Expanding priorities in the year of the supply chain

Without question, procurement has grown increasingly complex over the past decade, but in adversity lies opportunity. Last year’s Chief Procurement Officer (CPO) Survey explored how procurement organizations have begun to address rising complexity and risk while continuing to generate value. Business leaders are facing growing concerns related to climate change, geopolitical stability, increasing societal expectations, and, of course, public health. These challenges all offer a springboard to higher performance and future success.

2020 was, in many respects, the year of rethinking the supply chain. All aspects of the function were exposed and challenged. Few business sectors emerged unaffected, whether via explosive growth (online retailers) or decline (travel and hospitality). So, what do we have to look forward to in a postpandemic world, and how can CPOs prepare for success?

As supply risks continue to shift and multiply, many leading CPOs are responding by expanding their circle of influence. Addressing higher levels of complexity and volatility—while simultaneously managing input costs—requires deeper alliances with the business and suppliers. CPOs must also build new capabilities and a digitally enabled ecosystem of suppliers to enable new value streams and innovations for true strategic advantage.

The increasing levels of complexity highlighted in our last survey have brought higher levels of sophistication to operating models and broadened application of digital technologies to manage that complexity. This year, we correlated attributes and capabilities of survey participants to show what high performers do differently from their peers to harness agility and deliver value even in the face of headwinds.

The survey showed that leading CPOs:

• Have a broader understanding of value and deploy a wider, more sophisticated set of levers to unlock, measure, and protect value;

• Focus on relationships and influence across functions and supply markets;

• Invest in agility by developing talent and accessing capabilities, knowledge, and experience;

• Leverage on-demand, hybrid service delivery models (e.g., teams augmented with external support services);

• Use configured (not fully customized), end-to-end integrated processes and solutions—independent of whether best-of-breed or full-suite solutions are used; and

• Prioritize data, both internal (master data capture and consumption) and external (market intelligence), to make fact-based decisions from predictive analytics that reveal hidden opportunities and emerging risks.
  

Agility can be a powerful tool to enable strong performance and act as an antidote to complexity, disruption, and risk. True agility can be built through ambitious project portfolios, with targeted investments in underlying capabilities. These increasingly fast, iterative, and cross-functional projects use technology and analytics to target efficiency gains while also improving organizational talent models. Building agility is not a distraction to delivering performance; it’s a critical enabler.

Value redefined, delivered, and protected

The takeaway: It’s no surprise that cost management is still the dominant priority. But for the first time in our CPO Survey’s 10-year history, CPOs did not name “reducing costs” (traditional spend reduction) as their top priority. A new entrant, “driving operational efficiency,” is now the top focus, followed by cost reduction.

Key findings

• Digital transformation, which retained the No. 3 spot, has grown significantly in importance, increasing 20% since 2019, the second largest priority increase since 2019. This year, 48% of CPOs consider digital transformation a strong priority.

• Corporate social responsibility (CSR) saw the largest increase of any priority since 2019 (by 22%) with high performers three times more likely to be formerly measured on it. This topic now being discussed regularly at the board level, is a recognition that spend, if managed well, can do societal good.

• Surprisingly, enhancing risk management remained almost entirely unchanged.
  

Agile procurement

The takeaway: Procurement agility masters outperform their peers on all the major performance metrics. They’re a select class of procurement organizations who outperform against their stated or measured goals, excel at risk mitigation, and demonstrate impressive ambition (and requisite transformation) to realize their visions.

Key findings

High-performing procurement organizations display key agile characteristics, including:

• Almost twice as likely to leverage hybrid managed service support models to access knowledge, capabilities, and experience not available in-house.

• Four to five times more likely to have fully deployed advanced analytics with visualization and, in general, more likely to have fully deployed predictive analytics capabilities (12% vs. 0% for the rest).

• 10 times more likely to have fully deployed RPA solutions.

• Roughly 18 times more likely to have fully deployed AI solutions and other cognitive capabilities.

• 50% less likely to have businesswide and C-suite support as a barrier to realizing the shift from tactical and operational to strategic focus.
  

Building agile procurement

The takeaway: Procurement leaders must not only engage in periodic simplification and standardization of processes, policies, and systems; they also need to take a more systematic approach to accessing and deploying flexible resource pools, accommodating variability of demand and supply, and rapidly reconfiguring the value chain and internal processes to meet business needs and market demands.

Key findings

• Hiring is a high priority for many leaders (43.7%), but there’s also growth in leveraging agile workforce options.

• High performers are 50% more likely to leverage digital FTEs (e.g., flexible automation tools and methods) and hybrid managed services to augment their teams.

• Only 24% of high performers indicate it’s getting harder to find and recruit the right talent.

• Knowledge transfer and capability-building is the top challenge (35.6%) for leaders when fully outsourcing.
  

The many faces of an agile, evolving CPO

The takeaway: CPOs have been transcending their roles as operators (doing deals, saving money, managing contracts) and stewards (assuring supply and compliance), moving toward roles as transformational catalysts and intelligent strategists.

Key findings

• CPOs spend roughly a third of their time as a transformation catalyst.

• CPOs spend 76% of their time on operational and transactional activities.

• Low-agility CPOs spend 10% more time on transactional activities than the average CPO.

• High performers spend almost 15% more of their time as strategists and allocate more than 50% of their time to strategic activities.
  

Taking the next step toward becoming agile

At the end of the day, becoming agile must be seen as much more than an end in itself or a buzzword. It’s about transformation, building a set of capabilities, and proving the value and ROI of the effort by tracking appropriate metrics throughout. It requires a deeper and more transparent understanding of the work; careful deployment of resources; and alignment across diverse stakeholders to secure consensus on priorities, support, resources, and funding and to drive execution. Agile procurement requires a strong drive for progress and an appetite for risk: executing more development programs, failing fast (on a smaller scale), iterating, and ultimately getting to a great solution more quickly.

This year’s survey provides the clearest evidence yet that agility is the best antidote to the increasing complexity CPOs must manage. Agility can help organizations not only take advantage of a dynamic set of opportunities presented by an ever-changing world, but also do so faster and better than their competition.

A decade taking the pulse of procurement

Since 2011, the Deloitte Global Chief Procurement Officer Survey has been providing exclusive insights into the key challenges and opportunities shaping the course of procurement, serving as a global benchmark of sentiment about the function. Over the years, these insights have helped members of the C-suite, procurement leaders, business partners, suppliers, and supporting technology providers further their ambition, strategies, and performance.

Check our Deloitte Insights website