People remain stumbling block to procurement success

Technology is great, but people continue to be the largest roadblock to procurement performance, according to respondents of an online survey conducted by three researchers.

The results were announced at the recent Institute for Supply Management World 2023 conference in Grapevine, Texas.

Data was collected between February and April of this year via online survey in collaboration with ISM. In all, 409 people were considered full respondents, while over 1,200 people contributed to at least some part of the survey.

Researchers Marcell Vollmer, CEO of Prospitalia Group, Christoph Bode, professor at the University of Mannheim’s Business School, holding the endowed chair of procurement, and Ruth Schültken, doctoral researcher at University of Mannheim’s Business School, presented the State of Procurement Professional Survey 2023 results at ISM World.

Respondents were asked to rank performance roadblocks on a scale of 1 to 7, with 1 not at all and 7 representing to a very large extent. People scored between a 4 and 5, just outpacing technology, tasks and structure. All the answers scored higher than a 4, indicating procurement professionals are facing a series of challenges in performing their jobs.

“The people problem is lower for organizations that have a cultural trait called ‘entrepreneurial orientation,’” Bode said, explaining that this is defined as building a culture that encourages risks and empowers people to make decisions.

Organizations that were deemed to have high entrepreneurial orientation (OE) saw people as an obstacle drop into a near tie with tasks for second in terms of obstacles. Low OE organizations saw people rank almost a 5 in terms of being a roadblock, far ahead of the other three categories.

Procurement spend increases

The survey also found that procurement spending is increasing compared to last year, although that could be due to inflation, Bode noted. Generally, the procurement function reports directly to the CFO (26%) or CEO (24%). Only 17% report to the chief supply chain officer.

Breaking down the spend, 57% report an increase in 2023 compared to 2022, with 23% saying it is decreasing.

Procurement is also getting an increasing role in organizational activities, although it varies by topic. When cost is involved, nearly 4 in 10 procurement professionals are involved, but that falls off to just over 3 in 10 when discussing delivery and less than that for quality, sustainability, and flexibility. Procurement is involved in just 20% of innovation-related conversations.

“Earning that seat at the table and being part of the discussions, this is where we still need to do some justification,” said Bode.

Cost matters, sustainability not so much

While sustainability remains top of mind for many supply chain professionals, for those in procurement, it is a distant fourth in terms of importance. One-third of procurement pros are focused on cost, with 22% citing quality and 21% delivery as top concerns. Sustainability came in a distant fourth at just 9%, followed by flexibility (8%) and innovation (7%).

That is the same order of importance for top management as well.

“There is a huge gap in what procurement is doing in sustainability and what the company is actually doing,” said Schültken. “The majority of companies are not using opportunities presented by regulation to improve their sustainability.”

She went on to add that 25% of companies surveyed “fawn” sustainability compliance, taking the risk that they won’t be caught or that the fines will be justified by the revenue gained from non-compliance.

Changing strategies

The past few years of disruptions (COVID, supply chain bottlenecks, shortage of parts, Ukraine, etc.) have led to shifting strategies for procurement organizations.

According to survey respondents, more localization and more dual/multi-sourcing is taking place. Organizations are also seeking closer partnerships rather than adversarial relationships with suppliers, and are looking to build inventories to buffer against future disruptions.

More procurement organizations are also looking to centralize their procurement operations compared to a few years ago.

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