Cost reduction continues to be the top priority for procurement leaders, cited by 78 percent of the respondents to a new survey. New products/market development (58 percent) and managing risks (54 percent) are the second and third key business strategies cited by the respondents.
More than 500 procurement leaders from 39 countries representing organizations with a combined annual turnover of $5.5 trillion took part in the survey, “The Global Chief Procurement Officer Survey 2018.” Deloitte conducts the survey annually to gather insight into the key themes and challenges facing procurement, including market dynamics, value and collaboration, talent and leadership, and digital procurement.
Procurement leaders are continuing to expand the role of procurement in the wider supply chain. This is being achieved through better alignment between procurement and business strategies and priorities, adopting a closed loop and holistic approach to performance measurement for procurement and proactive involvement in key decision making. For example, consolidating spend (37 percent), reducing total life cycle/ownership costs (32 percent) and increasing competition (31 percent) are the key procurement strategies cited by respondents as a means to deliver value.
On the other hand, over the past few years, fewer procurement leaders seem to have used supplier collaboration as a procurement strategy for delivering greater value—indicating a continued focus on more tactical levers to support the achievement of procurement strategies. Indeed, only 23 percent of procurement leaders in 2018 plan to increase the level of supplier collaboration as a lever to deliver value, a decrease from 26 percent last year and 39 percent in 2016.
A surprising—and perhaps somewhat worrying—finding from this year’s survey is that 65 percent of procurement leaders say they have limited or no visibility beyond their Tier 1 suppliers. This has major implications for organizations across all industries, particularly for meeting regulatory and corporate social responsibility requirements, and for the identification and mitigation of supply chain risks. It’s worth noting, however, as the report points out, high performers are two-and-a-half times more likely than their peers to have full supply chain transparency.
Finally, a clear imperative for procurement leaders at high performing organizations is to lead the procurement, business, supplier and digital agenda, according to the report. Surprisingly, only 49 percent of the procurement leaders said they believe their current teams have sufficient levels of skills and capabilities to deliver their procurement strategy. Although this is the highest level of confidence shown by procurement leaders in their teams since 2013, it’s still a low figure.
I was interested to also read that spending on talent development has also fallen, with 72 percent of procurement leaders saying they spend less than two percent of their operating budgets on training and development programs for their teams, compared to 66 percent last year. Survey results for recruiting and training talent paint a similar picture. While sources of talent recruitment are broadly unchanged since last year, 47 percent of procurement leaders said it has become more difficult to attract talent in the last 12 months.
The report recommends a number of courses to address procurement challenges but I was particularly intrigued by its recommendations for improving talent management and leadership. For example, Deloitte recommends companies develop and implement a talent strategy and plan; accelerate development of leadership in procurement and at suppliers; and invest in training and new skill development. The report also recommends that companies establish or join collaboration networks with suppliers and other subject matter experts.
What are your thoughts on procurement’s role in the supply chain? Do you believe your company’s procurement team has the necessary skills and capabilities to deliver their procurement strategy?