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Challenges Facing Procurement Leaders

March 9, 2018
From limited visibility beyond their tier-one suppliers to teams that don't have the capabilities to deliver on the strategy, procurement officers have their work cut out for them.

A clear vision is a necessity to manage a global supply chain, yet 65% of chief procurement officers report having limited visibility beyond their tier-one suppliers, according to a new survey from Deloitte.

"Visibility throughout the supply chain is a key tool for meeting regulatory and corporate social responsibility requirements while mitigating risk,” said Brian Umbenhauer, global head of sourcing and procurement at Deloitte Consulting LLP.

The survey also found that cost reduction (78%), product and market development (58%) and managing risk (54%) are the top business priorities for procurement leaders surveyed in 2018.

Despite concerns, 61% of CPOs delivered better year-over-year savings performance than last year, with the highest-performing leaders thriving in executive advocacy, leadership, talent and digital.

Yet challenges remain: More than half (51%) of procurement leaders surveyed do not believe their teams have the capabilities to deliver their procurement strategy.

Even as digital technologies offer benefits to procurement teams and could help manage risk and increase visibility, a mere 3% of leaders believe their teams possess the skills required to maximize digital capabilities.

"There’s no doubt that digital is a game-changer in procurement," said Michael Daher, U.S. leader of sourcing and procurement, Deloitte. "Chief procurement officers should define a clear strategy and vision for digital transformation that is action-oriented. Leadership and training weigh heavily on the success of digital projects and directly correlate with enhanced performance, but CPOs aren't yet prioritizing digital as they should be."

Deloitte's survey found that, despite identifying digital skills as a major challenge for their organization, only 16% of procurement leaders surveyed were focused on enhancing these skills.

In a sign of shifting cost priorities, 72% of procurement leaders are spending less than 2% of their budget on training, compared to 66% in 2017.

Additionally, 17% of procurement leaders do not have a digital procurement strategy at all, and—of those that do—less than one-third believe their strategy will improve enterprise value.

"With today’s global supply chains, risk exists across geopolitical and economic disruptions," said Umbenhauer. "There are demonstrated techniques to help drive value, reduce risk and meet goals—from digital transformation to increasing visibility and properly training teams—but CPOs right now are struggling to make the most of them. Major benefits and competitive advantage await those who do."

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