Cost Reduction for the First Time in 10 Years Is Not the Main Priority for Procurement Directors

Deloitte has been conducting an international survey among chief procurement officers since 2011, providing unique insights into the key challenges and opportunities that shape procurement and can serve as a global benchmark for the function. These surveys over the years have assisted numerous directors, procurement leaders, business partners, suppliers, and other technology providers in enhancing their ambitions, strategies, and results. This year’s tenth survey emphasized the extent to which 2020 disrupted all aspects of supply chains. According to Deloitte’s international survey among chief procurement officers, organizations seeking ways to succeed in the post-pandemic market are turning to their procurement directors to drive innovation and profit growth, the statement notes.

Chief procurement officers indicated that their priorities are growing in size and importance, and for the first time in 10 years since the survey began, respondents did not list ‘cost reduction’ as their main priority. Its place has been taken by the priority ‘driving operational efficiency’ with a weighted score of 78.0. Digital transformation ranks third with a score of 76.1.

• The importance of digital transformation, which has remained in third place, has significantly increased, by 20 percent since 2019, marking the second-largest increase in priority importance compared to 2019. This year, 48 percent of chief procurement officers consider digital transformation a strong priority.
• The importance of corporate social responsibility recorded the largest growth among all priorities (an increase of 22 percent compared to 2019), and there is a 75 percent higher likelihood that it will be measured by directors aiming for high performance. Corporate social responsibility, which is now regularly discussed at the board level, confirms that consumption, if well-managed, can yield societal benefits.
• Innovation ranks fourth with a weighted score of 72.9, indicating the need to enhance internal business levels and improve supply chain transparency and broader supplier collaboration. According to the survey, high-performing organizations achieve the greatest visibility of their supply networks thanks to ‘next-generation’ technologies such as artificial intelligence and cognitive capabilities.

– Chief procurement officers have a unique opportunity to help their organizations navigate unprecedented times of supply chain disruption and establish the agile approach necessary for success despite external forces such as the COVID-19 pandemic, which poses significant challenges for the global economy. It is time for chief procurement officers to be bold and initiate change – stated Zlatko Bazianec, head of the Croatian office and partner in Deloitte’s consulting department.

Risk Management

A large majority of respondents (70 percent) indicated that risk has increased over the past year. Fifty-six percent of respondents stated that key suppliers have gone bankrupt or their businesses have been significantly harmed, and 41 percent had to expedite shipments to maintain supply. Seventy percent of chief procurement officers believe they have good insight into risks associated with their direct (primary) suppliers, while only 15 percent have insight into risks associated with secondary suppliers. Only 26 percent of respondents officially tracked risk in their supply networks. The crisis caused by the COVID-19 pandemic highlighted the need for a better understanding of the end-user network and the risks that exist outside the direct supplier network.

Agile Procurement

This year’s survey examined agility based on specific capabilities and using agility indicators. The findings indicate that agility is strongly correlated with higher overall performance and other procurement capabilities. The survey revealed that high-performing procurement organizations exhibit key characteristics of agility, including:

• two times greater likelihood of leveraging a hybrid management model to provide support services for accessing knowledge, capabilities, and expertise that do not exist within the organization
• ten times greater likelihood of comprehensive implementation of robotic process automation-based solutions
• eighteen times greater likelihood of comprehensive implementation of artificial intelligence/cognitive capability-based solutions.

Furthermore, chief procurement officers have begun to transcend their traditional roles and move towards the role of transformative catalysts and intelligent strategists. High-performing chief procurement officers spend nearly 15 percent of their time in a strategist role and aim to ensure that in the future, they spend more than half of their time on strategic activities. Procurement has proven to be a key driver of market competition in modern enterprises with a wide range of priorities, and chief procurement officers must act accordingly.

– This year has proven the importance of involving chief procurement officers in senior management discussions. They significantly contribute to the discussion: whether it is about risk management, aiding in digital transformation, or strengthening corporate responsibility initiatives – emphasizes Bazianec.

The results of the entire survey are available here: www.deloitte.com/hr/cpo-2021