Digital Transformation Can Enable Typical Procurement Organizations To Reduce Cost by 45%

Through full deployment of digital tools, typical procurement organizations can reduce operational costs by up to 45%, achieving efficiency levels below those of today's world-class procurement organizations, new research from The Hackett Group, Inc. maintains.

At the same time, say researchers, procurement specialists are “enabled” to improve effectiveness and customer experience.

World-class procurement organizations, which spend 22% less than their peers, can also reduce costs by an additional 33% with comprehensive digital transformation, according to the research.

This “breakthrough” can free up resources enabling world-class procurement organizations to further digital transformation initiatives, engage in more value-added activity, and/or fuel company growth.

The research details The Hackett Group's new “Digital World Class” analysis, an estimate of the additional benefits that world-class procurement organizations can achieve through the combination of operating model changes, full technology landscape optimization, and the successful adoption of digital technologies.

The Hackett Group's research concluded that procurement organizations can reap significant benefits by taking a simpler interim approach. By deploying smart automation technologies such as robotic process automation, smart data capture, and cognitive automation, typical procurement organization should expect a 17% cost reduction, while world-class procurement organizations can reduce an already competitive cost structure by additional 21%.

“The research highlighted a continuing and growing influence of digital transformation in supply management, but more importantly highlighted the growing focus on the customer (Big “C” and little “c”) in service design as well as the skill transformation required of supply management professionals,” said The Hackett Group Principal & Global Procurement Advisory Practice Leader Chris Sawchuk.

In an interview, Sawchuk added that digital transformation is already impacting traditional skills that are very important today and making them less relevant, while highlighting the need to significantly enhance skills such as data analysis and modeling, business acumen, agility, change orientation, creativity and innovation.

“We have seen more focus on supply management competency assessment and enhancement over the last year than we have in the last 5 years,” he said.

By taking a customer-centric approach to service delivery, world-class procurement organizations are also able to deliver far greater business benefit to their companies, the research found. While operating at lower cost, world-class procurement organizations also see higher effectiveness and improved customer satisfaction.

The research also updates The Hackett Group's service delivery model for world-class procurement, detailing how in addition to technology, procurement organizations must focus in other areas to truly achieve transformation, including: service delivery; analytics and information management; organization and governance; service partnering; and human capital.

A public version of the research, “World-Class Procurement: Redefining Performance in a Digital Era,” which contains nearly 70 metrics detailing the performance of typical and world-class procurement organizations, is available on a complimentary basis, with registration, at this link: World-Class Procurement: Redefining Performance in a Digital Era

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