ArcBlue unveils the maturity of procurement functions in Australia and New Zealand
ArcBlue has released the 2024 edition of its CPO Insights study, providing in-depth insight into the state of procurement across Australia and New Zealand based organisations.
The report by ArcBlue, an international consulting firm specialised in supply chain and procurement, asked Chief Procurement Officers (CPOs) and other leaders from numerous industries to self-assess the maturity of their procurement function. The assessment was conducted along the lines of the firm’s Procurement Excellence model, which consists of nine pillars.
For each pillar, organisations were grouped into one of the four maturity categories: Emergent, Developing, Advanced or Leading. “The maturity model builds on our experience in helping organisations to measure and advance procurement maturity,” said Chris Hampden, Director at ArcBlue and one of the lead authors.
ANZ’s procurement maturity
A rundown of the report’s main conclusions per dimension of the Procurement Excellence model:
Leadership & Influence
Across the survey respondents, Leadership & Influence had the highest number of organisations in the ‘Leading’ stage of maturity, compared to any other dimension of excellence. The majority of respondents believed that their procurement strategy contributes to, and aligns with, their broader business objectives and goals, and they also felt that they take a leadership role in mitigating procurement and supply chain risk.
People & Skills
The majority of ANZ leaders rated their procurement function as Advanced or Leading in this dimension, placing People & Skills in the top scoring category. According to ArcBlue, this demonstrates that business leaders are now recognising that procurement is vital to success and are starting to invest more in building procurement capability.
Organisation
A key finding from the report is that only a small fraction of respondents rated themselves highly in terms of having sufficient resources to effectively deliver on organisational objectives. While communication and collaboration effectiveness are high, Chief Procurement Officers noted there remains a disconnect between the role of the procurement function and how it is perceived within their broader organisation.
“For some organisations, decision-makers can still fail to understand the strategic value of procurement and they often encounter operational dilemmas including tight deadlines, fragmented stakeholders and decentralised decision-making,” said the authors.
Process & Governance
Notably, the Process & Governance dimension had the least number of organisations in the Emergent maturity level. 47% of surveyed CPOs felt confident that they have an effective governance structure that ensures process compliance. However, opportunities for improvement in Source-to-Pay (S2P) process and governance structures were evident, with respondents expressing concerns about inadequate governance mechanisms to enforce process adherence.
Value Realisation & Results
Despite its importance, many CPOs still grapple with cost and value realisation, with 53% of respondents telling ArcBlue they do not have a well-defined methodology for measuring savings and value which is aligned within their business. 43% of the respondents claimed they are unaware of the savings they delivered for 2023, and only 31% effectively track and measures procurement savings.
Category Management
Category management scored the highest number of ‘Emergent’ organisations, with only 8% reporting they are fully utilising category management processes to drive strategic value. “This underscore the need for greater clarity and understanding of category management roles and responsibilities, particularly among non-procurement stakeholders,” said the authors.
A significant opportunity has also been recognised in refining the quality and accessibility of spend data in relation to category management with only 11% of surveyed CPOs stating they have well-established, accurate and easily accessible spend date that facilitates great insights.
Technology
Technology has emerged as a crucial enabler for the procurement function, with the potential to streamline processes, improve decision-making, and unlock significant value. However, the journey to a fully digitalised procurement function is fraught with challenges and 72% of surveyed CPOs stated they do not have a full suite of digital tools in place across their source-to-pay process.
With only 18% of our survey respondents stating their digital procurement tools are fully integrated, this dimension presents large opportunities for development.
Sustainability
Sustainability remains an emerging field in procurement, with only 13% of surveyed CPOs reporting they have a clearly defined sustainable procurement strategy in place. Survey findings indicate a lack of depth in understanding Scope 3 emissions and a general lack of embedded sustainability practices, with over half of surveyed organisations stating that they don’t have clarity on their Scope 3 emissions and aren’t working with suppliers on decarbonisation.
Supplier Management
Managing suppliers effectively is a core activity for procurement which offers significant benefits to the business when done well, however 52% of surveyed CPOs felt they don’t effectively manage their suppliers throughout their lifecycle.
Effective supplier relationship management requires customised strategies and meaningful partnerships, rather than a one-size-fits-all approach, however 47% of surveyed CPOs don’t have a clear and well-established supplier segmentation strategy.
Learning from best practices
For procurement teams seeking to advance their performance, ArcBlue’s authors said that learning from industry best practices and the practices used by the frontrunning cohort is a good place to start.
“In the current fast-paced business environment, procurement departments face numerous obstacles. These challenges encompass supply chain interruptions, workforce deficits, shifting customer demands, environmental issues, and swift technological changes. By benchmarking against best practice, organisations can derive valuable insights into areas that need improvement.”
Headquartered in Australia, ArcBlue is one of the leading procurement consultancies in the Asia-Pacific region. The firm has over 150 staff and is part of Bain & Company.
