Five things procurement organizations need to improve in 2019
According to a survey from the consulting company The Hackett Group, significant "alignment gaps" exist between what procurement organizations see as critical procurement capabilities and their current abilities.
There are dozens of improvement initiatives that procurement organizations could roll out to help catapult them into operational excellence from improving data and systems security to better measuring and managing value to that perennial favorite—reducing operating cost. But how can they choose which ones to prioritize?
The consulting company The Hackett Group, which specializes in procurement, has identified five capabilities that it sees as critical development areas for procurement organizations in its paper "2019 CPO Agenda: Building Next-Generation Capabilities." These improvement areas are based on the company's 2019 Key Issues Study, which involved surveying 150 executives at midsized and large (more than US$1 billion in revenue) enterprises in both the United States and abroad.
Authors Laura Gibbons and Christopher Sawchuk looked at what respondents said were the most important procurement capabilities for the year and compared them to how well the respondents said they were currently able to perform these capabilities. The areas with the biggest gaps between importance and ability were identified as "critical focus areas." These are:
Improve analytical capabilities: According to the article, procurement organizations will increasingly need to use predictive analytics for such activities as spend analysis, while also starting to engage in more risk management analysis. The majority of organizations seem to be aware of this need. Fifty percent of respondents say they are already engaged in improvement programs in analytics or are planning to do so. Hackett recommends that if companies have not already done so, they should prepare for advanced data analytics programs by standardizing master data definitions and upgrading their data management architecture.
Develop more strategic skill set: As procurement continues to evolve, low-value tasks will be performed by software applications and automation. As a result, procurement managers will need to develop a new skill base that includes advanced analytics and data modeling, business acumen, relationship management, strategic thinking, and risk management. This development will require procurement leaders to work with human resources organizations to design new talent development programs. In spite of the need to develop new sets of skills, only 32 percent of survey respondents said they were investing in programs that better aligned skills and talent to business needs.
Make supplier relationship management more strategic: Procurement organizations need to be more strategic in how they communicate and interact with suppliers. These initiatives may include implementing digital tools or investing in supplier training and information sharing. The survey found that only 20 percent of companies are involved in such efforts.
Improve organizational agility: To help procurement organizations make faster, more focused decisions, companies will need to invest in technologies such as robotic process automation and in staff with the right skills and capabilities. A quarter of surveyed companies have established an improvement program focused on agility.
Become more customer centric: Rather than focusing solely on cost control, procurement must see itself as a partner to the businesses that it supports, according to Gibbons and Sawchuk. However, only 20 percent of companies are currently engaging in programs that formally focus on customer centricity or plan to do so in the next one to two years. To improve customer centricity, procurement talent should cross-train with the lines of business they support so that they have a deeper understanding of the business' needs. They should also use technology to make procurement processes faster, more efficient, and easier to understand. This may include self-service pOréals, a 24/7 customer help desk, and process automation.
The key to many of these initiatives will be a dual focus on implementing new digital technologies and training and developing employees.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.