By Dan Berthiaume
Global procurement executives consider strategic alignment to other business and cost reduction as their two most important key future focus areas. This priority is consistent between large and middle-market businesses, although different verticals have different priorities.
According to a new global survey of procurement executives conducted by sourcing advisory firm ISG and sponsored by procurement outsourcing provider GEP, “Procurement Strategy: Industry Trends and Implications,” almost one-third of procurement executives (32%) consider strategic alignment to other business their key future focus area. Another 26% rank delivering on cost reduction targets as their key future focus area.
These two areas are by far the most popular key focus areas for improvement in 2012 among global procurement executives. Other selections include driving business support for procurement (11%), addressing more spend under management (10%) and addressing transaction automation (9%).
Key Future Focus Areas Differ by Organizational Size
Dividing respondents into the large and middle-market categories, the study finds that percentages are similar for those selecting strategic alignment to other business (33% of large respondents and 35% of middle-market respondents) and delivering on cost reduction targets (24% of large respondents and 28% of middle-market respondents).
However, large respondents are much more likely to select driving business support for procurement (15% compared to 10%), developing an analytical capability (10% compared to 4%) and driving transaction automation (10% compared to 3%). At first glance, these responses are somewhat surprising, as presumably large organizations would be more likely to possess analytical capability and transaction automation.
These size-related differences possibly indicate a higher level of procurement agility among smaller organizations, or the fact that smaller organizations are less capable of absorbing procedural inefficiencies in any are of the business. It is also worth noting that 10% of middle-market respondents, but no large respondents, selected filling gaps in resource capabilities, suggesting that large organizations do have the resources to support and offer advanced functionality for procurement, even if they do not currently do so.
Different Verticals Focus in Different Areas
Dividing respondents by industry vertical, the study finds some significant differences in key future procurement areas. For example, 50% of manufacturing respondents plan to focus on delivering on cost reduction targets this year, more than double the percentage of respondents in the vertical with the next-highest percentage in this area (financial services, 22%). Considering how critical raw materials cost is to turning a profit in manufacturing, heavy focus on reducing procurement cost makes sense.
The only other other vertical preference discrepancy as pronounced as the significantly higher percentage of manufacturing respondents focusing on procurement is found in driving business support for procurement, selected by 30% of business services respondents, compared to 11% of financial services respondents and 10% of healthcare/pharmaceutical respondents.
Interestingly, 20% of healthcare/pharmaceutical respondents are focusing on filling gaps in resource capabilities, but no respondents in any other vertical are focusing on this area. Forty-four percent of financial services respondents are focusing on strategic alignment to other business, but so are 40% of healthcare/pharmaceutical respondents.
Editor’s Note: This is the second article in a two-part series reviewing the findings of this survey. Part one can be viewed here.