Procurement is Uniquely Positioned as the Enterprise Ecosystem Builder

While driving down costs continues to be a primary goal for procurement, the chief procurement officer’s (CPO) expectations are changing based on their skills in managing third parties. Today, CPO’s role includes new accountabilities in addition to spend management. What is the future of procurement’s role in driving new value? What are the hurdles? And what are the lessons learned from Procurement Achievers?

To find out, HFS Research, in partnership with Infosys BPM, surveyed 300 senior procurement executives across the Global 2000 enterprises. Our study reveals that procurement is uniquely positioned to become the “ecosystem builder” for an enterprise. Still, the path is challenging and requires a fundamental mindset shift within procurement and its stakeholders.

Key findings

Ninety-five percent (95%) of procurement executives believe procurement organizations of the future should act as ecosystem builders that drive collaboration across multiple organizations to generate new sources of value.

However, the CPO’s biggest challenge is to sell the value of the function within the enterprise as an enabler of business value, not just spend management.

Procurement faces five key challenges:

1. C-suite (in)visibility creating conflicting procurement goals. Only one in four CPOs have direct visibility to the CEO. Lack of alignment between procurement goals (e.g., sustainability versus cost savings) emerges as a significant challenge.
2. Lack of internal collaboration creates multiple blind spots in the organization. Supplier management continues to be decentralized in most organizations. Stronger organizational alignment and elevated budget planning across the business, procurement, finance, IT, and supply chain emerge as the #1 initiative to help procurement meet its goals.
3. An apathetic approach to the imbalance in the talent equation. COVID highlighted existing capability gaps within procurement organizations, primarily people capabilities. Most procurement executives have limited resources or feel the need to overhaul their resource mix.
4. Antiquated legacy systems and processes adding to existing process debt across the S2P value chain. HFS defines process debt as creating an awkward and often manual process to buttress aging technologies. Most participants reported the need for significant improvements across the S2P value chain.
5. Not realizing the full potential of digitized procurement. Despite strong applicability across the S2P value chain, the adoption of digital technologies within procurement continues to lag. Digital is no longer some sci-fi that will happen in three to five years. It is essential for survival today.

Only 15% of respondents emerge as Procurement Achievers. These organizations self-rated themselves as “best-in-class” across the S2P value chain. Procurement Achievers are more confident than Procurement Aspirants in realizing their “ecosystem builder” aspiration. More Achievers than Aspirants expect to strategize board-level initiatives and become the primary conduit for all engagement with the outside ecosystem.

Comparing the Achievers to Aspirants provides a roadmap of recommendations for CPOs to become the ecosystem builders for their enterprise:

• Drive leadership in areas of strategic importance to the business beyond spend management. Achievers differ from Aspirants in how they deliver on working capital, sustainability, and risk management goals for the enterprises.
• Build a fluid and resilient operating model to solve for talent gap and process debt. Achievers have a higher propensity to leverage third parties. They are investing faster to digitize and modernize legacy technology and train and retain top talent.
• Become the catalyst for enterprise transformation by building a digital core and leveraging data as an asset. Procurement Achievers invest heavily in scaling and growing investments in cloudification, robotic process automation (RPA), and machine learning (ML) compared to Aspirants. A significantly higher number of Procurement Achievers are investing in data visualization, master data management, advanced analytics, and spend optimization analytics compared to Aspirants.

The Bottom Line: Procurement is uniquely positioned within an enterprise to unearth new sources of value beyond driving down costs. Nearly 90% of respondents agree that the CPO of the future will need to be both a great buyer and a great seller to convince the enterprise that procurement can and should be its ecosystem builder.

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