Hackett Group’s new key issues report signals change in procurement

Supply Chain managers may expect to see a dramatic acceleration of globalization efforts that will likely increase the number of procurement jobs performed offshore by more than 50 percent by 2013.

According to The Hackett Group’s new key issues Research Insight “2012 Procurement Agenda: Enabling Enterprise Growth… Without Disabling Profits,” procurement organizations are heavily focused on addressing demand and pricing volatility.

At the same time, however, procurement organizations can expect to see small budget and domestic staff increases in 2012

Some of the same observations were made by speakers at last week’s “Supply Chain World North America” in Miami. The conference was organized by the Supply Chain Council.

“The ‘new normal’ will comprise of jobs in procurement going overseas unless we see better compensation here,” said Nick Little, assistant director of the executive development programs at Michigan State University.

The Hackett Group’s research finds that companies expect that the dramatic volatility spike which occurred with the recession in 2008/2009 will persist for the foreseeable future, certainly for the next two to three years. Many companies in the study said they expect changes of 25 percent or greater in input prices, customer demand, and talent availability. Therefore, the research recommends that organizations develop greater “supply agility” –  supply base agility, contract flexibility and even the agility of the procurement function itself. At the same time, they should strive to reduce supply chain risk.

The research finds that procurement leaders will be driving a dramatic transformation over the next two to three years, largely focusing on globalization. According to The Hackett Group, procurement organizations – like finance, HR and IT – have lagged behind other aspects of the business, such as product development, customer strategies, and supply chain, in becoming more global. Procurement leaders now have ambitious plans to nearly triple today’s level of globalization within two to three years.

The combination of increased globalization and selective outsourcing is driving dramatic structural changes in procurement, the study found.  Procurement organizations plan to increase their percentage of FTEs in low-cost regions by more than 50 percent by the end of 2013—from the present 16 percent to 25 percent. This effort will involve both moving routine processes to offshore service centers and also shifting higher-value work, such as tactical sourcing and market intelligence, to external service providers.