Kuala Lumpur, April 5 — Cost reduction and managing risk top the list of procurement leaders’ business priorities in 2017, according to Deloitte’s annual global Chief Procurement Officer (CPO) survey.
With uncertainty and growth ambitions being a constant focus in many organisations, the number one priority for 79 per cent of CPOs is reducing costs. This is closely linked to 48 per cent wanting to increase cash flow to help fund growth.
Managing risk will also be a strong priority for over half of CPOs this year (57 per cent). Key global risks cited include weakness and volatility in emerging markets; rising geopolitical risk; the possibility of a renewed Euro crisis; spill over effects of any slowdown from China; and uncertainty around Brexit and outcomes from upcoming trade negotiations.
In addition, 54 per cent of respondents report a resurfacing of procurement risk, which could include price volatility, disruptions in supply and supplier bankruptcy. This is up from 42 per cent in 2014.
The talent gap
87 per cent feel that talent is the single greatest factor in driving procurement performance and 60 per cent of CPOs still do not believe their teams have the skills to deliver their procurement strategy. Yet investment in new talent development approaches and training remains stubbornly low, with 25 per cent spending less than one per cent on training budgets.
“A genuine focus on talent entails both the acquisition of new expertise, as well as the capability building of existing talent,” commented Eugene Ho, Executive Director, Consulting, and Consumer & Industrial Products Industry Leader at Deloitte Southeast Asia.
“New expertise doesn’t always need to take the form of an employee, and the emergence of new services and technologies present opportunities to augment procurement capabilities without adding to headcounts. One approach is to empower talent by embracing digital and innovative technologies – such as automation, cognitive procurement and analytics – at a much greater scale.”
Digital procurement accelerators
The ambition to embrace digital and innovative technology is also apparent in this year’s survey, as 75 per cent of CPOs believe that procurement’s role in delivering digital strategy will increase in the future.
This will be important too, as CPOs report that the impact of automation and robotics on their function will steadily increase from 50 per cent today to 88 per cent in five years’ time, and up to 93 per cent by 2025.
65 per cent see analytics as the technology area that will have the most impact on the function in the next two years, but many see the quality of data available as a significant barrier to adoption. However, once again, an issue with talent is apparent, with 62 per cent claiming that there is still a large to moderate skills gap across analytical abilities.
“A crucial area where the procurement function should focus its efforts is in the development of “always on” Digital Supply Networks (DSNs), which are tightly integrated and connect the traditional silos across supply chains,” continues Eugene.
“In Southeast Asia, where fragmented supply chains can sometimes lack transparency, putting in place best practices in DSNs can enable more autonomous, real-time decision-making using a continuous flow of information and data-driven optimisation through use of prediction, visualisation and artificial intelligence in everyday.