Co
m
pl
im
en
PROCUREMENT EXECUTIVE INSIGHT
ta
ry
Re
s
ea
rc
h
Building an Agile Procurement
Organization
Technology and organizational design best practices and enablers
By Laura Gibbons and Christopher Sawchuk
EXECUTIVE SUMMARY
The Hackett Group’s recent survey on agility in procurement found that 100% of procurement organizations believe
this is an area where they have room for improvement. Their top-ranked technology-related agility improvement
initiatives include consolidating business applications (e.g., the use of source-to-settle suites), moving applications
to the cloud, and developing technology expertise within the function. Among service design best practices that
promote agility, establishing end-to-end value-stream process design, and utilizing customer-centric design tools and
methods are rated highest. Making use of these best practices allows procurement organizations to increase their
flexibility when facing external disruptions (competitive, geopolitical, regulatory or otherwise), which in turn increases
their value to the company.
INTRODUCTION: MANAGING PROCUREMENT’S organization-wide cost-cutting (often the case during
TOP OBJECTIVES the external disruptions mentioned above); and
As companies navigate digital transformation
increasing stakeholder satisfaction means that morale
initiatives and an increasingly competitive economic
has a higher place to fall from during times of turmoil.
environment, business agility is essential. Indeed, it
ranked as the fourth-highest priority among companies
HOW AGILITY CAN ENABLE PROCUREMENT
responding to The Hackett Group’s 2019 Key Issues
OBJECTIVES
Study (Fig. 1 on next page).
To understand why greater agility is a strategic and
Furthermore, agility is related to each of the three competitive benefit and thus worth cultivating, it’s
priorities rated higher: As procurement organizations necessary to first understand precisely what agility
prove they’re agile, they will flourish, because means. The Hackett Group defines it as “the ability to
companies will start to see them as a trusted advisor; anticipate or sense changes in business conditions,
reduced purchase costs ensures that procurement and swiftly make and implement effective decisions in
is already as lean as possible, a plus during times of response to these changes.”
© 2020 The Hackett Group, Inc.; All Rights Reserved. Procurement Executive Insight I The Hackett Group I 1
FIG. 1 Top 10 objectives for procurement in 2019
Percentage of organizations
Elevate the role of procurement to a
trusted advisor to the business
55% 40%
Reduce purchase costs 45% 50%
Increase internal stakeholder satisfaction 38% 50%
Improve procurement’s business agility 25% 63%
Enhance operational process efficiency 28% 53%
Deepen influence on complex spend categories
to drive value beyond sourcing
30% 47%
Expand purchasing’s scope/influence 23% 47%
Reduce supply risk to ensure supply continuity 18% 52%
Reduce supply risk to avoid regulatory non-compliance 30% 38%
Increase level of supplier collaboration 20% 48%
0
CRITICAL HIGH
Source: Key Issues Study, The Hackett Group, 2019
In a procurement context, agility means minimizing below is far from exhaustive. The capabilities listed are
and mitigating risk, specifically supply chain risk. This not necessarily new to procurement organizations.
applies to indirect procurement but has the highest The bigger question is, how fast are agility-related
impact and meaning in direct procurement. What agility decisions made and actions executed? Participants
means in procurement varies by organization, but some in our study confirmed that they are able to meet
capabilities are broadly applicable. That said, the list business expectations for agility most of the time, as
Capability Description/examples
Transition orders quickly to backup Identifying, vetting, and establishing relationships with suppliers that could be used in the event
suppliers of shortages with primary suppliers
Maintaining accurate records of suppliers’ financial health, creditworthiness, and overall
solvency to ensure ability to meet demand
Actively monitoring geopolitical, weather, and tier II supplier data where operations may be
Mitigate external risk factors affected, ensuring contingency plans are in place in the event of occurrences
Actively monitoring regulatory compliance throughout supply chains
Working closely with IT organization to ensure protection from nefarious entities and maintain
cybersecurity health
Maintaining cross-functional training programs, ensuring no single person has the only “key to
Expediently transition team to new the kingdom”
roles and responsibilities Ensuring in the event of expansion or downsizing actively preparing for re-organization
Prepare for merger and acquisition Maintaining detailed mapping of processes and procedures on file
activity
Actively preserving a relationship with R&D organization to rapidly onboard procurement to
Prepare for disruption new products or services in the event of competitive disruption
Plan for internal finance/treasury Identifying prospective action plans in the event of cash surplus or shortages, or exchange rate
objectives fluctuations (such as suppliers in different geographies)
© 2020 The Hackett Group, Inc.; All Rights Reserved. Procurement Executive Insight I The Hackett Group I 2
FIG. 2 Procurement’s ability to meet business-agility expectations: Decision-making and execution speed
Decision-making speed Execution speed
