- Procurement organizations recognized as "world-class" are shrinking, according to a recent study by The Hackett Group, requiring 29% fewer employees on staff and incurring 21% lower labor costs as compared to their peers.
- The key, according to the study, is in digital transformation, which has equipped procurement teams to lower process costs for world-class organizations by 22% and more "typical" organizations by 30%.
- Computers, automation and data-driven focus will continue to enable smaller procurement teams to function at a high level. “We can expect to see procurement teams being smaller in the future,” said Nic Walden, The Hackett Group's head of UK procurement.
Procurement teams should not be judged on their size, but on their influence.
Technological advancements supporting the procurement organization are overdue. While some may look at the automation of selected processes as a way to cut staffing, it actually provides an opportunity to shed non-value-added tasks. As a result, procurement organizations will bring a greater focus on the strategic processes of building and maintaining supplier relationships, as well as their contribution as an internal resource in areas including sales and operations planning and customer satisfaction.
Traditionally, management success in most functional areas was determined by the size of the staffs that managers controlled. In the procurement area, there were far too many expediters and clerical support staff, driven by systematic inefficiencies, a complicated paper-driven process, and marginal supplier performance.
However, it is not a badge of honor for a procurement manager to be proud to hire a bench full of expeditors, entry-level buyers or administrators. It is a sign of a process out of control. Or, one not worthy of an investment in technology.
Procurement managers should look at the addition of technology not as a threat, but as a gift, allowing the opportunity to finally shed the tactical label and spend time to develop and execute the internal and external strategies necessary to manage a global supply chain. But not all will appreciate this gift.
Some managers still take comfort in blaming arduous administrative tasks for the lack of a strategic approach to their jobs. With those excuses being reduced, the job changes. Progressive supply chain managers will embrace those changes with a sense of relief and renewed purpose, measured by action and influence, and not by their organizational charts.
The procurement function has evolved from a focus on tactical acquisition to one of strategic importance, responsible for a global web of suppliers critical for a company to meet their operational, financial, and customer service targets. While the use of technology may indeed reduce the need for larger staffs, the importance of the function has never been higher.