Cost reduction top priority for procurement leaders in 2024
Procurement executive identified spend cost reduction as the top priority in the coming year, according to The Hackett Group’s 2024 Procurement Key Issues report. The research and consulting firm polled 375 executives in procurement, supply chain, HR, IT, and business services.
Last year’s top priority – ensuring supply continuity – fell to second place in this year’s survey, while “combating inflationary prices increases” came in third place.
“Spend cost reduction is perennially a high priority for procurement," said Chris Sawchuk, principal and global procurement advisory practice leader at Hackett. "But economic concerns have propelled it back into the top spot this year. In addition to the array of global economic challenges, companies are concerned about their ability to grow revenue, so cost focus and margin expansion are key. Many companies are even hoping to claw back some of the inflationary cost increases to support margin growth.”
Procurement leaders are again anticipating an efficiency gap in 2024 with workloads expected to increase by 8% while budgets are only expected to grow 1.6%. Technologies such as generative AI could help with the gap, with tech spending avoiding cuts with an expected 4.6% budget increase.
Data analytics and reporting was the top planned improvement initiative for 2024. Data analytics was deemed highly important but low in maturity by survey respondents – making it a critical development area.
Though a nascent technology, Gen AI was already within 28% of procurement technology portfolios. The most promising opportunities cited by respondents were spend analytics and contract lifecycle management, followed by category management. Fifty percent of procurement leaders highlighted category management, which with the help of Gen AI can pull together historical spend data, planned expenditure, and supply market data to automatically create category strategies – and free up staff for other duties.
“Supply chain disruption risk remains top of mind for many procurement teams due to ongoing geopolitical conflicts,” said Amy Hillcox, senior research director of procurement and purchase-to-pay advisory. “Managing supply disruption is critical to protecting revenue and profitability, and several capabilities key to supply continuity – including supplier relationship management and third-party risk management – were identified as critical development areas in our research.
“Procurement must continue to enhance its capabilities in these areas, engaging in upfront risk monitoring across a broader set of risk domains, and continuing to monitor and mitigate risks using real-time data and insights through the full supplier life cycle,” Hillcox added.
