The Hackett Group: For 2014, Procurement Expanding Priorities Beyond Cost Reductions to Focus on Influence, Innovation

  The Hackett Group: For 2014, Procurement Expanding Priorities Beyond Cost
  Reductions to Focus on Influence, Innovation

 Procurement Key Issues Study Recommends Three Areas of Transformation Focus:
          Rebalancing Supply Risk; Recalibrating Tools & Technology;

               And Reinventing Procurement's Value Proposition

Business Wire

MIAMI & LONDON -- March 18, 2014

Procurement leaders are expanding their priorities for 2014, moving beyond a
historic emphasis on reducing purchase costs and adding focus on expanding and
deepening the scope of spend influence as well as supporting supplier-led
product innovation, according to 2014 Procurement Key Issues research from The
Hackett Group, Inc. (NASDAQ:HCKT).

The Hackett Group's research reveals a major change in procurement's
priorities from last year, when cost reduction/avoidance was their number one
concern. For 2014, the highest-ranked issue is expanding the scope of
procurement's spend influence. Over three quarters of the executives placed
this first in their priority ranking. Tapping into supplier innovation is the
second-highest priority and a focus for 69 percent of the companies in the
study. Prioritization levels for both of these issues increased significantly
from 2013. Despite its historic position as a top focus, only about half of
the companies said they were focusing on cost reduction and avoidance in 2014
as a key procurement strategy, placing it fourth on their priority list.

The Hackett Group's research also showed that procurement leaders are
expecting to see small increases in budgets and staffing in 2014. Budgets are
expected to increase by 0.7 percent and staffing by 0.9 percent. But the
expected enterprise growth rate of 6.7 percent will far exceed both of these
increases, resulting in a productivity and efficiency gaps of about 6 percent
for 2014.

"Overall, companies are turning to innovation to drive revenue growth and
margin improvements in 2014," said The Hackett Group Global Managing Director
and Procurement Advisory Practice Leader Chris Sawchuk. "Cost reduction is
still a top priority. But we believe many procurement organizations have
reached the upper limit of cost reductions possible in categories they are
actively sourcing today. So they're looking for ways to reinvent their value
proposition. A key part of this is expanding their influence, and taking a
life-cycle approach to category management. This requires working more
effectively with spend owners, executives, requisitioners, suppliers, and
other stakeholders. It also calls for skills that are outside procurement’s
traditional areas of expertise."

According to The Hackett Group's research, procurement should focus its
transformation efforts in three areas to achieve the biggest enterprise impact
in 2014: rebalancing supply risk; recalibrating procurement technology and
tools; and reinventing procurement's value proposition.

Rebalancing Supply Risk

Procurement organizations must recharge their risk management and mitigation
efforts in 2014, The Hackett Group's research recommends. Even among
top-performing procurement organizations, only slightly more than half conduct
formal supply-base risk assessments, The Hackett Group found. The main focus
of procurement's risk mitigation efforts are on trying to identify signs of
financial distress among suppliers, evaluating alternative sourcing
arrangements, and running what-if scenarios to identify supply network risks
and build resiliency.

The Hackett Group's research identified several emerging risk mitigation areas
where procurement organizations are beginning to focus as part of their supply
chain strategy. Supplier data security -- ensuring that suppliers are able to
keep sensitive data private -- is one area that is being addressed by
procurement organizations in several ways. Procurement organizations are
considering the need to pre-qualify suppliers' ability to handle sensitive
data. They are beginning to work with IT to understand data-security
compliance issues. Finally, they are seeking to balance an expanded risk
management role with the need to foster supplier innovation, better
understanding the tradeoffs between supplier risk and innovation potential.

Recalibrating Procurement Technology and Tools

With only limited new procurement-related technology spending in 2014,
procurement leaders are focusing on reconfiguring or extending existing
applications to improve their value. Enhancing the quality of inputs is one
way to do this, and as a result driving master data management is the
principal technology priority for 2014, according to The Hackett Group's
research. Another top technology focus for procurement in 2014 is implementing
business intelligence and analytics applications, to facilitate automated
spend analysis as well as other efforts to extract valuable insights from the
massive amounts of data that are available, and gain strategic sourcing
insights.

New for 2014 is a higher level of attention to self-service and collaborative
tools by procurement. Over half the companies in The Hackett Group's study
said they intend to roll out Web-based and self-service tools for internal
employees. In addition, the research found procurement leaders hoping to
significantly expand their use of peer networks to share supplier risk and
performance information, and also collaborate with suppliers on demand
forecasts.

Reinventing Procurement's Value Proposition

The Hackett Group's Key Issues Research also found that the importance of
monitoring, measuring and reporting on procurement’s value contribution is on
the rise for 2014, as companies seek to quantify and communicate the value
procurement delivers. A total of 75 percent of all companies ranked value
contribution visibility as a key procurement investment area for 2014, and
another 69 percent ranked investments in measuring and monitoring their value
contribution as a key objective.

But increasing and measuring spend influence should only be the first step in
quantifying value contribution. The Hackett Group's research suggests that
procurement leaders should consider what impact enterprise-level
innovation-based strategies will have on procurement and how to measure their
value against that goal. This could include improvements in requirements
engineering, the number of truly new solution proposals that procurement
brings to the table, or a consideration of whether the resulting products or
services ever make it to the market.

"To bring clarity to the discussion, procurement must know how to document its
own innovation and the impact it has on enterprise growth and be able to
convince the rest of the organization that procurement’s expanded value
proposition is real," said Mr. Sawchuk. "Unquestionably, the process of
broadening value objectives, scorecards and capabilities will be arduous. More
than brute force, flexibility is of the essence to help the procurement
organizations expand globally in step with the business."

The Hackett Group's 2014 Procurement Key Issues research is based on a study
conducted in late 2013. Study participants included executives from over 150
large companies in the US and abroad, on their business strategies, revenue
and budget expectations, and key initiatives for 2014. A complimentary copy of
The Hackett Group's research insight, "Rethinking How Procurement Defines Its
Value, Balances Risk and Gets the Most from Technology Investments," is
available with registration at this link:
http://www.thehackettgroup.com/research/2014/pr/keyissues-pr/

About The Hackett Group

The Hackett Group (NASDAQ:HCKT), a global strategic business advisory and
operations improvement consulting firm, is a leader in best practice advisory,
business benchmarking, and transformation consulting services including
strategy and operations, working capital management, and globalization advice.

Utilizing best practices and implementation insights from more than 10,000
benchmarking studies, executives use The Hackett Group's empirically-based
approach to quickly define and implement initiatives that enable world-class
performance. Through its REL group, The Hackett Group offers working capital
solutions focused on delivering significant cash flow improvements. Through
its Archstone Consulting group, The Hackett Group offers Strategy & Operations
consulting services in the Consumer and Industrial Products, Pharmaceutical,
Manufacturing, and Financial Services industry sectors. Through its Hackett
Technology Solutions group, The Hackett Group offers business application
consulting services that help maximize returns on IT investments. The Hackett
Group has completed benchmark studies with over 3,500 major corporations and
government agencies, including 97% of the Dow Jones Industrials, 84% of the
Fortune 100, 87% of the DAX 30 and 48% of the FTSE 100.

More information on The Hackett Group is available: by phone at (770)
225-7300; by e-mail at info@thehackettgroup.com.

Contact:

The Hackett Group
Gary Baker, 917-796-2391
Global Communications Director
gbaker@thehackettgroup.com
 
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