Procurement Gets a Bold New Look

For decades, procurement was seen as a tactical, back-office task. But today the function has a new look. And according to The Future of Procurement, a new survey and series of reports from Oxford Economics—conducted with support from Ariba, an SAP company—it is increasingly viewed as a strategic resource and key driver of business value.

“Procurement has undergone dramatic changes in recent years, becoming more collaborative and technology-driven than ever before,” said Edward Cone, Deputy Director of Thought Leadership, Oxford Economics. “And this is fueling greater payoffs not only in terms of the cost savings and efficiency that the function has traditionally been on the hook to deliver, but also innovation and overall financial performance.”

What’s behind this transformation? Through a worldwide survey of 1,000 respondents—the first of its kind to include both procurement executives and daily practitioners—the Future of Procurement uncovered three major trends:

Collaboration

Procurement is by nature a collaborative process. And it is becoming increasingly connected.

• 63 percent of the practitioners surveyed said procurement is more tightly aligned with other parts of the business.
• 51 percent of executives said procurement is working more closely with suppliers.

“Both of these trends have borne fruit and in fact are remaking the function,” Cone said.

Take Las Vegas Sands. To illuminate its casinos around the world, the company needs lots of light bulbs. But it is also needs to reduce its energy footprint. To balance these requirements, the company decided to take a new, more collaborative approach to sourcing. Rather than simply negotiating a better bulk price, the procurement team worked with its lighting supplier to custom design more energy-efficient bulbs for its fixtures. In doing so, the casino operator hopes to drive energy efficiencies and cost savings and provide its vendor with a new product that it can sell to other customers.

“This kind of strategic collaboration with a supplier represents a big leap forward for the procurement function and provides a sense of where it can go in the future,” Cone said.

Technology

Once a manual, paper-laden process, procurement has made great strides in automating key tasks to improve performance and productivity. And the trend is accelerating.

• Roughly one-third of executives and practitioners surveyed say investments in procurement/supply chain technology are a priority, and nearly half say they intend to fund supplier innovation programs.
• When asked which areas they expected to be completely or mostly automated within two years, executives offered the following:
• 70 percent – invoice management
• 69 percent – strategic sourcing
• 68 percent – contract management
• 64 percent – supplier collaboration
• 63 percent – supplier risk management

And 35 percent expect business networks will have a significant impact on procurement and its transformation in the next three years by enabling new, more efficient ways for companies to discover, connect and collaborate with their trading partners around the world.

Big Data

As a result of technological investments that have been made to digitize and modernize the function, procurement now sits atop vast amounts of transaction-level data from its supplier, customer, and partner relationships. And this is creating value across the enterprise and further elevating procurement’s status within it.

• 60 percent of practitioners who participated in the survey say procurement data is being used across their organizations to drive more strategic decision making.
• 66 percent say procurement is playing a more strategic role within the organization, becoming less a service and more a function.

“The convergence of technologies like cloud computing, mobility, and social and business networks is redefining procurement as we know it,” said Marcell Vollmer, Chief Operating Officer, Ariba. “Organizations that embrace these trends can gain unique insights and forge completely new ways of operating that create significant advantage for their businesses.”

For more insights on where procurement is headed, visit http://www.ariba.com/lp/future-of-procurement-executive-overview. and download a complimentary copy of the Future of Procurement today.

About the Research

During the first quarter of 2015, Oxford Economics, with support from Ariba, conducted a pair of global surveys. Fielded across 18 countries, one survey went out to more than 500 senior procurement executives. The other went to over 500 non-executive procurement practitioners, such as category managers, sourcing staff, buyers, and procurement operations specialists. Respondents came from around the world and a range of industries, including financial services, retail, consumer products, and energy and represented companies with more than $750 million in revenue. Oxford Economics also conducted a series of live interviews with executives who represent the industries surveyed.

Oxford Economics

Oxford Economics is the world leader in global forecasting and quantitative analysis for business and government, and the most trusted resource for decision-makers seeking independent thinking and evidence-based research. Headquartered in Oxford, England, with offices in London, New York, and Singapore, and elsewhere around the globe, the firm employs more than 100 professional economists, industry experts and business editors—one of the largest teams of macroeconomists and thought leadership specialists in the world.

About Ariba, an SAP Company

Ariba is the world’s business commerce network. Ariba combines industry-leading cloud-based applications with the world's largest Internet-based trading community to help companies discover and collaborate with a global network of partners. Using the Ariba^® Network, businesses of all sizes can connect to their trading partners anywhere, at any time from any application or device to buy, sell and manage their cash more efficiently and effectively than ever before. Companies around the world use the Ariba Network to simplify inter-enterprise commerce and enhance the results that they deliver. Join them at: www.ariba.com

About SAP

As market leader in enterprise application software, SAP (NYSE:SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 291,000 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

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