What Are The Pressures That Procurement Faces In 2023 And Beyond?
In recent years we have seen the demand placed upon the Procurement function significantly increase. It has been reported by McKinsey that in 2023 alone the typical workload on the function is set to increase by over 10%. Of note is that the increase in workload is juxtaposed by data that suggests that for most organisations, headcounts are set to be reduced or maintained at best.
What is driving the pressure on Procurement?
The pressures that have been placed on the Procurement function show no signs of reducing. The increasing pressure from macroeconomic factors that include Inflation, Continued Supply Chain disruption and Geopolitical tensions are primary areas of concern for the procurement professional. These issues can be summarised by:
- Inflation continues to remain high. At the time of writing, UK core inflation is tracking at 8.7% with over 80% of categories experiencing pricing pressures.
- With the legacy issues of Covid, the energy crisis, the continuation of the war in Ukraine and the post-Brexit financial pinch in the UK, supply chain distribution continues. McKinsey reports that supply chain disruption is costing companies 0.47% on average each year. With the UK’s annual economy being worth £2.6tn, this amounts to an “astonishing” £12.2bn every year.
What can Procurement do to successfully challenge these pressures?
The challenges that Procurement face has, in some cases, made traditional operating models obsolete. There is no longer a one-size-fits-all model, often multiple priorities need to be managed concurrently. Procurement leaders can lead functions to mitigate issues through:
- Identifying vulnerabilities with a full 360 risk assessment and enhanced transparency. Questions such as: What vulnerabilities do current suppliers have? What are the events impacting the end-to-end supply chain? How are suppliers managing the Cost of Goods Sold (COGS)? What measures such as product value engineering or alternative raw materials can be implemented to mitigate pressures?
- Developing a cross-disciplinary approach with multiple departments to improve total cost ownership
- Encouraging a category focus with an agile mindset; category strategies must be continuously reviewed and amended
- Exploring how technology adoption can create functional efficiencies and enhanced resilience. Those organisations that are successfully mitigating the challenges have increased their reliance on technology. Adopting benefits through automation can allow increased focus on strategically important initiatives. Enhanced spend and supply base information through robust analytics helps make better decisions and even exploring the possibilities of the creation of a digital supply chain ‘twin’ can provide valuable insights through scenario planning.
How can Barkers help?
At Barkers, we combine spend analytics with professional expertise to deliver excellence for our clients. Senior members of our team are Chartered MCIPS, FCIPS or equivalently qualified with relevant Honours Degrees, MBAs and PhDs based on research completed in areas relevant to the advancement of procurement and commercial best practice.
Our senior delivery resources come from a background of industry leadership with hands-on experience in leading and developing complex procurement and commercial teams. Our advice is based on years of hard-earned practical experience so you can be confident that the strategies and methodologies we recommend will hit your budget, timescales and objectives.
We recognise that one size does not fit all. Our approach is simple; we work in partnership with our clients to:
- Provide enhanced spend visibility through analytics
- Agree on scope and opportunity
- Utilise our Procurement As A Service expertise to deliver savings, consolidation and control, improving compliance and reducing risk
- Manage on your behalf on an ongoing basis
What are the Benefits?
Due to the nature of how Barkers work and the expertise we have within our team, we deliver multiple benefits for our clients:
- Enhanced visibility of your spending profile
- Increased savings
- Immediate access to leading Procurement professionals
- Increased compliance and enhanced governance
- Technology expertise and award-winning implementation capability