“Cost reduction is still a top priority. But we believe many procurement organizations have reached the upper limit of cost reductions possible in categories they are actively sourcing today . . . It also calls for skills that are outside procurement’s traditional areas of expertise.” – Chris Sawchuk, The Hackett Group
What makes the just released Hackett report interesting is not so much the revelations that it provides regarding the coming changes to our profession. It is instead the fact that as one of the old guard analyst firms – the organization was founded in 1991 – they have recognized the present day realities of an industry in transition.
In making reference to the fact that cost reduction/avoidance is no longer the top priority, and acknowledging that skill sets outside of procurement’s traditional areas of expertise must be pursued, Hackett may have finally delivered one of the knock out punches to the old thinking that contributed to the devaluation of the profession.
In this context, and even though this may not be recognized as a critical industry moment, it very well may be if we had greater details regarding the demographics relating to the study’s participants. More specifically the profile of the 150 executives who provided the actual feedback upon which the findings were based. This of course would be the most interesting data to review in that it would demonstrate either a change in thinking of long time professionals or a shift based on the emergence of younger members of the industry moving up the corporate hierarchy. Or to put it another way, the source of the answers is in many ways more important than the answers themselves.
Hopefully Hackett will decide to share this information so that we can determine if we are in the midst of a true evolutionary renaissance of our profession, or a generational revolution.
Check out my remote feed keynote from 2011 on The Changing Face of Procurement for additional insight on how we arrived at this present point in time, as well as where the industry is headed.
Click here to view . . .
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Procurement Insights 
Market Dojo
May 19, 2014
wrt to “we believe many procurement organizations have reached the upper limit of cost reductions possible in categories they are actively sourcing today ” [Chris Sawchuk, The Hackett Group] – I cant see that we are even close to this or ever will be. With continuous innovation and an evolution in products which is at the very heart of the capitalistic life we live in, there are always suppliers that can offer more. And if an organisation believes they have reached the limit in line item negotiation then either they or their suppliers have just stopped innovating (and I would question their future). I will concede however that the sourcing process of the future will most likely take into account a flexibility and ability for the suppliers to suggest innovations more easily and for these innovations to be accepted. In other words the rapid fire eSourcing negotiations will still be rapid but very much not based on price alone. Thus more collaborative
Kelly Barner
May 19, 2014
Great points from Market Dojo – as always.
You bring to mind a very interesting distinction between procurement the profession and the procurement team in any given organization.
There will always be more than an individual procurement group can do on behalf of their organization. As you rightfully point out, more strategic negotiation, better leveraging our supply base, etc. But what about procurement as a whole? Have we hit the wall as a profession?
As I mentioned in my prediction on the future of procurement, when you look at the major developments and milestones over the last 100 years, less has changed than any of us might think. We move from transparency to transformation to value creation. But has the organization changed their view of us? Are we working in significantly different ways? I venture that we are not.
Sure, technology has improved by leaps and bounds. We’ve moved from behind the firewall to the flexibility of the cloud. But we are still collecting prices, consolidating spend, negotiating, etc.
Would love to hear your thoughts on the “two procurements”!
Market Dojo
May 20, 2014
Have we hit the wall? I certainly don’t think so but the question is where will the progression be. As organisations have matured they have looked for competitive advantages. These advantages have come from both processes and technologies. In the last 50 years you can follow how technology has developed. Take an engineering company. This has had with major developments in engineering and testing software, MRP I and MRP II, ERP, then sales CRM and now there is a large focus on Procurement. In other words as we have progressed we have addressed each of the departments in turn continuously improving the technology and processes. However, will we have a step change in what we do? Or is it just technology which will evolve to make us better at it? If you take things down to the fundamentals: Communication – We used to use semaphore and now we use satellite mobile phones – however we are still just talking. Or engineering – We can design and build a structure quicker then before with software and big machines, – but we are still just building. Procurement – As you mentioned we have moved from transparency to value creation – but we are still just purchasing. I guess what I am saying is that perhaps the fundamentals wont change but how we do it and how it integrates with information and the organisation will, and this will be achieved through technology. Perhaps I am too much of a techie, and I certainly think processes will evolve as well. However if procurement will evolve further it seems it will do so with technology at the fore.