parts of the business.

Procurement is becoming more collaborative with suppliers.

Procurement data is being used across the company to drive strategic decision-making.

Energy executives Energy practitioners


In the consumer products industry, procurement executives and practitioners do not always see eye-to-eye on the state of collaboration. §  Consumer products practitioners tend to

emphasize collaboration more than their executive counterparts. But executives do acknowledge suppliers’ growing role: 67% say suppliers increasingly contribute to marketing and product design, vs. 54% of other executives.

§  Procurement may lack the collaboration technology it needs: 39% of consumer products executives say increased mobility allows for closer partnerships with suppliers, vs. 53% of others.

§  Consumer products practitioners are just as likely as their peers in other industries to spend time working closely with suppliers on both administrative and strategic tasks.

54% 69%

57% 68%

54% 68%




Consumer products executives

Consumer products practitioners


Procurement professionals in the financial services industry see a growing role for strategic collaboration—especially with external suppliers. §  Integrated supplier networks are enabling

greater collaboration with suppliers—79% of financial services executives say so, compared with 61% of all other executives.

§  Financial services practitioners are more likely than executives to report increasing collaboration with other areas of the business (74% vs. 60%).

§  Financial services executives are more likely than execs from other industries to consider supplier innovation programs—another key collaboration effort—as a top investment priority (26% vs. 20% of all other executives).

60% 68%

68% 54%

64% 55%




Financial services executives Other executives


Procurement professionals in the retail industry see a growing role for strategic collaboration, especially with other functions within their company. §  Retail executives are more likely than their peers

in other industries to say procurement collaborates with other functions, is embedded in other areas of the organization, and shares data that drives decision-making.

§  Retail practitioners are somewhat less bullish than executives about collaboration with other functions, but they are focused on collaboration with external partners—61% say strategic work with suppliers takes up a majority of their time.

§  Both executives and practitioners from retail are more likely than peers in other industries to say mobile technology—a key collaboration tool—will play a big role in procurement’s future.

Retail executives Other executives

79% 66%

79% 56%

70% 54%


Procurement is becoming embedded in other parts of the organization.


Goodbye to business as usual

Procurement’s new strategic role is forcing change on the way the function operates. §  These changes have sweeping effects: energy

executives say they lead to cost savings, better-managed risk, and competitive advantage. But executives and practitioners agree that these changes are not driving revenue growth.

§  When it comes to day-to-day work, energy procurement professionals are focused on operations: 51% of practitioners say they spend their time on operational procure-to-pay tasks, compared with 39% of other practitioners.

§  Change may be a certainty, but the future of the function is not: energy executives are more likely than their peers to say the function will shrink, while practitioners see it growing in strategic importance.

These trends are affecting the way procurement operates…

45%

37%

51%

51%

42%

64%

66%

70%

Suppliers providing more end-to-end solutions, instead of just materials or parts of a solution

Procurement managing accounts payable

Increased competition for high-performing suppliers

Procurement owning the supplier relationship

Energy executives Energy practitioners


Procurement’s new strategic role is forcing change on the way the procurement function operates. §  Executives and practitioners from consumer

products see supplier interactions and operational details changing day-to-day work in the function.

§  These changes are allowing procurement organizations within consumer products to manage more spending and drive compliance (59%, according to executives).

§  Ultimately, these changes will add up to a new role for procurement. But the future of the function is uncertain: consumer products executives are more likely than their peers in other industries to say the function will shrink (32% vs. 25%), while practitioners are more likely to say it will grow in strategic importance (32% vs. 28%).


55%

48%

52%

52%

48%

59%

61%

65%



An increase in services purchasing, including

statement-of-work contracts


Consumer products executives

Consumer products practitioners


Procurement’s new strategic role is forcing change on the way the function operates. §  Financial services executives see big changes

for procurement on the horizon: 57% expect the function to grow in strategic importance over the next 10 years, compared with 39% of others—but just 22% of financial services practitioners (and 29% of others) see the same future.

§  Financial services executives emphasize procurement’s increasing role in services purchasing (66%) and supplier relationships (60%) as top drivers of change.

§  New supplier relationships force change on day-to-day work: 45% of financial services executives want their employees to focus on strategic collaboration, vs. 41% of executives in other industries.


Financial services executives Other executives

61%

59%

54%

51%

49%

60%

47%

60%

66%

57%








Procurement’s new strategic role is forcing change on the way the procurement function operates. §  According to retail practitioners, managing

accounts payable is a key driver of change. Meanwhile, executives are more focused on ownership of the supplier relationship (79% vs. 59% of executives in other industries).

§  Big payoffs are expected: 70% of retail executives say changes within the function will lead to competitive advantage (vs. 54% of others). Another 73% (vs. 58% of others) expect cost savings from new initiatives.

§  Retail executives and practitioners have different views on the function’s future: executives are more likely than peers in other industries to see an increasingly strategic role (55% vs. 39%); practitioners are more likely to predict it will shrink.


48%

55%

54%

52%

45%

55%

59%

63%






Retail practitioners Other practitioners

The technology agenda

Technology is driving progress in the procurement function as energy professionals embrace new tools, especially platforms and devices that facilitate collaboration. §  These technologies are changing everything from

how procurement collaborates to how it tracks performance. 64% of energy executives say mobility allows collaboration with suppliers (vs. 50% of other executives).

§  Nearly two-thirds of energy executives cite supplier quality as a critical KPI (vs. 48% of others), but they may lack the tools they need to track it effectively: 30% are using supplier-tracking software, vs. 41% of others.

§  Energy may not have the skills needed to keep up: practitioners report below-average proficiency in technology (26%, vs. 46% of other practitioners).

