Cost, risk and digital top priorities to improve growth

Cost, risk and digital top of mind for chief procurement officers

Deloitte annual Global Chief Procurement Officer Survey shows priorities for procurement to improve growth in uncertain times

Cost reduction and managing risk top the list of chief procurement officers’ (CPOs) business priorities in 2017, according to a recent Deloitte survey.

The annual Global Chief Procurement Officer Survey 2017 found that a combination of uncertainty and growth ambitions has meant 79 percent of survey respondents identify reducing costs as their number one priority for the coming year. Linked to this, 48 percent of CPOs indicate wanting to increase cash flow to help fund growth.

Managing risk is also a strong priority for over half (57 percent) of CPOs this year. Key global risks cited include weakness and volatility in emerging markets; rising geopolitical risk; the possibility of a renewed Euro crisis; spill over effects of any slowdown from China; and uncertainty around Brexit and outcomes from upcoming trade negotiations.

In addition, 54 percent of respondents report a resurfacing of procurement risk, which could include price volatility, disruptions in supply and supplier bankruptcy. This is up from 42 per cent in 2014.
Deloitte New Zealand Partner Paul Shallard explains that business leaders are required to drive business growth against a global backdrop of economic and political risks.

“CPOs play a critical role through focusing on robust cost management practices. While a reassuring 58 percent of CPOs indicate they achieving better savings performance than last year, more must be done to enable sustainable cost reductions into the future,” says Mr Shallard.

“CPOs must drive supplier engagement more than ever to be responsive to the volatility of the supply base,” he adds.

The survey also indicates a talent gap exists among procurement teams. Eighty-seven percent of respondents feel talent is the single greatest factor in driving procurement performance while 60 percent still do not believe their teams have the skills to deliver their procurement strategy. At the same time, investment in new talent development approaches and training remains stubbornly low with 25 percent reporting spending less than one percent of their annual budget, on training.

“With the pressure on organisations to reduce costs and remain agile in times of uncertainty, CPOs must think and act differently. One approach would be to focus on data analytics as a planning tool for sourcing events, while another would be to automate outdated procurement practices to help practitioners be more responsive and proactive,” says Mr Shallard.

The ambition to use digital procurement accelerators is apparent in the survey results. Seventy-five percent of CPOs believe that procurement’s role in delivering digital strategy will increase in the future.

In addition, CPOs report that the application of automation and robotics in transactional procurement activity, will increase from 50 percent today to 88 percent in five years’ time, and up to 93 percent by 2025.

Sixty-five percent of respondents see analytics as the technology area that will have the most impact on the procurement function in the next two years but many see the quality of data available as a significant barrier to adoption. However, once again there is a concern about talent with 62 percent claiming there is still a large to moderate skills gap across analytical abilities.

“As these technologies continue to advance, CPOs must respond quickly and align the digital transformation of the procurement function with ongoing business priorities,” concludes Mr. Shallard.

The full Deloitte Global Chief Procurement Officer Survey 2017 can be found at www.deloitte.com/nz/cposurvey.

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