Cost containment and supply chain resilience are imperative for procurement teams in 2024. Geopolitical tension, economic downturn, and worsening environmental circumstances all threaten to derail value chains and disrupt the movement of critical goods and services. McKinsey analysts idenified economic volatility, supply chain disruption, and labour market challenges as being among the biggest trends affecting the procurement landscape in 2024.
Goods but not services
Procurement teams have become increasingly strategic in their approach to acquiring goods and materials over the past several years. However these same teams have paid less attention to services procurement.
“Businesses have always relied on third-party services to help them get things done. Today’s business environment makes procuring the right services at the right price from the right provider crucial for success,” argues a recent blog post from SAP’s Gordon Donovan.
However, Donovan (a man whose LinkedIn bio claims that “procurement can save the world,” so you know he’s serious) highlights the fact that “many organisations lack a mature approach to sourcing and managing services.”
This fact exposes organisations to higher levels of risk, is more likely to cost them money, and prevents them from gaining necessary visibility into their procurement process.
Services procurement struggles to be efficient
According to a recent paper on “Benchmarking Services Procurement: A Global Study,” the way many companies approach services procurement is “long overdue for digital transformation.”
The paper found that half of CPOs still rely on manual methods like phone calls, emails, and spreadsheets for buying services. Fewer than 30% use a specialised purchasing management platform. In some ways, this makes sense. Engaging a service provider is, on the face of it, a much more human process than buying physical things. However, CPOs are supposedly missing out on vital benefits they could be experiencing by taking an approach to procuring services that mirrors the one they take to buying physical and digital goods.
Three key opportunities unlocked by a more technologically integrated approach included: better data governance allowing teams to manage large volumes of data safely; AI-assistants increasing productivity by automating manual tasks and synthesising complicated, unstructured datasets; and the potential for more specialised technology platforms that outperform generalised solutions by providing more robust support when managing services spend.
The size of professional services spend in an organisation is such that businesses that fail to digitally transform their services procurement process are potentially missing out on serious savings. Professional services spending accounts for between 45% and 65% of an organisation’s total non-employee spending,” according to a report from 2023.
Donovan reflects that, while “technology can help accelerate” the digital transformation of procurement, procurement teams “must do more to assert themselves within the business” if they are to drive genuine change, contain service procurement costs, and avoid disruption.
