The business landscape in 2019 is a more complex place than ever before: Between trade “wars,” the ever-increasing pace of technological change, global economic and political uncertainty, and the ongoing struggle to find and retain the best talent, Chief Procurement Officers (CPOs) around the world face a litany of new, challenging risks.
Yet there is also virtually unparalleled opportunity to master that complexity in the new year, obtain a competitive advantage, and turn these challenges into opportunities. So where does the modern CPO start?
Deloitte’s 2019 CPO Survey has uncovered three key areas where CPOs can invest smartly in their businesses, make strategic changes, and move forward with confidence to thrive in an uncertain world. By partnering effectively with the business as a whole, embracing disruptive digital technologies, and addressing talent challenges, CPOs can become masters of complexity.
Work With – Not Just For – Business Leaders
Business partnering is not just a key priority for technology leaders, human resources, or other relevant stakeholder relationships CPOs have. Increasingly, the procurement function – which connects the business to suppliers in every corner of the globe and is more entwined than ever with business strategy – has begun to lead business strategy and take a vocal role in the C-suite. Where ten years ago procurement was often not even considered a component of the C-suite, let alone a leader, today’s CPOs are more influential than ever before.
Significant challenges accompany that responsibility. Only 26% of CPOs surveyed described themselves as “excellent” internal business partners, a slight increase from 24% in 2018. IT, finance, and operations were most likely to rate procurement effectiveness as “excellent,” which demonstrates some strength in key business functions. For others, business partnering can open the door to more effective procurement strategies and wider business value.
One key place to start is digital. Only 14% of procurement organizations report “always” being involved during enterprise-level digital strategy, and a further 31% report “usually” being involved. These barriers to digital alignment can hinder successful procurement strategies in the age of complexity. Yet businesses that achieve digital alignment, integrate procurement into enterprise-level strategy, and align its strengths to the right business priorities are well-positioned for success.
Embrace Technological Change
Technological mastery is a well-known competitive advantage in business today – frankly, it has been for decades. The digital landscape for procurement, however, has evolved rapidly even in the last few years, as CPOs expand beyond process automation to leverage deeper analytics tools for faster and deeper insights.
There is room to grow. Fifty-eight percent of CPOs are aligning their digital strategies to both their own objectives and to business strategy overall; in our survey, 74% of “complexity masters” (top performing organizations) did so, suggesting that those who can align digital tools with business priorities will be most successful.
How are CPOs transforming procurement? Sixty-eight percent are improving and automating processes with modern IT applications, and 59% are extending innovative digital procurement tools to stakeholders and suppliers – effectively expanding the reach of their own digital investments to improve processes across the board. Analytics, at 59%, was seen as the most impactful technology area over the next two years as organizations look to predict and navigate volatility across the marketplace.
Solve the Talent Question
To add to this uncertain landscape, many CPOs are now contending with thin budgets, fewer resources, and insufficient talent. Fifty-five percent of respondents said it was now harder to attract talent over the last 12 months. Perhaps not coincidentally, only 46% of CPOs thought their teams could sufficiently deliver on procurement strategy.
As procurement increasingly takes center stage to navigate global complexity, “soft” skills are in high demand to connect the dots between disparate elements of business strategy and to navigate increasingly ambiguous challenges.
Training, recruiting, and unconventional talent partnerships all offer clear opportunities to close that gap and improve skills. Supplier collaboration and business partnering – both essential to executing procurement strategy and “leading” the way for the enterprise – emerged as a key priority for training, with 64% of CPOs aiming to train in this critical area. No other “soft” skill scored more than 38% in the survey.
This year’s survey also found an increase in contingent labor in the “complexity masters” organizations. Twenty-eight percent of these respondents are drawing upon contractors, on-demand category expertise and offshore centers to meet their growing talent needs. CPOs can tap new options to improve their talent situation; the question is how effectively they execute on an unconventional talent strategy to adapt alongside today’s landscape.
Become Masters of Complexity
Procurement is at a crossroads. As complexity rises in global business, CPOs face new and fast-moving challenges for which their expertise is more important than ever. That presents an opportunity for global CPOs: Master complexity to offer smarter counsel, develop more effective procurement strategies and transformational capabilities for the business, and reap the benefits to leapfrog competitors.
Fortunately, CPOs know where to start. By partnering with the business effectively, embracing technological change, and leveraging training and new talent sources to build a strong and flexible talent pipeline, CPOs can lead their organizations into the future with confidence.
This piece was co-authored by Lee Barter, partner, Deloitte Canada, Americas sourcing and procurement leader; and Ryan Flynn, principal, Deloitte Consulting LLP
Brian is the leader of Deloitte’s US Consulting Industrial Products & Construction Sector as well as the leader of the Global Sourcing and Procurement Practice. In his two decades of experience, Brian has taken a personalized approach to building consulting practices, collaborating with clients, driving engagements and (above all) measuring value. He has a proven track record in global business development, operations/business strategy advisory and non-traditional approaches to creating client value. Brian is particularly experienced in industrial/consumer-related industries but has also worked across industries and sectors. Additionally, he is fascinated by the convergence of expertise, capability and technology in creating a new breed of integrated client solutions.