In last years’ Procurement Annual Survey we discussed the unprecedented procurement and supply chain challenges facing organisations and provided a series of recommendations on how to reimagine and to reinvent procurement for the future.
Whilst supply chain resilience issues caused by the pandemic linger, other challenges have emerged with recent political and macroeconomic events significantly impacting energy and input costs and the commercial and operational sustainability of many organisations.
The next few years will continue to be challenging for procurement and supply chain professionals. The economic environment is likely to continue to be characterised by high inflation and cost pressures, dysfunctional supply chains, continued political uncertainty and possible recession. Our research shows that the strategic issues at the top of board agendas have largely remained the same, but cyber security and, not surprisingly, energy consumption and inflationary pressures also appear.
To assist organisations address these issues and challenges 4C Associates in partnership with the University of Birmingham have again conducted research building on the insights from last year. This report provides organisations with a health-check of the procurement function to help organisations understand their maturity position against peers, with clear recommendations on how to transform across all elements of the operating model, and where to focus, to improve capability and deliver the greatest value.
The survey confirmed a very clear linkage between the maturity level and level of value and savings achieved to increase profitability, showing that for every single step increase in maturity, savings increase by around 2x.
Pleasingly, our research highlights a general marginal increase in maturity across all the elements of Procurement’s Target Operating Model, but worryingly far too many procurement organisations (76%) still fall short when it comes to proactively managing their key challenges, adding unforeseen additional cost and leading to significant supply chain disruption in the short to medium term.
Organisations that place value on defining a clear procurement vision and strategy (just 35% had a developed or well developed functional vision), with roadmap, aligned to business goals with senior executives, are most successful in overcoming business challenges. This will have an impact on how it is viewed by leadership, stakeholders and suppliers and the role it plays in the organisation.
You can download the full report here.
Spotlight on Sustainability
Procurement Sustainability remains a topic of focus as there is an ongoing mismatch between organisation ambition and reality, but the focus is often far too narrow. Our research explores the full opportunity for prosperity, from Ethical Prosperity for the People who operate in our organisations and supply chains, to Environmental Prosperity and the way we take responsibility for our Planet, to how we manage the Economic Prosperity by delivering business and social value across our supply chains and within the communities our organisations operate in. The research demonstrates a direct link between Procurement Maturity and Sustainability maturity.
Last years’ report highlighted only 4% of procurement functions felt they had a fully developed and robust approach to enabling resilient and sustainable procurement and supply chains, but despite this recognised challenge, this has not materially altered (5%). The most forward-looking organisations are increasingly making sustainability part of their mainstream procurement activity, but for many it is still focussing on the minimum viable product ‘have to have’ rather than looking to realise the full potential ‘want to have’ opportunity. With B2C consumers considering sustainability in their buying choices, and this becoming an ever-increasing area of focus in B2B procurement, those who do not invest in this capability will be left behind reputationally, and commercially. This highlights a very real and pressing need for investment.
GET IN TOUCH WITH OUR TEAM TODAY
If you would like to benchmark your organisation against the 300 organisations who participated in our research or understand more about how to improve the maturity of your procurement and supply chain function please contact Paul Ireland, Manager, Research and Insights or Allison Ford-Langstaff, Partner at 4C.
