Six Trends on the Horizon for Chief Procurement Officers

What’s on the horizon for the chief procurement officer (CPO)? An improving economy, increased confidence, and anticipated growth in spending, lead the expectations among CPOs.

These statements, according to a recent study by Deloitte, point to a continued transformation of the CPO, who will “need to broaden capabilities and transform the procurement function into a multi-speed gear box” that must be:

Rapid: focused on delivering results to the business as they are needed.
Efficient: investing in the right number of the appropriately skilled people.
Innovative: bringing insight to the business driven by analysis and input from suppliers

To accomplish these procurement strategies, the CPO looks to expand his or her role beyond that of cost savings. Many of these executives are turning to technology to improve the efficiency and innovation of the purchasing department.

1. A Positive Market Outlook

As the world exits the recession of the late 2000s decade, CPOs in most industries and regions are seeing increased confidence, with many reporting better prospects in coming years. Aside from supply concerns and commodity weaknesses, there is much positivity and CPOs see a shift away from cost control (down slightly, 70% to 69%, from 2013 to 2014) as the number one concern.

To note, more organizations are meeting or exceeding their procurement plan, now at 94%, up from 88% in 2013.

2. Expansion, Collaboration, and Diversification

With credit historically cheap, organizations are leaning toward expansion and diversification. The survey shows a majority of CPOs expect companies will expand through acquisition and organic growth, and CAPEX will grow. Penetration of emerging markets remains a strong area of focus.

Two of the main ‘procurement lever’ increases from 2013 are those of increasing the level of supplier collaboration (29% to 34%), and restructuring existing relationships (25% to 31%), meaning that procurement will be looking to simplify relationships with the intent of improving the company.

3. Ascent Through the Value Chain

The CPO role looks to grow as a strategic partner throughout the role, providing a holistic cost and supply assurance through the organization. This growth does however bring a new set of challenges, and CPOs are being asked to drive top line growth, bringing insight and innovation from the marketplace to the organization.

4. Partnership with Other C-Suite Members Important, Overcoming C-Suite “Language Barrier”

Aligning procurement goals with those of the CFO (97%), CIO (73%), CEO (92%), and COO (73%) remain important to the CPO. With these the main internal customers for CPOs, being able to develop closer ties with these departments requires a new engagement process.

Related: Common Obstacles to the Modern Payment Process

Malcolm Dare, Supply Chain Director, BAE Systems – Submarines, believes that to grow with internal systems, procurement must “[…] be able to explain what they are doing and why they are doing it, in business language, not just pure supply chain or procurement language.”

5. Technology Aspirations Meet Integration Realities

Procurement looks to invest in technology, but worries about integration —namely integration between procurement and enterprise resource planning. Stakeholders look for procurement to take advantage of forward looking analytics software, but CPOs remain focused on improving requisition to purchase order capabilities.

“[…] despite our ambitions to be investing in technology that is going to support us in terms of driving spend analytics and more foresight,” says Dapo Ajayi, CPO, AstraZeneca, “we are all still investing a lot of our resources in implementation of P2P and ERP integration.”

6. Supplier, Self Service, and Ecommerce Lead Investment Initiatives

Three of the biggest initiatives invested by CPOs are those of Supplier Portals (65%), Self-Service Portals (43%), and B2B Ecommerce (40%); all contributing to improved relationships with suppliers, easier comparison and purchase abilities for procurement departments, and simpler ordering.

Related: The B2B Ecommerce Manifesto

“Since the Internet made pricing of goods more transparent, the push to contain costs has spurred complex global supply chains that must sustain the ebbs and flows of economic shifts, natural disasters, and other risks. And the Great Recession saw many corporations trim their resources under a mandate to do more with less,” says Joni Young, a director at Deloitte Consulting LLP.

Conclusion

As much of the world comes out of the recession, the reduced focus on lowering cost is replaced by the increased drive for adding business value through improved relationships with suppliers and other members of the C-suite. Learn more by viewing the 2014 Global CPO Survey, as well as checking out the following resources: