Trends Identified challenges

1.  Being aware of the shareholders and top management
expectations on the procurement organization to improve
bottom-line result and secure business continuity, the challenge
that most leaders are facing during 2019 is to demonstrate the
added value of procurement services as an operational and
strategic contributor supporting actively the set business
objectives.
 Most supply chain organizations are experiencing difficulties to
plan and develop a roadmap to proceed with their digitization
journey, and it is indeed an extremely strategic, complex and
cross-functional team initiative that brings risks of disruption and
poor ROI if not planned and executed correctly.
 Most Procurement leaders are still not clear about how to manage
digitization of the function to deliver tangible value to the
organization and as such are facing budget limitations.
The gap between leading procurement
organizations and the rest is getting bigger
Only Tier one organizations are leveraging
Artificial Intelligence, Machine Learning,
3D-Printing or Prescriptive Analytic solutions
Digitalization is on every CPO’s
agenda, but apparently there is a
lack of clarity on how to leverage
technology to drive tangible value!
2019 Copyright FOCUS International
2019
Overview

2. ‘Corporate attractiveness’ of
procurement still relatively low
 We have identified two reasons that may explain the difficulty in promoting
procurement as a key component of sustainable shareholder value:
1. Lack of internal credibility. Most company cultures do not associate
procurement in business with success. It is often perceived as a support
function that produces cash to invest in marketing and/or R&D. Procurement
objectives are rarely aligned with business objectives and measurement
tends to focus on purchasing price variance rather than total cost reduction.
Presentations show how the increases from suppliers are lower than those
budgeted, whereas CFOs want to know how they are going to offset it and
reduce total costs year on year.
2. Alignment with the business. The inability to sell effectively internally by
employing the same language as finance, marketing or R&D is one problem.
The inability to measure effectively the procurement impact across sites,
categories and countries is another. The inability to measure value (the
business impact is always associated with cost reduction, stock
management, payment terms, etc) in turn leads to a lack of commitment
from top management to invest time and resources into a procurement
change programme – for example, sponsoring and participating in a
change to the way that major supplier relationships are managed.
Although attitudes towards procurement have changed in the past decade,
there is still considerable room for improvement, as these examples show:
 CPOs have difficulty proving that savings have affected the P&L, because
there is little or no traceability of the benefits hitting a budget or cost centre.
Budget holders tend to thank procurement for their help, then spend the
savings provided on other things (or to offset overspends in other areas).
 Many executives and general managers conceal their real financial
contribution. There is little visibility, transparency or accountability. It is difficult
in this context to present the savings.
 Some CPOs claim the same saving year after year, even though there was
only an impact in the first year. CFOs want them to start from a new baseline
each year.
 CPOs are rarely involved in major projects or confidential ones. Procurement
is often brought in at the last minute to finalise a contract, or totally ignored.
2019 Copyright FOCUS International

3. 2019 Identified
challenges
for Value Creation
Human Capital
A shortage of qualified talent is a significant obstacle facing procurement due to Changing
requirements on domain expertise, training needs, attractiveness to join the function…
Improved Supplier Management
Improvement in the way procurement may leverage supplier capabilities to drive business
value by Innovation and closer collaborations based on value exchange.
Slow technology adoption
Digital technologies including cryptocurrency blockchain, cloud, internet of things (IoT),
artificial intelligence (AI) have a slow adoption and expected to take into 2021 however
improving data quality and RPA are on top of priorities
Realized Social Value
Organizations have begun to understand Social value and sustainability as the overall
value proposition customer package and procurement is a key player to follow through.
Fact-based Procurement Decision
“Price reduction” is still the driving force for many procurement organizations.
A better leverage big data and analytics should be the priority.
2019 Procurement
Dependencies
 Key Performance Indicators
 Budget restrictions
 Qualified Resources
 Stakeholders Buy-in
 Agile Technology Roadmap
 Identifying, Quantifying and Realization of
procurement added value services.
AI and procurement automation
are eliminating human
intervention by 15 percent of
digital spending
2019 Copyright FOCUS International
According to Gartner, the main
obstacles for firms to pursue and
implement digitalisation are expensive
technical set up costs (46%) and long
development times (42%).
On the other hand, digitalising the
practice of procurement and supply
chain appears to be economically
and operationally justifiable despite
being expensive to implement and
maintain as it would place firms in the
position of competitive advantage.