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As procurement departments prepare themselves to thrive in the “next normal,” most CPOs (80%) believe that the period of rapid response to maintain supply continuity has passed (or, that it will end soon). According to Deloitte’s new “2020 Chief Procurement Officer Flash Survey,” 64% of CPOs have shifted from defense to offense by focusing on adapting their supply chains to thrive in the “next normal.”
“The COVID-19 pandemic has created a ‘black swan’ environment for organizations to navigate,” Deloitte explains, “requiring many to rethink the supply chains they have built over decades.” Procurement leaders that are working through these uncertainties and positioning their teams for success in the near and long term are focused on these 10 key shifts:
- Cash is king. According to a recent Deloitte survey of global executives, two in three companies globally now expect to pursue cost reduction efforts over the next 12 months, compared with 38% before the pandemic began. For the Flash survey, CPO respondents identified cost management as their top priority right now, commanding nearly eight times more focus in day-to-day operations. This aligns with additional survey findings, showing that two-thirds of organizations are planning to pursue cost reduction strategies post-COVID-19, compared to just one-third pre-COVID-19.
- The not-so-passing storm. Only 28% of survey respondents expect a quick return to pre-COVID-19 economics, while the majority, around 70%, expect and are planning for a much longer economic downturn (either U- or W-shaped) that will likely last into Q2 2021 and beyond.
- To consolidate or not to consolidate? According to Deloitte, 47% of respondents are planning to expand their overall supply base, while 25% of respondents plan to consolidate. Nearly all respondents suggested they are looking to either shift their global supply base footprint and/or activate nearshoring.
- The team matters. Two of the top three most critical success factors for procurement organizations to navigate the pandemic concern employees and teams. “While CPOs must equip and train their teams and leaders to manage in this new world,” Deloitte advises, “they must also foster a culture that empowers and supports employees to be their best while working remotely and remember that working from home doesn’t equate to always working.”
- Hand-to-hand combat. Deloitte says 38% of top-ranked procurement strategies were short-term and tactical, including activating alternative sources, increasing inventory levels and injecting capital into their supply chain to quickly respond and prevent further supply disruption.
- Fighting fires. During these unprecedented times, enabling effective remote working and virtual working environments were the fires that had to be put out, seemingly pushing data quality and visibility, digitization, and analytics down the priority list.
- You can't manage what you can’t see. Only 50% of procurement leaders surveyed had high or very high visibility into their Tier 1 suppliers, while 90% of organizations rated their visibility into their extended supply networks as moderate to very low.
- Thriving through chaos. Organizations that are thriving have higher visibility into both Tier 1 and Tier 2 suppliers, were twice as likely to prioritize digitization in their day-to-day operations, and were seven times more likely to expand their supply bases in response to supply-side vulnerabilities, Deloitte found.
- Enhancing business performance. Enhancing supply management capabilities, as well as adopting and investing in advanced technology, emerged as the two primary themes among CPO respondents.
- Hindsight in 2020. Approximately 18% of respondents regretted not accelerating digitization fast enough through investments in upgraded systems that enhance visibility and analytics capabilities. “If CPOs are to command a seat at the table, and their procurement organizations deliver their full value,” Deloitte states, “supply chain visibility must be a priority.”
