Limited supply chain visibility, poor supplier transparency, new regulations, and an ongoing need to do “more with less” are just a handful of the key issues that are keeping procurement teams up at night in 2018. Here’s a look at each issue and some advice on how to work through these obstacles:
Poor supply chain transparency. According to Deloitte's Global CPO Survey 2018, 65% of procurement leaders have limited or no visibility beyond their tier one suppliers—a challenge that can be tackled in part by utilizing software (i.e., track-and-trace solutions that provide visibility over the entire supply chain).
“Lack of visibility is a major concern for CPOs as they look to navigate global headwinds and prepare their teams for the future of procurement and innovative technologies,” said Deloitte’s Brian Umbenhauer in a company press release. “Visibility throughout the supply chain is a key tool for meeting regulatory and corporate social responsibility requirements while mitigating risk. Technology can help procurement leaders deliver value and reduce costs while achieving a more robust view of complex supply chains.”
The need for better risk management. There are risks lurking around every corner of the supply chain, where procurement professionals are expected to effectively identify and thwart these issues before they turn into real problems. This isn’t always easy in a world where the bulk of the procurement department say they lack visibility beyond their top suppliers.
A key concern for procurement—with the primary focus on suppliers’ financial status, followed by health and safety and industry practices—risk is both inherent and addressable. “It’s no longer good enough to simply engage with your tier one suppliers,” CASME’s Graham Crawshaw writes in The top six challenges facing procurement. “Emphasis needs to be paid to controlling the approach taken with tier two suppliers, ensuring that the necessary obligations are passed down to subcontractors.”
Lack of digital strategy. Technology may be the ultimate facilitator for today’s procurement teams, but that doesn’t mean CPOs are using it to their best advantage. Deloitte reports that while 75% of procurement leaders consider digital strategy an increasingly important part of their jobs, 17% of them have no digital procurement strategy. And of those that do, less than one-third believe that the initiatives actually add value for the organization.
“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.”
Lower operating budgets. A priority for most organizations, enterprise-wide cost reductions have historically been carried out in “functional silos,” and without much cross-functional coordination. In the era of digital transformation, however, better alignment and collaboration between groups like finance and procurement is necessary but often requires significant cultural change, according to The Hackett Group’s recent report, The CPO Agenda: Expanding Procurement's Influence Through Change and Innovation.
“Procurement organizations need to evolve to meet the demands of a rapidly changing business environment, but must live with reductions in operating budgets averaging 0.3% in 2018,” the firm states, noting that this challenge reflects the current resource-constrained and risky environment. To offset this challenge, The Hackett Group advises procurement teams to work on improving their agility, elevating their role to that of a trusted advisor, enhancing their cost-avoidance capabilities, and supporting enterprise digital transformation.
Always Be Persevering
The good news is that procurement leaders are never ones to back down from a challenge, nor do they allow these roadblocks to stand in the way of their ability to source products, form solid supplier relationships, and deliver value to both their internal and external customers.
“Despite an inevitable array of disruptions (technological, regulatory, etc.),” The Hackett Group concludes, “nothing should keep procurement from working to meet the needs and wants of internal stakeholders and suppliers through investment in talent management and technologies that will improve data collection, performance measurement, risk mitigation, and collaboration.”