Shift/transition suppliers based on geopolitical
or regulatory risk-related activities
29% 36% 22% 44%
Shift/transition suppliers based on financial,
weather or disaster risk-related activities
28% 38% 22% 48%
Implement a major procurement cost
reduction, including layoffs
27% 51% 26% 47%
Predict and react to the impact of regulatory
or price changes, like tariffs
24% 45% 30% 44%
Predict and react to cash flow/
treasury strategy
24% 41% 22% 48%
Implement a major organizational or
service delivery model change
22% 57% 18% 41%
Shift resources/talent based on
changing business needs
21% 62% 26% 48%
Incorporate new data types and information
sources into analytical models
19% 51% 20% 43%
Plan and execute a major procurement
technology platform change
16% 53% 15% 53%
Develop a new digital procurement capability 14% 47% 15% 35%
Attract or develop new procurement
talent and skills 11%
53% 9% 31%
CONSISTENTLY MEETS USUALLY MEETS
Source: Agile Operating Model Survey, The Hackett Group, 2019
shown in Fig. 2. Situations include changing suppliers, Respondents to our agility study reported that the
implementing major cost reductions, and predicting and following are among the most effective established
reacting to regulatory or price changes such as tariffs. technology practices:
This makes sense, as these capabilities are core to the • Consolidating business applications (e.g., by using
procurement function. source-to-settle suites): Visibility into procurement
data (spend, supplier, etc.) is increased, as consolidated
On the other hand, the capabilities organizations are applications can easily communicate with each other.
least often able to deal with quickly tend to involve A less complex infrastructure also costs less and lets
technology and talent: planning and executing major organizations make large-scale updates faster.
platform changes, developing new digital capabilities,
• Migrating applications to the cloud: Cloud
and attracting/developing new talent and skills. Ways that
applications tend to be more flexible, scalable, secure
procurement can utilize technology and organizational and accessible by stakeholders, all of which contribute
design to increase its agility will be covered more to increased agility.
thoroughly in the sections that follow.
• Developing technology expertise within the
procurement function: Procurement staff who can
THE ROLE OF TECHNOLOGY IN INCREASING AGILITY
function independently of the IT organization can act
Some of the biggest hurdles to increasing agility in the
quicker and make more informed decisions, while
procurement function involve technology (Fig. 3 on next
keeping procurement priorities in mind. This does not
page). Digital transformation is something that is on every
mean dedicating an IT resource to procurement, but
company agenda. It can also be a cornerstone for building
rather, ensuring that appropriate procurement staff have
a more modern and agile procurement organization. For a fundamental understanding of emerging technologies
most, at a high level, this involves modernizing technology and their applications in source-to-settle.
to increase capabilities such as those detailed in Fig. 2.
© 2020 The Hackett Group, Inc.; All Rights Reserved. Procurement Executive Insight I The Hackett Group I 3
FIG. 3 Agile technology practices: Adoption and effectiveness
Higher
Migrate applications Consolidate business
to the cloud applications
Use ESPs to bridge
technology competency gaps
Develop technology expertise
within the procurement
Effectiveness
Extend core applications function
with best-of-breed
Integrate applications and
processes using RPA
Deploy smart automation
technologies
Lower
Lower Adoption Higher
ESTABLISHED PRACTICE EMERGING PRACTICE
Source: Agile Operating Model Survey, The Hackett Group, 2019
These practices are also among the most widely adopted. This is particularly true for smart automation.
adopted, which only promotes their credibility as a larger Only now are companies starting to test these
set of companies are reporting benefits. Considered technologies, making it too early to fully assess their
less effective are using best-of-breed applications, effectiveness.
RPA solutions and smart automation technologies (i.e.,
cognitive, chatbots). However, it bears mentioning that Beyond overarching technology best practices, specific
these practices are still emerging and thus not as widely types of technology and functionality can increase
agility. These are detailed below.
Technology or
Effect on agility and use cases
feature
B2B/many-to-many Increases the ability to quickly identify, vet and replace suppliers. In the event suppliers need to be replaced, pre-
marketplace validated sets of suppliers can be immediately used without the need for approval and onboarding.
Provides comprehensive information on supply sources and performance, including the ability to closely monitor
SIM and market
performance and blacklists, and identify red-flag suppliers or vital alerts in category intelligence. This helps
intelligence
organizations get ahead of supply chain disruptions.
Artificial intelligence
AI and RPA are applied to automate manual processes, increase efficiency, and reduce cycle time and decision-
(AI) and robotic
making speed. Included: RFx structuring, onboarding and renewal of suppliers, supplier credit validation, due
process automation
diligence and communications, document analysis and validation, and supplier performance tracking.
