2016 Procurement Trends: A look back

2nd November 2016

When assessing procurement activities and planning for the future, it’s imperative to look back on what were the predicted trends, any unexpected issues and all-round triumphs. Earlier in the year we collaborated with eWorld Procurement and Supply to bring you our Procurement Trends Survey.

A lack of resources and investment was predicted to be the biggest challenge in 2016, and now appears to have been even further compounded due to unknowns around the imminent ‘Brexit’. Expected to take a few years, this will leave many procurement professionals further scrutinising decisions due to a higher level of risk. Resources may well be squeezed and markets have already become increasingly volatile, potentially hampering investment in procurement capability.

We had already picked up on the fact that there seemed to be an attitude of making do with what we have, but Brexit is yet to reveal its real effects on the procurement landscape. That being said, this opens up further opportunities for supplier rationalisation and smarter purchasing for organisations. Suppliers will want to maintain their existing contracts, so opening up for talks may be on the table in this time of unrest.

In 2016, there has been a common view that procurement is just about cost reduction; however cost reduction as a priority fell by 11% as reported by our respondents. Before getting ahead of ourselves, it’s important to realise that this still remains by far the professions highest priority and only time will tell if this is a sustained shift.

Popular procurement priorities as voted for in The Procurement Trends Survey 2016:
• Reducing supply risk
• Becoming more strategic
• Improving contract management
• Effectively looking to control spend and efficient purchasing.

Have you noticed a reduction in training or procurement professionals joining your organisation? Well, worryingly investment in people will be reduced. Only 26% of those surveyed stated that they were investing in procurement training, a reduction of 30% from previous years. The free flow of people into the UK from talent hot-spots could well be severely reduced, meaning those few jobs that do crop up could see a far smaller pool of candidates.

A key out-take from the sector challenges, in addition to the implications of Brexit, saw Local Authority and Manufacturing facing the largest number of issues. Surprisingly the Healthcare sector was shown to be 46% down from 2015, although this is widely thought to be respondents becoming accustomed to the year-on-year pressure. Although certain sectors may be experiencing harder times, procurement savings targets as a whole remain aggressive as ever. Taken from The Procurement Trends Survey, a third (38%) of CPOs have a target of between 6-10% whereas a quarter must achieve 10% savings or more.

An increasingly common way of realising and delivering these savings seems to be collaborative procurement – driving standardisation and reducing costs. This form of procurement has been taken up by almost a third of survey respondents.

When assessing changes in procurement technologies, we found that respondents now rank ease-of-use and data accuracy ahead of customer service. Linking to our previous blog on an effective eCatalogue, it’s prevalent to see the change in preferences for a procurement solution.

The final driving force in 2016 trends has been the increased prioritisation of data analysis. More than half of organisations (57%) stated that spend analysis is a major priority this year. This will identify additional sources of value – both in terms of immediate cash savings and longer term opportunities. A stat that counteracted the overall Survey results was that only 6% of respondents selected Artificial Intelligence (AI) as a technology that will have an impact on their procurement. This being said, AI is already widely used and is the driving force behind many big data applications, such as Spend Science. AI was even highlighted last week when a televised documentary about robots; demonstrated capabilities to teach itself over a certain timeframe. We continue to predict that this will have an impact on procurement over the coming years when looking at search tools, spend analysis and data processing.

Looking back on the survey’s results and the subsequent impact of recent events, it’s still important to emphasise that we are working within a complex and changing environment. Procurement professionals will always adapt and assess policies while always trying to minimise risk and hit those growing targets. Those that prosper are the ones who are able to deliver tangible results on a continuous basis due to conscious procurement decisions.

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