Through full deployment of digital tools, typical procurement organizations can reduce operational costs by up to 45%, achieving efficiency levels below those of today’s world-class procurement organizations while at the same time enabling them to improve effectiveness and customer experience, according to new research from The Hackett Group, Inc. (NASDAQ: HCKT).
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Through full deployment of digital tools, typical procurement organizations can reduce costs by 45%. (Photo: Business Wire)
World-class procurement organizations, which spend 22% less than their peers, can also reduce costs by an additional 33% with comprehensive digital transformation, according to the research. This ‘breakthrough’ can free up resources enabling world-class procurement organizations to further digital transformation initiatives, engage in more value-added activity, and/or fuel company growth.
The research details The Hackett Group’s new “Digital World Class” analysis, an estimate of the additional benefits that world-class procurement organizations can achieve through the combination of operating model changes, full technology landscape optimization, and the successful adoption of digital technologies.
The Hackett Group’s research concluded that procurement organizations can reap significant benefits by taking a simpler interim approach. By deploying smart automation technologies such as robotic process automation, smart data capture, and cognitive automation, typical procurement organization should expect a 17% cost reduction, while world-class procurement organizations can reduce an already competitive cost structure by additional 21%.
By taking a customer-centric approach to service delivery, world-class procurement organizations are also able to deliver far greater business benefit to their companies, the research found. While operating at lower cost, world-class procurement organizations also see higher effectiveness and improved customer satisfaction.
The research also updates The Hackett Group’s service delivery model for world-class procurement, detailing how in addition to technology, procurement organizations must focus in other areas to truly achieve transformation, including: service delivery; analytics and information management; organization and governance; service partnering; and human capital.
A public version of the research, “World-Class Procurement: Redefining Performance in a Digital Era,” which contains nearly 70 metrics detailing the performance of typical and world-class procurement organizations, is available on a complimentary basis, with registration, at this link: http://go.poweredbyhackett.com/wcpro1905sm.
“In response to the pressures of rising demand, disruptive tech, and intensified competition, procurement is turning to digital transformation. And as our research shows, the potential is there for even the best procurement organizations to use digital to dramatically improve efficiency, effectiveness, and customer experience,” said The Hackett Group Principal & Global Procurement Advisory Practice Leader Chris Sawchuk. “Few procurement organizations are there yet. But many are already engaged with smart automation, which represents the first steps on this path. Smart automation can generate real ROI quickly while procurement continues the longer journey to full digital transformation.”
World-class procurement organizations have also realized that digital solutions deliver effectiveness benefits, reducing human intervention in routine, rules-based processes, and driving lower error rates and other benefits, the research found. World-class procurement organizations influence 93% of spend (compared to 64% for the peer group) and generate 75% more savings via cost reduction and cost avoidance. One key here is a focus on standardization of end-to-end processes.
For 2019, The Hackett Group’s world-class procurement research breaks out customer experience as a separate area of analysis, measurement, and transformation focus for the first time. Digital-era customer experience metrics move beyond simple customer satisfaction surveys to assess the view of the consumer. World-class procurement organizations are over 4x more likely to be perceived by stakeholders as an integral and valued business partner, and more than 2x likely to be seen as an expert.
According to The Hackett Group Principal & Strategic Sourcing and Procurement Practice Leader Robert Derocher, “The benefits of getting to digital world-class are clear. But the how of getting there is also critical to consider. A holistic transformation plan describing how to engage and partner with the business is key. Our updated world-class service delivery model describes all the elements that must come together in parallel with technology transformation.”
“Procurement must change its service design approach, so that processes meet customer needs and desires,” said Derocher. “They must improve analytics, to provide more informed guidance, manage risk, and identify opportunities. They must look at organization and governance, and consider the best overall organizational structure to support their business. Service partnering is critical, as procurement must have strong relationships with external business partners, such as offshore service providers. And human capital is key, because staff need new skill sets to succeed, requiring procurement to create a culture of continuous learning.”
World-class procurement organizations are those that achieve top quartile performance in both efficiency and effectiveness across an array of weighted metrics in The Hackett Group’s comprehensive procurement benchmark. Digital world class is The Hackett Group’s estimate of the additional benefit that world-class procurement organizations can derive from full technology enablement of execution of procurement work and optimization of the procurement technology landscape. The Hackett Group’s world-class procurement research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of global companies.
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual property-based strategic consultancy and leading benchmarking and best practices firm to global companies, with offerings that include smart automation and enterprise cloud application implementation. Services include business transformation, enterprise analytics, global business services, and working capital management. The Hackett Group also provides dedicated expertise in business strategy, operations, finance, human capital management, strategic sourcing, procurement and information technology, including its award-winning Oracle and SAP practices.
The Hackett Group has completed more than 16,500 benchmarking studies with major corporations and government agencies, including 93% of the Dow Jones Industrials, 89% of the Fortune 100, 83% of the DAX 30 and 57% of the FTSE 100. These studies drive its Best Practice Intelligence Center™ which includes the firm’s benchmarking metrics, best practices repository and best practice configuration guides and process flows, which enable The Hackett Group’s clients and partners to achieve world-class performance.
Cautionary Statement Regarding “Forward Looking” Statements
This release contains “forward looking” statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Statements including without limitation, words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, seeks”, “estimates” or other similar phrases or variations of such words or similar expressions indicating, present or future anticipated or expected occurrences or outcomes are intended to identify such forward looking statements. Forward looking statements are not statements of historical fact and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward looking statements. Factors that may impact such forward looking statements include without limitation, the ability of Hackett to effectively market its digital transformation and other consulting services, competition from other consulting and technology companies who may have or develop in the future, similar offerings, the commercial viability of Hackett and its services as well as other risk detailed in Hackett’s reports filed with the United States Securities and Exchange Commission. Hackett does not undertake any duty to update this release or any forward looking statements contained herein.