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Outsource magazine: thought-leadership and outsourcing strategy | July 20, 2017

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Global business environment demands more from procurement

Global business environment demands more from procurement
Outsource Magazine

As the global macro environment improves and procurement leaders turn their attention towards corporate growth, pressure is mounting on conventional models of procurement.

Looking at the state of play in the industry amid signs of stronger growth in some parts of the world’s economy, our latest global chief procurement officer (CPO) survey is a benchmark indicator of sentiment in the industry.

What is clear from the latest results is that despite 81% citing improved financial prospects for their businesses, a lack of talent, technology issues and geopolitical risks are amongst procurement leaders’ main business concerns.

We found that almost six in 10 CPOs currently believe their existing teams do not have the core and necessary skills to deliver their organisation’s procurement strategies, including leadership, influence, communication and relationship building.

Moreover, amid rising demand for speed, greater efficiencies and new skills sets, almost half of CPOs feel that the market for talent has become further constrained in the past 12 months. In particular, there is now a resource requirement for this talent to support a drive towards greater innovation, such as the use of analytics.

Over half of CPOs were concerned that existing procurement systems are difficult for the business to use. This interestingly increased to 62% for the largest organisations.

These results clearly demonstrate that a new approach to recruiting talent and developing skills is needed, supported by advancements in procurement technology.

It is also apparent that CPOs’ perception towards risk is shifting, with one in four CPOs now concerned about geopolitical risk, over triple that perceived in the previous year. As a consequence, supply chain risk has undoubtedly increased for 43% of respondents.

While these facts show challenges remain in some markets, procurement leaders are on balance increasingly more confident, especially in the consumer business, banking, pharmaceuticals and business services sectors. Increased capital expenditure in the manufacturing, energy and public sectors is also positive.

This can be seen further by the fact that one-third of procurement leaders perceive themselves as highly regarded strategic business partners to the rest of the organisation. Such CPOs and their teams are being invited to participate in key growth activities such as new product development, M&A activity and securing innovation from suppliers.

As a result of these factors, 30% are looking to increase levels of outsourcing in operational and transactional activity in the next 12 months. It is notable through this survey and our previous research, that outsourcing is permeated more broadly across the scope of the procurement functions.

Whether it is market intelligence to drive proactive opportunity generation, or facilitation of the supplier innovation pipeline, a number of CPOs continue to draw on external capability in non-traditional areas.

This move to shared services, whether in-house or outsourced, might provide one part of the multi-speed gearbox required to deliver efficiency. It could also fund the skills and technology needed to develop the requirements expected of procurement in the future.

As we begin 2015, companies will be looking to procurement for innovation to support the wider economic and corporate growth. In the past, many procurement functions have been able to deliver a strong savings performance by focussing on a small number of core activities – category management and strategic sourcing in particular. Now there is a need for new ‘gears’ to continue to climb and meet expectations.

The case for change is pressing, and those procurement officers who can most effectively adapt, will be able to support the acceleration of growth and become ever more crucial to their business’ success.

About the Author

James Gregson 150James Gregson is UK head of sourcing and procurement at Deloitte.

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