These tech trends will have an impact on the procurement function in two years…

Social media 76% 53% 65% 56%

Knowledge exchange platforms

66% 52% 55% 56%

Mobile 58% 53% 49% 49%

Energy executives All other executives

Energy practitioners All other practitioners


Technology is driving progress in the procurement function as professionals embrace new tools, especially platforms and devices that facilitate collaboration. §  Consumer products executives are less likely than

their peers in other sectors to consider a number of technologies important to procurement’s progress (e.g., mobile), but they do emphasize the importance of knowledge exchange platforms.

§  Automation is another driver of progress in the function for consumer products: 59% of executives say it is a key strategy for achieving KPIs, vs. 50% of other executives.

§  Procurement organizations in consumer products are poised to get significant value from new tools, as practitioners claim greater proficiency in technology (52%, vs. 43% of other practitioners).


Social media 54% 56% 55% 57%


61% 52% 55% 56%

Mobile applications 37% 55% 47% 49%

Consumer products executives All other executives

Consumer products practitioners All other practitioners


Technology is driving progress in the procurement function as financial services professionals embrace new tools—especially collaboration platforms. §  Social media and collaboration platforms are top

tech trends for executives. §  Financial services companies may be better

positioned to take advantage of these new tools, as practitioners in the industry are more likely to report proficiency in technology skills (55% vs. 43% of others).

§  Financial services executives report less value than executives in other industries from a number of process automations.

§  Implementing and training on new technology will be the top area of focus in two years (55% of financial services executives say so, vs. 40% of others).

Social media 68% 54% 60% 56%


55% 53% 50% 56%

B2B commerce networks

68% 46% 52% 49%

Financial services executives

All other executives

Financial services practitioners

All other practitioners



Technology is driving progress in the procurement function as retail professionals embrace new tools such as collaboration platforms, IoT, and analytics. §  Retail companies may be better positioned to take

advantage of these new tools, as practitioners in the industry are more likely to report proficiency in technology skills (55% vs. 43% of others).

§  Automation of key processes is an area of focus for retail executives, with 61% saying it is critical to their KPIs, compared with 50% of other executives.

§  Practitioners are seeing value from automation efforts, particularly in spend analysis: 65% of practitioners save significant time from automating this process, vs. 45% of practitioners in other industries.


Social media 66% 54% 38% 59%

Internet of Things 63% 51% 52% 60%

Analytics 64% 48% 43% 50%

Retail executives All other executives

Retail practitioners All other practitioners

The human challenge

Procurement’s transformation is powered by people. But energy companies have work to do to make sure their employees are satisfied and engaged. §  Job satisfaction is below-average among energy

practitioners (45%, vs. 58% of others). §  Competitive compensation is a more popular

recruitment method among energy procurement organizations: 32% of executives say it is their top strategy, vs. 23% of others. This could be one reason why energy practitioners are just as likely as others to stay in their jobs long-term, despite lower satisfaction levels.

§  Energy companies should prioritize training and development: practitioners in the industry are less likely to say they have a good understanding of all lines of business and less likely to be proficient in technology.

of practitioners are satisfied or very satisfied with their jobs.

of practitioners plan to stay in the procurement function long-term.

45% energy

58% others

57% energy

53% others

The human challenge

Procurement’s transformation is powered by people. But consumer products companies have work to do to make sure their employees stick with the function. §  Executives from consumer products are less likely

than their peers in other industries to say hiring and retention is changing to fit the new function. But they may be more focused on existing employees: consumer products practitioners spend more time on training programs.

§  Consumer products practitioners are more equipped than their peers in other industries when it comes to technology (52% vs. 43%), but have some catching up to do in business acumen. (47% vs. 55%)

§  Satisfaction is relatively high among consumer products practitioners—but that does not guarantee workers will stay in the function.



63% consumer products

55% others

44% consumer products

55% others

The human challenge

Procurement’s transformation is powered by people—and the financial services function may be better equipped to tackle these changes; practitioners in the industry are substantially more satisfied with their jobs than their peers in other industries. §  Recruiting new talent is a top investment priority

for financial services companies (42%). Defining a clear career path is the top strategy for bringing workers to the function (32% of financial services executives say so, compared with 19% of others).

§  Practitioners in financial services are more likely to claim proficiency in risk management (57% vs. 44%) and technology (55% vs. 43%), and to have a good general understanding of all lines of business (55% vs. 44%).

64% financial services

55% others

48% financial services

54% others



The human challenge

Procurement’s transformation is powered by people. But retailers have work to do to make sure their employees are well-compensated and engaged. §  Retail practitioners are roughly as likely as

practitioners from other industries to be satisfied with their jobs.

§  Retail executives and practitioners agree that competitive compensation is rare at their company—13% of retail executives say it is their top recruiting strategy (vs. 25% of all other executives), and just 38% of retail practitioners say competitive pay was why they entered the function (vs. 54% of others).

§  Retailers may be turning to outsourcing to acquire talent: 61% of practitioners say the use of contingent workers within the function is changing the way their organization operates, vs. 46% of others.



52% retail

57% others

50% retail

54% others

Download our reports and infographics

Visit the Future of Procurement Resource Center today for the executive overview, infographics, and think pieces—and look out for our series of industry fact sheets.

www.ari.ba/abc3

OXFORD ECONOMICS

Ariba Contact:

Michael Koch

Director Solutions Marketing SAP Ariba

[email protected]

Oxford Economics Contact: Edward Cone Deputy Director, Thought Leadership Oxford Economics [email protected]

The Future of Procurement -...

Documents

Transcript of The Future of Procurement -...