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Procurement’s increasingly strategic role

The Deloitte Global 2021 Chief Procurement Officer Survey has underscored how disruptive 2020 was to all aspects of the supply chain function. It found that organisations looking to thrive in the marketplace as we emerge from the pandemic are turning to their chief procurement officers (CPOs) to drive innovation and profitable growth.

Expanding priorities 

CPOs have indicated that their priorities are growing in both size and importance, and for the first time in the survey’s 10-year history, respondents did not name 'reducing costs' (traditional spend reduction) as their top priority. Instead, a new entrant, 'driving operational efficiency', claimed the top spot with a weighted score of 78.0. Digital transformation ranked a close third place with a score of 76.1.

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 (22% increase versus 2019) and is 75% more likely to be formally measured by high performers. CSR, a topic now regularly discussed at the board level, is a recognition that spend, if managed well, can do societal good.

Innovation landed the No. 4 spot with a weighted score of 72.9, reflecting the need to up-level internal operations and improve supply chain transparency and supplier collaboration more broadly. The survey found that high performing organisations are generating the greatest supply network visibility, thanks to 'next gen' technologies like AI and cognitive.

"CPOs are uniquely positioned to help their organisations navigate such a historically disruptive time and build the agility required to thrive amidst external forces like the COVID-19 pandemic that pose significant challenges for the global economy," said Ryan Flynn, principal at Deloitte Consulting LLP. "The time for CPOs to stand up and help create change is now."

Managing risk

A large majority of respondents (70%) indicated that risk has increased over the last year. Fifty-six percent said that key suppliers have gone bankrupt or been severely hampered, and 41% have had to expedite shipping to keep supply lines flowing. 

Seventy percent of CPOs believed that they had good visibility into the risks that exist in their direct (tier 1) suppliers, yet only 15% had visibility into lower tiers. Only twenty-six percent were formally tracking the risk in their supply base. The COVID-19 crisis highlighted the need to better understand the end-to-end supplier network and the risks that exist beyond direct suppliers.

Agile procurement

This year’s survey studied agility through specific capabilities and through an 'agility index'. Findings reveal that agility strongly correlates with higher overall performance and other procurement capabilities. The survey found that high-performing procurement organisations display key agile characteristics, including:

  • Twice as likely to leverage hybrid managed service support models to access knowledge, capabilities and experience not available in-house.
  • Ten times more likely to have fully deployed RPA solutions.
  • Eighteen times more likely to have fully deployed AI / cognitive capabilities.

In addition, CPOs have been transcending their traditional roles, moving toward roles as transformational catalysts and intelligent strategists. High performing-CPOs spend almost 15% more of their time as strategists and target more than 50% of their time to be spent on strategic activities. Procurement has emerged as a key driver of competitiveness in modern business across a wide range of priorities - and CPOs must respond accordingly.

"This year has demonstrated the importance of bringing CPOs into higher level C-suite conversations," commented Jennifer Brown, principal at Deloitte Consulting LLP. "They bring significant value to the table - whether it’s in navigating risk, helping realise digital transformation, or furthering corporate responsibility initiatives."

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