Hackett: Procurement Can Expect Small Budget & Staff Hikes In 2012 as They Manage Increasing Demand and Pricing Volatility
Understanding Regional Differences on a Global Basis is Key
MIAMI & LONDON – Procurement organizations can expect to see small budget and staff increases in 2012, according to new key issues research from The Hackett Group, Inc. The Hackett Group's research also found that procurement organizations are heavily focused on addressing demand and pricing volatility that is the "New Normal." In addition they are seeing a dramatic acceleration of globalization efforts that will likely increase the number of procurement jobs performed offshore by more than 50 percent by 2013.
The Hackett Group's new key issues Research Insight "2012 Procurement Agenda: Enabling Enterprise Growth... Without Disabling Profits" finds that procurement leaders face a unique challenge in 2012: the enterprise wants procurement to enable global growth scenarios while also continuing to protect supply and lower input cost, in the midst of unprecedented levels of instability that have become the "New Normal." In this context, the research finds that companies are expecting a small uptick both in procurement budgets and FTEs in 2012, with operating budgets expected to rise by 1 percent and staff expected to increase by 3 percent.
The Hackett Group's research finds that companies expect that the dramatic volatility spike which occurred with the recession in 2008/2009 will persist for the foreseeable future, certainly for the next two to three years. Many companies in the study said they expect changes of 25 percent or greater in input prices, customer demand, and talent availability. Therefore, the research recommends that organizations develop greater “supply agility” – supply base agility, contract flexibility and even the agility of the procurement function itself. At the same time, they should strive to reduce supply chain risk.
The research finds that procurement leaders will be driving a dramatic transformation over the next two to three years, largely focusing on globalization. According to The Hackett Group, procurement organizations – like finance, HR and IT – have lagged behind other aspects of the business, such as product development, customer strategies, and supply chain, in becoming more global. Procurement leaders now have ambitious plans to nearly triple today’s level of globalization within two to three years.
The combination of increased globalization and selective outsourcing is driving dramatic structural changes in procurement, the study found. Procurement organizations plan to increase their percentage of FTEs in low-cost regions by more than 50 percent by the end of 2013 -- from the present 16 percent to 25 percent. This effort will involve both moving routine processes to offshore service centers and also shifting higher-value work, such as tactical sourcing and market intelligence, to external service providers.
The study also found that procurement organizations are increasingly focused on global process ownership. But most of that focus to date has been at the function and process level. In the next two years, companies are planning to dramatically increase their global process ownership at the cross-functional level. The Hackett Group also expects that procurement will increasingly own the source-to-settle and purchase-to-pay processes, even though procurement itself may report to finance or to a Global Business Services organization.
The Hackett Group's research also recommended that companies be prepared to adapt their business models and priorities in response to economic changes in regional global markets. This will require companies to fully understand the benefit that comes from adopting global standards and organizational models that allow optimal execution by leveraging both skill and scale more broadly. In addition, the increased instability of demand across global regions has made it more critical than ever for companies to truly understand how each region should operate while still gaining the advantages that comes from a global process operating platform.
The full study is available for complimentary download (with registration) at: https://www.thehackettgroup.com/functions/enterprise/.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT), a global strategic business advisory and operations improvement consulting firm, is a leader in best practice advisory, business benchmarking, and transformation consulting services including strategy and operations, working capital management, and globalization advice. Utilizing best practices and implementation insights from more than 7,500 benchmarking studies, executives use The Hackett Group's empirically-based approach to quickly define and implement initiatives that enable world-class performance. More information on The Hackett Group is available: by phone at (770) 225-7300; by e-mail at [email protected].
