Hackett: Cost CPOs' top Worry, Outweighing AI Adoption
Cost containment and cash flow optimisation are top of the priority list for procurement leaders, research from the Hackett Group shows.
The 2024 Procurement Key Issues report finds that cost reduction is most important issue currently facing procurement leaders, who are facing a challenging market, beset by high interest rates, labour problems, supply chain disruption and tight margins.
The report says that, at the start of 2023, most organisations were “preoccupied with ensuring supply continuity and combating inflationary price increases”.
But it adds that as we neared 2024, the outbreak of the Israel-Hamas war – giving rise to the Red Sea commercial shipping crisis – means the economic outlook remains “uncertain, with projections global economic growth could slow in 2024”.
The study shows that almost two-thirds (62%) of chief procurement offices (CPOs) worry about the impact of interest rates on their ability to invest during 2024, while 57% fear a recession during the year.
Meanwhile, nearly half (46%) expect labour and skills shortages to continue disrupting business during the coming year.
The Hackett Group’s 2024 Key Issues Study is undertaken every year, and provides a snapshot of the perspective of executives as they look ahead to the upcoming year.
Two leading Hackett analysts have picked over the report in a podcast.
Amy Hillcox is Senior Research Director at The Hackett Group, while Chris Sawchuk is Principal & Global Procurement Advisory Practice Leader.
Sawchuk stresses the importance for organisations to “understand the context of the broader environment as they begin to consider their priorities”.
He points out that the top three priorities for 2024 were also the same as those listed in both 2022 and 2023. He adds that one procurement priority that is new for 2024 is transforming the procurement operating model.
Procurement leaders 'in early stages of new tech'
The study reveals the majority of organisations are still in the initial stages of exploring new technologies and how they may adapt to their current working environments.
Only 15% of respondents are currently piloting GenAI in their business areas. People report that they are seeing the most potential around spend analytics and contract lifecycle management.
explores the role of Gen AI in the context of procurement, saying “businesses need to consider how they use large-language models like GenAI to help with their specific business challenges”.
She adds: “Some of the best AI currently automates tedious tasks and allows organisations to allocate time to other areas that are often overlooked.
“We are only in the very early stages of discovering the possibilities of GenAI and I am excited to see how things play out in the future.
Saechul meanwhile goes on to say procurement leaders are keeping in mind “all priorities”, rather than only the top three.
“This proves businesses have much more on their pnlates now compared to several years ago,” he says. “GenAI is one of the most common topics of organisations, as leaders are making a special attempt to learn as much as they can about the topic.”
Although cost control is hugely important to procurement leaders, many of the leading businesses providing procurement solutions -- such as SAP -- are focusing products on helping business leaders focus on strategy.
In recently launching Joule – SAP’s natural-language, generative AI ‘co-pilot’ – SAP CEO Christian Klein talked of how it has the power to redefine both the way businesses and people work. “Joule will know what you mean, not just what you say,” Klein told the world.