(RPA)
Connects physical devices in real time to improve visibility of inventory, logistics and lead-time data. Real-time
Internet of things
information on stock levels enables just-in-time ordering. This is extremely valuable in direct procurement, where
(IoT)
lead times and stock levels are critical to the smooth flow of enterprise processes.
Increase information visibility, particularly in supply/demand and supplier performance. This permits continual
Advanced analytics optimization of the procurement function, along with reductions in cycle times and faster implementation of
change.
© 2020 The Hackett Group, Inc.; All Rights Reserved. Procurement Executive Insight I The Hackett Group I 4
THE ROLE OF SERVICE DESIGN IN INCREASING focus on user adoption. Although this practice is
AGILITY viewed as relatively more effective than others, it is
Technology is only as supportive of agility as the not widely embraced yet.
processes and people that enable it. Using data from • Use of customer feedback for continuous
our agility study, we plotted service-design practices improvement initiatives: Stakeholder insights are
by their effectiveness and adoption level (Fig. 4). This vital to ensuring that teams, processes and tools are
exercise uncovered the highest-ranked actions and at their maximum effectiveness. Heeding customer
methods for building agility into service design: complaints can help organizations get ahead of
• End-to-end value stream process design: Moving problems before they worsen and lead to financial or
beyond functional process design, to partnering with reputational loss.
stakeholders to deliver timely support and end-to-end
services, as well as setting up service centers that CONCLUSION
support source-to-pay, legal, IT and finance, allows Procurement organizations that want to increase
procurement to reduce overhead and maintain a lean their agility should consider the ways that technology
and efficient environment for implementing change. and service design can help. When processes are
This practice is reported to be very effective but is still designed around value streams and stakeholder
emerging, and thus not yet widely adopted. needs (rather than simply to maximize efficiency and
• Utilizing customer-centric design tools and reduce costs), organizations are able to alter service
methods: When designing processes and service design more quickly. When technology is cloud-based
centers, and even when selecting applications, and applications are consolidated, rapid change is
ensuring that customer-centric tools and methods considerably easier to execute and manage.
are used maximizes adoption. That in turn magnifies Following the best-practice guidelines for technology
the positive effects of new processes as well and service design in procurement discussed in this
as the speed at which adoption occurs. When
report will provide a stable foundation during times of
companies report unsuccessful transitions and
uncertainty and economic volatility.
implementations, it is usually because they did not
FIG. 4 Service design practices: Adoption and effectiveness
Higher
Customer-centric design
tools and methods End-to-end value stream
process design
Use of customer feedback
Iterative, collaborative for CI initiatives
solution-development
methodologies
Standardize and simplify
Persona- or processes
role-based
service
delivery
Effectiveness
capabilities
Center of excellence for tool adoption,
best practices, etc.
Lower
Lower Adoption Higher
ESTABLISHED PRACTICE EMERGING PRACTICE
Source: Agile Operating Model Survey, The Hackett Group, 2019
© 2020 The Hackett Group, Inc.; All Rights Reserved. Procurement Executive Insight I The Hackett Group I 5
About the Advisors
LAURA GIBBONS
Senior Director of Research, Procurement Executive Advisory Program
Ms. Gibbons has 10 years of industry and consulting experience in areas such as procurement
strategy, organizational and process design, digital transformation, strategic sourcing and
category management. She previously worked in The Hackett Group’s Strategy and Operations
consulting practice, specializing in sourcing, procurement and supply chain. Before joining The
Hackett Group, she worked in product development and strategy and operations at Groupon.
CHRISTOPHER S. SAWCHUK
Principal & Global Procurement Advisory Practice Leader
Mr. Sawchuk leads The Hackett Group’s global procurement advisory practice. He has over 20
years of experience in supply management, working directly with the Global 2000 and midsized
companies around the world and in a variety of industries to improve all aspects of supply
management, including process redesign, digital enablement, operations strategy planning,
organizational change and strategic sourcing. Mr. Sawchuk specializes in working directly with CPOs
to help define a long-term strategy. He is a regular contributor to business publications, a frequent
presenter at industry events and author of numerous reports and books. Mr. Sawchuk’s background
includes engineering, operations and sales roles with both United Technologies and IBM.
The Hackett Group Atlanta Global Offices
1000 Abernathy Road NE +1 770 225 3600
Amsterdam Montevideo
Suite 1400
Atlanta New York
Atlanta, GA 30328 London
Chicago Paris
+44 20 7398 9100
Frankfurt Philadelphia
+1 770 225 3600
Hyderabad Vancouver
1 866 844 6514 (toll-free)
London
info@thehackettgroup.com
www.thehackettgroup.com
CR_6000242
