Across all industries, 2020 led business leaders to reevaluate their priorities and adjust based on the new challenges the pandemic had uncovered for them. This is especially true for Chief Procurement Officers (CPOs) and other sourcing and procurement leaders. The strain of supply chain disruptions and accompanying market shortages seemingly made national headlines daily.
Since 2011, Deloitte has conducted an annual survey of CPOs in order to identify key challenges, emerging opportunities, and blossoming trends in the area of sourcing and procurement. Unsurprisingly, this year’s edition featured some major differences from previous entries. What are high-performing agility masters prioritizing according to the Deloitte Global 2021 Chief Procurement Officer Survey? Here’s 4 key focus areas.
Operational Efficiency
Operational efficiency is simply the relationship between business input and output which leads to the drive to reduce costs, time spent, waste, and more while increasing revenue. For the first time in 10 years, operational efficiency topped cost reduction as the top priority among CPOs according to Deloitte’s annual survey. While efficiency and cost reduction are intrinsically linked, greater focus is now streamlining process top to bottom than merely the bottom line.
To drive operational efficiency, high-performing sourcing and procurement leaders are utilizing hybrid operating models. In fact, Deloitte’s research found noted high-performing organizations were twice as likely to utilize hybrid operations and flexible automation methods. For sourcing professionals, this means investing in applications which revamped workflows and eliminated manual processes. Increasing operational efficiency also means increasing end-to-end visibility throughout processes. Focus on making information more visible from beginning to end makes operations more efficient and reduces cost.
What sort of operating model are these industry leaders employing? Nearly 75% of respondents stated that they prefer a hub and spoke operating model featuring a centralized (often legacy) system as the hub. The use of a standardized system allows for the flexibility of additional applications to be adopted which solve new problems as they arise rapidly and efficiently. Technology which aligns with a hub and spoke model facilitates operational efficiency.
Digital Transformation
Facilitating digital transformation has become an increasingly important priority for CPOs across the world. According to Deloitte, 76% of respondents listed digital transformation as a top priority in 2021 up from 56% in 2019. Digital transformation means identifying innovative approaches to create structure around workflows and optimize processes with technology. This is not achieved merely by licensing new software, but by taking a holistic look at your existing operations and processes.
Enabling digital transformation begins with analyzing your legacy systems for inefficiencies and points of inflexibility and leads to advanced insights into your systems. A highly customized ERP system was once viewed as a major asset for organizations. However, due to the rapidly changing external conditions, difficult to change systems became a liability in 2020. Beyond this, legacy systems often lack real-time insight, present barriers to data access, and are expensive to maintain.
Today’s digital transformation should be driven by citizen development in your organization. Citizen development empowers professionals performing jobs to build out their own custom app solutions without relying on already strained IT resources. Citizen developers in no-code platforms are driving digital transformation by surfacing advanced analytics from existing systems fully dashboards they have built to address changing needs. For sourcing professionals, this means pulling data from internal and external stakeholders together in one cohesive, dynamic place.
Enhancing Risk Management
For leading CPOs, risk management is only slightly more important than operations. Their focus on streamlining operations and building an overall strategy ensures than risk management is enhanced. In fact, 75% of respondents stated that enhanced supplier information-sharing is the top supply risk mitigation strategy. In other words, focusing on communication and visibility into suppliers’ systems is the best way to reduce risk in sourcing. This is also deemed “supplier collaboration.”
Supplier collaboration is a cooperative action between a business and supplier to increase their visibility and communication to reduce risk and improve collective processes. Technology solutions are key to create a culture of collaboration between you and your suppliers. These platforms build a link between disparate systems and increase visibility for all stakeholders. For leaders in sourcing and procurement, 95% are more likely to have high visibility into their tier 1 suppliers and 50% less likely to have low visibility into their tier 2 and lower suppliers.
Prior to the COVID-19 pandemic, only 34% of enterprise supply chain professionals identified increasing visibility as a supply chain priority. As a result of the disruption created by the pandemic, 54% now cite visibility as a major priority. This is because disconnected systems and lack of visibility present the greatest risk to your supply chain. A focus on supplier collaboration and supply chain visibility is a difference maker being adopted by global leaders in sourcing and procurement.
Corporate Social Responsibility
Amid the chaos of the coronavirus pandemic, civil discourse and protest took centerstage across the globe. Businesses were often expected to make statements and take stances on social and political issues. It is no wonder that corporate social responsibility (CSR) grew into one of the top priorities for CPOs coming out of 2020. According to Deloitte, 67.6% of respondents listed it among their chief priorities, an increase of 22% from 2019.
How are sourcing and procurement innovators prioritizing CSR? By setting value-based goals for their sourcing practices and tracking their performance. They are building out supplier diversity programs and treating them as a strategic priority and not merely a checkbox. In fact, high-performing sourcing and procurement professionals are 3 times more likely to be formally measured on their programs.
What are diverse suppliers? A diverse supplier is a business that is owned and operated by a member or group of members of a traditionally underrepresented or underserved group. The diverse classification includes small businesses and enterprises which are women-owned, minority-owned, veteran-owned, LGBTQ-owned, and/or disability-owned. This mindset is also being adopted to identify and source from sustainable suppliers. Establishing CSR programs extend well-beyond the internal operations of an organization. Prioritizing supplier diversity does not merely promote your organization’s ethical or moral standards, but also drives competition in your vendor base. By advancing these strategies, leading sourcing and procurement organizations are promoting their ethics while also bolstering their bottom line.
