Consolidating spend, increasing vendor competition and supplier collaboration are the top three priorities of procurement leaders over the next 12 months, according to a Deloitte study. Leveraging cutting edge digital technologies to realise improvement potential is not surprisingly at the forefront of change endeavours.
The analysis comes in the context of mounting pressures on Chief Procurement Officers (CPOs) to deliver benefits and insights to the business. Where CPOs were previously tasked with driving cost-savings through more efficient procurement and sourcing processes, recently, expectations from executives are on the rise.
Today, CPOs are increasingly expected to tap a data-driven procurement organisation in order to bring strategic insights. In addition, procurement is seeing their mandate expanded, now also carrying out a variety of supporting activities for functions such as business and corporate development, financial and risk management, product development and innovation.
The issue for procurement is however that they are expected to deliver more with comparatively less – funding and resources. According to Deloitte’s report, while “the cost as well as the risk of operations has significantly increased”, procurement are often left behind with a “flimsy budget”.
The firm’s researchers spoke to dozens of CPOs in Australia and across the globe to get an overview of how executives navigate this challenging scenario. The analysis revealed that alignment is a crucial component to managing these growing professional complexities.
Alignment is required at every step of a company’s value chain, between various internal departments and the procurement department, between procurement and suppliers, or between internal practices and acknowledged best practices. Deloitte categories alignment into three spheres: functional, business and digital.
One strategy to tackling internal and external complexities is to form internal business partnerships with other departments in a business. CPOs have been active in this process, looking to collaborate with IT, HR and a number of other departments, although some collaborations have proved more fruitful than others.
Most CPOs, for instance, reported that they had the strongest relationship with the IT department, while the finance department came in a close second. Operations is another department that CPOs have managed to form strategic partnerships with, although others such as risk and HR have been less prevalent.
A rapidly changing landscape including business threats means that collaboration – and growing its maturity – will remain high on the agenda in the coming period. “Broader trends such as increased outsourcing of business functions and exploration of the external ‘gig’ workforce suggest that a higher degree of collaboration will be needed between procurement and other functions,” stated the authors.
The way forward
According to Deloitte, much like digitalisation and innovation are disrupting business for CPOs, they at the same time might also be the ticket to navigating these scenarios. For instance, automation can play a key role in freeing up resources from routine procurement tasks, which in turn can be injected into more value adding activities. Similarly, data analytics can enhance the strategic planning process.
Disruptive technologies in procurement such as artificial intelligence and blockchain have been found to be utilised to lesser extent than more mainstream technologies such as advanced analytics and robotic process automation.
In the case of innovation, objectives such as cost reduction and risk reduction could be achieved through innovative avenues such as creating new business models, developing a new suite of services and entering new markets.
