What are your organization’s key priorities? If your supply management organization is like most others, ensuring supply continuity, combating inflationary price increases and reducing spend cost top the list.
Those are the top three procurement priorities shared by CPOs in The Hackett Group’s 2023 CPO Key Issues report. Rounding out the top 10: (4) pursuing procurement digital transformation, (5) improving analytics and insights capabilities, (6) strengthening third-party risk management, visibility and capability, (7) acting as a strategic adviser to the business, (8) improving stakeholder-centricity, (9) improving procurement agility and (10) embedding responsible procurement.
“Given the economic environment, it is not surprising that combating inflationary price increases soared to No. 2,” the report states. “Improving analytics and insights and capabilities also rose several spots as organizations realize the importance of being able to support more predictive, prescriptive, and intelligent decision-making to tackle challenges like inflation and supply continuity.”
That ensuring supply availability remains at No. 1 — it held the spot last year as well — should come as no surprise, given the past three years of coronavirus pandemic-induced disruption and uncertainty.
“We’ve seen a reordering of priorities in terms of procurement strategy for 2023,” Amy Hillcox, The Hackett Group’s senior research director, procurement and procure-to-pay advisory, said in a press release. “Ensuring supply continuity … is even more of a focus than it was at the outset of the pandemic, in part because of geopolitical turmoil and other disruptions.”
Brought on by pandemic pressures, inflation, which reached a high of 9.1 percent in July, registered 6.5 percent in February and is projected to be about 4 percent this year. Supply managers have been willing to pay what it takes to ensure supply.
In an effort to curtail continuing inflation, The U.S. Federal Reserve has raised interest rates regularly, and there is speculation of another quarter-point increase this week. In the past year, interest rates have increased from about a.5 percent last March to 4.75 percent in February.
“While inflationary pressures have eased in some spend categories, they remain a concern in other areas,” the report states. “Teams need to manage this closely with suppliers and keep abreast of commodity price movements.”
Visibility is key, The Hackett Group says in the report, citing the importance of visibility into category-level price increases. Additionally, organizations must have processes in place to manage pricing, and capitalize on (or strengthen) supplier relationships and partnerships to find “solutions for curtailing price surges and mitigating supply disruption risks.”
Curtailing spend is also crucial. “(It) will be elevated further in 2023 as procurement organizations aggressively pursue opportunities to claw back cost increases that have occurred in the last couple of years,” Chris Sawchuk, The Hackett Group’s principal and global procurement advisory practice leader, said in the press release.
Still, he expects value creation to harness an increasing focus, as organizations realize it can bring them competitive advantage. Digital transformation and improved data collection and use of advanced analytics will be among the ways to create that value and opportunities, he said.
The report also delved into the top 10 planned improvement initiatives — talent management ranked No. 1 — cited by procurement executives. More than 350 leaders in such functions as procurement, supply chain, finance and global business services of mid-sized and large companies participated in the research.