Hackett Group: procurement transformation cuts costs by 45%

In the past, the transformation or re-structuring of a business department, the process was primarily driven by the desire to cut costs and increase efficiency. Now, there’s no denying the fact that the entire industry and approach is shifting dramatically as companies come to understand the potential that their supply chains and procurement divisions have to be value creators. 

“The digital transformation of the supply chain is real, and is creating roles that never existed before, like digital transformation officer, chief supply chain officer and chief procurement officer that are specific to supply chain procurement - not indirect procurement,” says Tom Kieley, CEO of supply chain software solutions company SourceDay.

But how do companies looking to reap the rewards of a digitally transformed supply chain and procurement function go about taking the first steps - or picking up the pace - along that road. 

This week, Miami, Florida-based strategic consulting firm the Hackett Group shared the findings of its latest report. Through the deployment of digital tools, procurement organisations can reduce operational costs by up to 45%, the report says, 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.

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The report also notes the best areas of developing technology that will provide the most immediate and impactful benefits to adopters. Average procurement companies that deploy smart automation technologies, such as robotic process automation, smart data capture, and cognitive automation can expect a 17% cost reduction. 

“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 in 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.”

Among other factors, like spend efficiency and customer relationship strategies, digital transformation strategies can make the difference between what the Hackett Group identifies as typical and world-class procurement organisations.