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Procurement

Chief Procurement Officers: The Newest C-Suite Strategists

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The expanding CPO role

 

This year has been characterized by growing global complexity, from trade wars to tariffs and talent shortages. Business has become more complicated for the entire C-Suite, including the Chief Procurement Officer (CPO). Ten years ago, the CPO role didn’t exist at many companies, and procurement leaders didn’t report into the C-Suite. But now, as the eighth edition of Deloitte’s Global CPO Survey has found, they’ve begun to play an increasingly strategic role across executive leadership, especially as top-of-mind business issues have become part of the CPO portfolio. CPOs have traveled far over the last decade, but there is still work to be done for CPOs to unlock their full potential to become fully strategic business partners.

From Finance to IT to HR, CPOs ultimately touch nearly every element of the business and beyond, reaching into supplier and other third-party networks. Still, only 26 percent of respondents in the CPO Survey highlighted their effectiveness as a strategic business partner as “excellent.” The majority labeled their effectiveness “fair,” signaling that within their organizations, procurement has mixed influence, having stronger relationships with some functions over others.

In today’s increasingly complex and technology-driven environment, CPOs have the power to bring more value to their organizations than ever before, if they can cultivate these relationships and become a leading strategist within the C-Suite. So how can they get started?

Continued Collaboration with Finance and Operations

This year’s survey saw a significant surge in two new concerns: slowing global growth and the current “trade war.” An economic downturn and deflation were the No. 1 risks cited, with several geopolitical issues also top of mind. Respondents expressed concerns surrounding Brexit, the US-China trade dispute, and weakness and/or volatility in emerging markets, among other issues.

Faced with growing external threats, CPOs are more often collaborating with other internal leaders, looking to navigate these risks together. To that end, procurement maintains strong relationships with the finance and operations functions, which were second and third most likely to view their procurement partners as effective. Further evidence stems from procurement’s active role early in the strategic decision-making progress, particularly as it relates to cutting costs and managing risk.

In fact, the majority of respondents plan to cut costs as a means of ensuring long-term success. Cutting costs remains a primary business strategy across sectors — 70 percent of respondents indicated they are very likely to cut costs over the next year.  Other top strategies spanning procurement, finance, and operations include business partnering and supplier collaboration. Teamwork amongst these functions will be key as organizations look to plan for an unknown future.

Embracing Technology

Organizations are now able to understand larger business and economic trends thanks to tools like artificial intelligence that are powering predictive analytics. The potential of these technologies to cut costs and weather uncertainty is tremendous, pending that CPOs partner with their CIOs to align on technology priorities and investment. Our survey found that these efforts must be focused on data quality, governance, and standardization — cited as the biggest challenge to digital transformation in procurement today.

What’s more, procurement has an opportunity to collaborate with technology leaders to proactively adopt next-generation capabilities. CPOs who fall behind the technological curve will not only miss out on value creation for themselves but can also become less digitally savvy and relevant to stakeholders, including key suppliers. CPOs who want to realize their most ambitious goals can take a proactive and continuous approach to technology research and investment—and often tap an experienced partner in the process, including their fellow C-Suite leaders.

Influencing Human Resources and Talent

Technology is poised to overhaul business strategy, which leads business leaders to ask another equally pressing question: Do we have the talent necessary to support these changes?

Looking specifically at the procurement function, we’re finally starting to see a pivot as CPOs internalize and embrace the idea that they are an external face to their organization’s broader supply ecosystem. Technology is enabling connectivity worldwide, with digital supply networks superseding the traditional supply chain. This has forced many CPOs to reconsider their staff — no longer hard-nosed negotiators, these workers need more collaborative skillsets as they interact and engage with globalized networks.

Throughout the enterprise more broadly, there has been a marked shift regarding the way employees are brought in. These days, more than half of workers could be temps or contractors, transferring the acquisition of talent from strictly the human resources function to a collaboration between HR and procurement.

A bit of an afterthought ten years ago, procurement is now a board issue with C-Suite visibility. Given continuous shifts in the business cycle, there is no denying procurement’s strategic importance today.

CPOs have the insights and power to help guide an organization and provide strategic value to their C-level partners. Amid today’s ever-changing landscape, filled with economic uncertainty and emerging technology and talent trends, the C-Suite needs to embrace procurement’s critical role in informing broader business strategy — or else risk missing out.

Written by: Brian Umbenhauer, Ryan Flynn, and Lee Barter

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

 

 

 

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