A New Priority Greets Procurement Professionals in 2024

Like several other studies in the past few months, research from The Hackett Group found that cost reduction is now the top priority for procurement professionals. Last year's number-one item, supply continuity, dropped to second place in the 2024 Procurement Key Issues research.

The Hackett Group research said concerns over the ability to continue growing revenue, high-interest rates, fear of recession, and potential labor and skill shortages are driving the push to reduce costs. That also shows up in the third priority, combating inflationary price increases.

Acting as a strategic advisor (priority No. 4) returned to the top five priorities for 2024, the firm said, and transforming the procurement operating model (priority No. 5) is a new addition to the top priorities.

"Spend cost reduction is perennially a high priority for procurement," explained Chris Sawchuk, The Hackett Group's principal and global procurement advisory practice leader. "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."

More than 375 executives finance, procurement, supply chain, human resources, information technology, and global business services at a global set of midsized and large enterprises contributed their insights to the research.

The survey found that procurement operations are anticipating an 8% increase in workload this year even though budgets are only expected to rise 1.6%. To close this gap, spending on technology is expected to climb 4.6%.

Data analytics and reporting topped the list of planned improvement initiatives for 2024, followed by talent management. Data analytics was one of several improvement initiatives deemed to be of high importance but low maturity, making it a critical development area. Other critical development areas include category management, sustainable procurement, third-party risk management and supplier relationship management.

When it comes to technology investment, procurement organizations are projecting double-digit growth to power digital transformation efforts. That investment, though, is going to "core" technologies rather than emerging technologies. While Generative AI is considered an emerging technology, The Hackett Group found that 28% of procurement organizations have already added it to their portfolio of solutions.

"Procurement teams are projecting higher levels of savings in 2024 for both purchase cost reduction and cost avoidance," Sawchuk said. "But most procurement organizations have a significant opportunity to drive improved value on lean procurement cost structures."

The most promising opportunities are spend analytics and contract life-cycle management, the firm said. Both of these areas offer access to accurate data that can enhance the effectiveness of procurement personnel. Category management is another area for Gen AI adoption highlighted by 50% of respondents.

While supply continuity fell to the second spot this year, it is still top of mind for most procurement professionals.

"Supply chain disruption risk remains top of mind for many procurement teams due to ongoing geopolitical conflicts," said Amy Hillcox, senior research director of procurement and purchase-to-pay advisory. "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."

Hillcox added that 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 lifecycle."

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