Why top-performing chief procurement officers must become masters of complexity

From trade wars, climate change, and digital disruption to talent shortages and regulations, procurement organizations today are facing increasing complexity on all fronts. This complexity has only amplified challenges for chief procurement officers. In addition to delivering sourcing-centric cost savings, they’re also expected to enhance their influence with C-level peers and extend their business impact into strategic areas such as procurement risk management, corporate development, and innovation. However, more often than not, chief procurement officers are asked to do all of this with fewer resources and thinner budgets.

While many chief procurement officers may feel like they could drown in a sea of complexity, they can still find ways to stay afloat—or even identify new opportunities to move their organizations forward. This year’s Global Chief Procurement Officer Survey explores how CPOs can change their lens on improving core value chains and organizational resources. The report also provides insights on tapping transformational digital capabilities to revolutionize the procurement industry. And finally, it details how CPOs can become “complexity masters” who are able to turn the risks apparent in complex business scenarios into value creation opportunities.        

We examine procurement complexity in four areas:

At the end of each chapter, we offer three key action items for CPOs as they consider how to tackle complexity within their own organizations, including a recommendation for “going digital” as part of a larger digital supply network transformation effort.

Preparing for the world outside the box: Mastering external complexity

The takeaway: Respondents agreed that they could decrease damage to their organizations in a potential economic downturn by utilizing the procurement strategies they employ in their day-to-day jobs.

Key findings

• Identical to the 2018 survey, only one in four respondents described themselves as excellent business partners that contribute significant strategic value.
• Respondents cited an economic downturn as the top risk impacting procurement.
• Even among respondents who anticipate an economic downturn, most CPOs plan to employ traditional tactics in response, such as contract renegotiations with existing suppliers (58 percent), conducting competitive bids with new suppliers to reduce prices (54 percent), and reducing costs by changing design requirements (54 percent).

Setting the house in order: Mastering internal complexity

The takeaway: There’s a significant need for procurement to maintain functional alignment, both as a service provider for stakeholders and as a business partner in strategic planning.

Key findings

• While cost reduction is still the number one focus, leaders also cited procurement risk management (managing corporate risk, 53 percent; managing corporate social responsibility, 43 percent) and growth (expanding or introducing digital business models, 50 percent; introducing new products/services or expanding into new markets, 46 percent) as top areas of focus.
• Most respondents look to digital procurement transformation to improve and automate processes via modern IT tools.

Driving the change: Addressing talent challenges to master complexity

The takeaway: CPOs must tackle the industry-wide shortage of analytical and technical skills needed for success but also embrace new ways of thinking about talent.

Key findings

• Respondents noted improvement in the talent gap; at least 45 percent claimed their current teams were “to some extent” at the level of sufficiency, and an encouraging 38 percent of organizations were “to a large extent” appropriately skilled.
• This year, respondents report increased training emphasis on technical procurement skills, with 62 percent planning to address it in the coming year compared with 41 percent last year.
• In addition, respondent teams’ soft skills jumped to 49 percent this year compared with 36 percent in 2018.

Tech-over: Mastering digital and procurement technologies to unsettle complexity

The takeaway: CPOs must rely on a core set of technologies that automate tactical, low-value work and enhance the function’s ability to focus on more strategic efforts.

Key findings

• More than half of respondents (54 percent) viewed analytics as the technology area that will have the most impact on their businesses going forward, showing CPOs are eager to leverage the proactive and predictive capabilities of this technology.
• Responses indicate that the technologies that are driving the Fourth Industrial Revolution, AI/cognitive (49 percent) and computing and blockchain (63 percent), are of little focus and haven’t been utilized at their respective organizations.

About the Deloitte global chief procurement officer survey 2019

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.

The 2019 survey was conducted in association with procurement market intelligence firm Spend Matters and Odgers Berndston. In this year’s survey, 481 procurement leaders from 38 countries took part, representing organizations with a combined annual turnover of US $5 trillion.