3 Concerns Keeping Procurement Leaders Awake at Night
At a recent ProcureCon Indirect Connect virtual conference, Michael van Keulen, Chief Procurement Officer at Coupa, and Ryan Flynn, Principal and Third-Party Risk Management lead at Deloitte Consulting, took a close look at the trends, challenges, and opportunities that are top of mind for procurement leaders. This post summarizes some of the highlights.
2021 may be in full swing, but many procurement leaders are still struggling to plan and strategize for a year that has a multitude of unknowns and uncertainty. Which is why we recently asked procurement leaders across the country: What are the critical issues keeping you up at night?
Based on early results from the 2021 Deloitte Global Chief Procurement Officer Survey — data which has long served as a global benchmark of sentiment for procurement leaders worldwide — we focused our ProcureCon session on three top areas of concern: cost reduction, risk management, and talent development.
Cost Reduction and Value Generation
The latest Deloitte CPO survey data shows that the top priority of CPOs in 2021 is cost reduction. But in today’s environment, the challenge is how to balance cost reduction with assurance of supply, as well as new inclusion and sustainability initiatives.
It’s helpful to take a value generation perspective when communicating about, and dealing with, cost reduction priorities. Focus on value — including looking at risk, quality, lead-time, innovation, cost avoidance, M&A value, demand management, working capital — and communicate about this value to the right stakeholders. Not all these things show up on an income statement or a balance sheet, yet they are critical.
Looking to the year ahead, there’s concern that — as we emerge from the pandemic — demand management may challenge procurement organizations, due to a unique post-pandemic pent-up demand cycle. In response to this, we’re seeing many leading organizations focus on enhanced supplier collaboration enabled by digital transformation as a major part of the solution.
Risk Mitigation and Management
No company is immune to supplier risk, as we’ve all learned over the past year. Survey data shows that enterprises are responding, with almost 70% of CPOs reporting active involvement with risk management this year, up from 56% last year.
The role of the CPO is changing. The past year showed that those with strong supplier risk management programs — those who could methodically monitor Tier I, II, III, and maybe even Tier IV suppliers — managed the crisis much better than others. But the challenge remains for many if not most procurement organizations to better measure and monitor risk, as well as for CPOs to communicate about risk more effectively to the C-Suite.
When you have thousands of suppliers around the globe, if you don’t have the tools that offer strategic sourcing best practices, such as real-time end-to-end visibility and intuitive control — as well as proactive alerts and vendor sentiment analysis built upon AI, ML, and community intelligence — your supplier risk is both unknowable and unmanageable. The vendor risk management solution includes developing a comprehensive 360-degree view of the customer, which requires integrated data systems and eliminating functional silos.
Talent Development and Acquisition
A third concern keeping CPOs up at night this year relates to the challenge of finding new qualified talent, as well as developing and retaining existing staff. We’ve long suffered from a shortage of fully qualified practitioners, and this may not be changing anytime soon. So, the question becomes: how do you develop talent in today’s environment to meet your shifting needs?