The Year in Reflection as CPO and an Outlook to 2023
Throughout the year, I’ve been fortunate enough to meet many procurement leaders, customers, and partners around the globe. Reflecting on this crazy year, we have seen many challenges, from the war in the Ukraine to macroeconomic challenges that required us to work more collaboratively with strategic partners and suppliers.
Shortages in energy, labor, raw material, and shipping ensured we had to perform at the top of our game to keep operations running, ensure business continuity, and cement our place as a strategic business partner.
We must ask ourselves, is this the new norm or will we be getting back to “more normal times”? The 2023 procurement agenda will have more topics than this year and as the year draws to a close, I’d like to share some highlights of what we’ve learned together and what our priorities for 2023 look like.
Key insights from the Customer Executive Board (CEB) meeting and community
Our CEB recognizes standouts in the Coupa community for their leadership, expertise and ongoing contributions to the Coupa Community and the Business Spend Management (BSM) industry at large. Two recurring themes I’ve seen from the most recent meeting as well as throughout the series:
- Procurement has significantly repositioned itself over the last 24 months. Across the globe, we know procurement has become a force to be reckoned with. Our practice has increased in strategic relevance beyond the operational and tactical elements as we now lead in areas like ESG, DEI, managing supply chains and business risk. We do this while combating high inflation and raw material shortages as well as ensuring business continuity.
- Siloes are coming down rapidly. There is a lot of talk around building a more resilient and agile operating model, allowing for companies to make decisions quickly with greater visibility and transparency. To achieve this, we are seeing increased cross functional collaboration and connectivity between procurement, finance, IT, legal, supply chain, and operations. There’s a shared understanding that this collaboration is fundamental for businesses to survive (and thrive); this featured very strongly at the CEB with Eric Tan, Vice President of Business Services and IT at Coupa.
Looking ahead: What are successful CPOs prioritizing for 2023?
At Coupa, we always focus on people, process, and technology — and that’s consistent with most organizations. What’s more, most successful businesses have invested in digitizing their Business Spend Management process, creating higher levels of visibility and a foundation to drive real measurable value. Over the next year, successful CPOs will also:
- Bring the right people on board. It’s going to be crucial to not just hire and keep capable people in the right roles but to create a diverse pool of talent — one that is even better at spotting opportunities and acting on them. Digital fluency, change management, and soft skills like emotional intelligence and empathy are more important now than ever before.
- Operationalize the procurement function and technologies at their organizations. This is, in my mind, often the most challenging piece of the puzzle. When executed well, this fosters deep(er) connections with the business to consider scenarios three or five years out. And it strengthens existing relationships with suppliers to understand where they’re headed and how you can unlock greater value together.
People and investments will shape procurement in 2023
There’s no getting around it — 2023 is going to be painful. The outlook is uncertain, and business leaders are asking: Are we going to see a short-, mid-, or long-term recession? How long is this going to last and how do I set myself up for success?
At Coupa, we’re seeing customers start hiring freezes and undergo some form of restructuring. Although we don’t know how volatile the macroenvironment is going to get, most organizations can consider doing one of three things: fight, flight, or freeze. What we know for certain is that organizations that make the right investments will come out ahead, just like those companies in 2007–2008 that focused on creating a competitive edge by managing resources and their supply chains (for more information on containing costs in uncertain times, explore these 10 steps.)
When looking forward, we have to look back, too. In 2011, we saw organizations shift their attention to agility — being nimbler across the supply chain and optimizing resources. Starting in 2015, we saw a deeper focus on digitization, which lasted about five years. This investment has helped normalize “digital” over the past two to three years, where the previous five years provided a tail wind.
As we move into 2023, we need to broaden our focus to people. And not just how many people, but how engaged they are. Why people? Workforces are shrinking, especially in the Western Hemisphere. The annualized workers entering the job market is 15% lower than it was 10–15 years ago, and employment is at record highs even with the recent hiring freezes and restructuring announcements across the globe.
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The Hackett Group also recently released the top ten priorities for procurement next year. The first five, including ensuring supply chain continuity and reducing cost, are metric driven, while the second half of the list is geared toward optimizing business value. Beyond this list, ESG is going to be essential to best-in-class procurement — we know that the community expects more detailed planning and data around Net Zero, for example. Emphasizing ESG gives procurement a path to remaining strategically relevant and not lose the “seat at the table” that we worked so hard to secure over the last few years.
Another CEB insight I fully agree with: We can’t lose sight of the fundamentals. Businesses will continue to differentiate themselves through ensuring customer expectations are met and exceeded.
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Stagflation and the skills gap are top concerns for 2023
Procurement leaders are concerned about inflation, both short and long term. Retail inventory levels are significantly higher than what they have been in the past, and with demand coming down it makes you wonder — where is inflation headed after the holidays? The situation is uncertain. The demand on containers is always a good gauge of economic activity. Demand is down 73% (according to the SCFI released nearly two weeks ago), and the continued increases in inventory levels will contribute to this even further.
The skills gap is extremely challenging (I get asked regularly if I know somebody looking for a new opportunity), and this is likely to continue. Beyond the skilled workforce, there is a general shortage of people.
CEB members also mentioned the adoption of all things digital, which leads to normalization. My take is that the right digital landscape attracts (and retains) talent, averts (some of the impact of) stagflation, and helps resolve the skills gap. Digitization is no longer considered to be transformative but more a business imperative and more evolutionary in the years ahead.
Another concern of mine is stagflation, with people choosing to delay purchases as they know things will be cheaper tomorrow, and the day after that. This could significantly affect economies. As most people know, I’m a positive person and while I don’t view inflation as a major concern, there are serious implications if we do enter into a period of stagflation.
How does procurement stay at the executive table in 2023?
Procurement has made vital gains in the past few years, partially due to the pandemic. CEOs and CFOs have turned to procurement leaders for insight and partnership as revenue growth is no longer a given. Here’s how we can secure what we’ve achieved:
- Wear many hats well. As we interact with stakeholders and create value, we need to fulfill many different roles — psychologist, doctor, nurse, lawyer, judge, dentist, environmentalist, accountant, treasurer, and yes, even a wizard! Procurement as a function has such a broad range of responsibilities, and we’ll need to draw on other areas to complement our capabilities. People across almost all organizations now understand how important supply chains are, and procurement teams are capturing more interest than ever.
- Stay nimble and continue to rely on data to make the right decisions. At Coupa, we reset and reprioritize quarterly and always seek to make the right investments. We’ve worked this way for a long time, and we believe it has empowered our growth and our community of customers. Many organizations are now adopting a similar decision-making process within a clearly defined strategic framework.
Does 2023 hold nothing but doom, gloom, and caution? Certainly not. I’m convinced there are several positives — and our CEB members feel the same. Procurement will remain a major contributor to a business’s success because:
- Supply chain pressures are being relieved, reducing the stress on the internal procurement function and allowing us to focus on driving competitive advantage.
- The situation has made people stretch and grow, and they’ve turned that experience into new opportunities.
- The resiliency within procurement teams has never been greater due to these once-in-a-lifetime events, and people are approaching the future with a “the art of possible” mindset.
- We bring great business acumen to the table; our stakeholders look to procurement for this, and it makes conversations more productive and collaborative than ever before.
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I’d like to wish everyone a happy holiday season, and here’s to a prosperous, healthy, and fun 2023!