2022 Procurement Key Issues Research Finds Sustainability Rising in Importance as Digital Transformation Remains a Key Focus
Supply assurance is now the top priority for procurement, according to 2022 Procurement Key Issues research from The Hackett Group, Inc. (NASDAQ: HCKT). Sustainability has also risen more than any other procurement priority for 2022, as digital transformation remains a key focus.
2022 is quickly shaping up to be a challenging year for procurement, with key business risks, including increased supply chain disruption, inflation, commodity volatility, and labor and skills challenges, on top of the need to deliver cost savings in an inflationary environment. According to the research, the agenda for today’s CPO is now much broader than just a few years ago.
The full research, “The Procurement Agenda: 2022 Key Issues,” is available from The Hackett Group® on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/22prockey2201sm.
Key findings include:
Supply Assurance Elevated to Top Priority – Managing supply disruption and its impact on revenue remains procurement’s top priority, up from second in the previous year’s study. Cost-cutting, traditionally procurement’s number one priority, has slipped to the number two spot. This reflects continued disruptions driven by the global pandemic. The pandemic has also given suppliers greater leverage and control in the buying relationship – and procurement must adapt. Fallout from the growing conflict with Russia over the Ukraine may further accentuate supply disruption concerns. The key to addressing this is to build resilience by developing capabilities in supplier relationship management, improving analytics to better identify and predict supply chain challenges, and overall digital transformation.
Sustainability Rises in Importance – Sustainability rose more than any other procurement priority for 2022, jumping up four spots to the number four position, the research found. While sustainability has long been a top priority in Europe, it is now a much greater priority for U.S. companies. In addition, corporate social responsibility, including diversity, equality and inclusion, another key part of the environmental, social, and governance (ESG) agenda, continues to climb the ranks of priorities for many companies. These are areas where procurement can make significant impact. Procurement must be able to source responsibly to support the longer-term business impacts of climate change and diversity commitments and adapt to support ESG strategy and the execution of operational plans.
Digital Transformation Remains a Key Focus – Digital transformation remains a front and center enabler, now with a greater focus on obtaining value from technology investments and an increased rigor around data management to deliver up-to-date insights that inform supply risk, sourcing, and supply management, according to The Hackett Group’s research. Procurement leaders expect an 8% increase in capital investment and technology costs in 2022, in large part to drive digital transformation. Digital workforce enablement and core procurement application suites have the highest level of large-scale adoption in procurement. Data visualization and master data management tools are not far behind, and are also expected to see accelerated growth. But for digital transformation to be successful, procurement organizations must also focus on talent and data, the research suggested.
Critical Areas for Development – Five of procurement’s top 10 priorities for 2022 are deemed “critical development areas,” with high importance but low confidence in procurement’s ability to meet business expectations, according to The Hackett Group’s research. These priorities are: enable corporate sustainability; accelerate digital transformation; improve analytical, modeling, and reporting capabilities; align skills and talent with changing business needs; and improve procurement agility. If procurement cannot overcome challenges in these areas, it may be difficult to address critical priorities such as supply risk objectives, the research found.
Operational Efficiency Remains Critical – Procurement workload is expected to increase by 11.4% in 2022, the research found. But no increase is expected in staffing, and a reduction is expected in budget, creating large productivity and efficiency gaps that must be overcome, in part through the use of technology.
Talent and Skills Challenges – The efficiency gap, when combined with escalating salaries in procurement and the unprecedented turnover levels driven by the pandemic, will put great pressure on procurement organizations seeking to become better strategic advisors to the business and deliver on other priorities, according to The Hackett Group’s research. Procurement organizations must develop specific offensive (acquisition) and defensive (talent retention and development) strategies to mitigate these issues, close skills gaps in key areas such as leadership, data analytics and more.
Concerns Over Pandemic Fallout Continue – The pandemic has cast a long shadow and is causing increased concern in procurement over supply chain disruption, inflation, commodity price volatility, and the “Great Resignation” which is driving limitations from structural shortages of labor capacity and skills, the research found.
The Hackett Group’s 2022 Key Issues research is based on results gathered from more than 250 executives in procurement, finance, supply chain, HR, technology, and global business services at a global set of midsized and large enterprises.
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