Nobody said controlling indirect spend was easy. There is plenty to worry about. But the question is, what are the other main challenges in procurement being faced today?
Let’s look at a Global CPO Survey from Deloitte and Odgers Berndtson. This survey was done on 324 senior procurement leaders from 33 countries offering a deep insight into current procurement preoccupations.
Unsurprisingly, number one on the list is Cost Reduction. This always has been a major priority for procurement and even more, so last year in 2016 amid of fears of a slowing economy; 74% of the respondents cited it as their top agenda item. This level is higher than the previous year, 69%.
Another current challenge for CPOs is the lack of digital strategy. Four out of six CPOs already have one and have started to embrace the digital revolution.
But the rest are missing out on growing demand for more flexible, cost-effective and responsive purchasing. Deloitte cites how one of its clients cut work-in-progress analysis reporting from 15 to 4 minutes by moving to an automated system.
Defects have dropped remarkably and are dropped to even as minor as 0.2% and the automated system can work round the clock, unlike the employees it replaced.
“The message from non-procurement stakeholders to the CPO is clear and consistent”, says Deloitte.
A third challenge for CPOs is risk mitigation. From 2014 to uptill 2016, 45% of the respondents reported a significant amount of procurement risk, up from its very last year when it was 33% in year 2013.
What has changed in recent years in procurement is that CPOs are now increasingly being tasked with managing this risk. In 2013, only 16% of CPOs were fully involved in risk management. That remarkably went up to 22% in 2014 and then 25% in 2015 and has been significantly increasing either.
The need for increased access to accurate data seems corresponding with an increasing reliance on software and tech tools in the supply chain. Market research, spend analysis and benchmarking appear to be the areas where data is lacking as per the survey respondents.
Interestingly, only 2% of the top CPOs and Procurement directors cited data as a top procurement challenge. Perhaps, this depicts that the upper management relies on the reports from those closer to the action and their bigger concern is how to use whatever data they are provided with to drive strategy selection.
The Deloitte study also hints that CPOs are undergoing the impact of weak supplier relationships. Restructuring the existing supplier relationships is noted as being a major value-generation policy for many CPOs this year.
Supplier relationships that are innovative, collaborative and sources of competitive advantage is cited as one of the ways CPOs can make up for skill gaps in the team.
Bearing this in mind, 29% of procurement chiefs surveyed in the Deloitte study are planning to invest in supplier relationship management systems for the upcoming months.
Skill emerges as a major challenge for today’s CPOs; 62% of those surveyed do not believe their teams have the enough skill needed to deliver their procurement strategy.
This significant finding is highly related with the need for digital strategies and better supplier relationships- both of which can highly help procurement functions to overcome a lack of in-house skills.
So…what emerges from the study is not just a set of challenges but also an opportunity. CPOs willing to step ahead with a digital strategy along with keeping eye on other aforementioned issues could find it resulting in a competitive advantage for their organizations!