CPOs and the Digital Imperative

By March 22, 2017Procurement
Capital Management

According to a recent Deloitte Global Chief Procurement Officer (CPO survey report, the successful transformation of procurement will depend a great deal on collaboration, talent, and digitization.

In an increasingly competitive global environment, traditional business models no longer provide a pathway to success. That’s especially true for procurement as evidenced by the recent Deloitte Global CPO Survey, 2017 which represented the opinions of 480 CPOs from 36 countries. These CPOs represent organizations with a combined turnover of $4.9 trillion.

The survey shows that although cost reduction remains a top priority for 79% of respondents, many are concerned about the lack of talent needed to compete in a world that’s become increasingly digital. The CPOs understand that digital technologies will likely disrupt their industries. Fully 90% agree with that assessment, yet only 44% indicated that they were preparing for these disruptions while only a miniscule 5% would be considered best-of-class in their endeavors and planning. These percentages will likely change over time since, according to the survey, only 8% of respondents indicated that automation and robotics are currently having a significant impact on procurement functions; however, by 2025, a full 58% feel that will be the case.

What are the barriers that may be holding companies back?

For those ready and willing to invest in digital solutions, a major concern is finding the talent that would enable procurement to optimize those solutions. When asked if their teams have the necessary skills, 60% of respondents expressed doubt. Yet with that acknowledgement, only 25% are planning to invest in new talent development through training, recruitment or career planning, a 2% drop from last year.

Most respondents (65%) feel that the most important technology investments they can make right now are in analytics. Because of that investment in digital (38%) and cloud technologies (37%) aren’t getting the dollars they need.

Other barriers to digitization include concerns over data quality (49%); lack of data integration (42%), limited senior stakeholder endorsement (23%), and skills capability of analytics resources (29%) and limited senior stakeholder endorsement and prioritization (23%); and current state of existing technology which may or may not be compatible with newer digital technology (29%).

Don’t lose sight of the value of collaboration

I’ve often expressed how important collaboration is between all stakeholders, including senior internal stakeholders, procurement, accounts payable, and suppliers. Many of the respondents to the Deloitte study revealed significant backing from senior executives (75%). Though this is commendable and necessary, the collaboration needs to travel throughout the transaction function. Through digitization, this becomes easier to accomplish. Visibility into transaction and payment status is one of the most valuable functionalities these digitized solutions provide.

This enables better relationships and ongoing communication at each step in the P2P process. Procurement can more effectively negotiate pricing and terms by understanding the current status of suppliers; accounts payable can determine more advantageous payment cycles; senior management can make better, more strategic decisions regarding working capital and cash flow; and suppliers can better evaluate their own inventory cycles with the knowledge of when payment will occur.

What is obvious from this survey is that procurement understands they must not only accept automation and digitization; they must embrace it. Not only will these advances enable procurement to be more effective; it will enable them to play a more strategic role rather than a simple operational one. This new role may include involvement in mergers and acquisitions, risk planning, and new product and service development.

According to the survey, “Digital transformation will be a strong enabler for economic growth and productivity, reducing the operational procurement work, amplifying the strategic procurement work, and allowing resource investments to focus on higher value added activities.”

Reggie Peterson

About Reggie Peterson

Reggie Peterson is Director of Indirect Products for AmeriQuest Business services. In this role, Reggie is responsible for leading the company’s growth of its indirect procurement offering that helps organizations better manage their procurement lifecycle to reduce cost and complexity. A 20 year veteran in supply chain management, Reggie’s previous experience includes serving 16 years as a Senior Procurement Manager for Coca-Cola, and as a Procurement Manager – Indirect Materials for Siemens.

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