Procurement tech may lower labor costs, but staffing only tells part of the story
- The implementation of digital technology has enabled procurement organizations to reduce their full-time workers by an average of 29% while lowering labor costs by 22%, according to a recent report by The Hackett Group, Spend Matters reported.
- Digital tech automates the most routine tasks, which boosts efficiencies while lowering the cost of labor activities. Yet even though less is spent on labor costs, the study reveals that these procurement teams possess better retention plans and have lower turnover rates.
- Operations and compliance management are the specific areas where world-class procurement organizations surge ahead of their peers, as it is in this area where tech and automation has its most significant impact due to the routine nature of the work.
There is no doubt that technology is creating opportunities to manage the supply chain in a more effective and efficient manner. Both buyer and seller are the beneficiaries of technologies that automate processes, accelerate communication, and essentially shrink the distance between a global web of suppliers and customers.
This study reports that world-class procurement organizations have fewer full-time workers, but still deliver on cost savings. While technology is indicated as a primary reason for this solid performance it is certainly not the only one. Professional dedication and high performing suppliers help as well.
There is not one procurement organization in the world that feels that they are properly staffed. I’ve checked!
Seriously, the pressures on procurement organizations to manage their supply bases while reducing costs and increasing overall supplier performance is never ending. While technology will certainly help in the process, it is important to recognize the dedication and positive attitude of procurement professionals. Collectively, this is a group of hard working, dedicated, and yes, at times underappreciated professionals that are asked to juggle a wide range of business issues on a daily basis. And this expertise is a multi-generational trait.
There should be a well-deserved shout out to the supplier community as well. Procurement professionals select suppliers that perform well. High caliber suppliers are invaluable in that they need little babysitting to meet their performance goals, freeing up the buyer to work on more pressing issues. A self-managing supplier goes a long way in filling in the gaps caused by organizational under-staffing. As a profession, we have learned to leverage and appreciate these kinds of suppliers.
Technology is like allergy medicine. It helps control the symptoms, but doesn’t cure the underlying cause of the sneezing. We can address the underlying issues around the chronic under-staffing of procurement organizations at another time.
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