Deloitte’s 2018 Global CPO Survey Reveals Doubts About Digital Tech and Easing Talent Worries

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The latest picture of the state of procurement looks to be a cautiously rosy one. While most procurement leaders feel supported by their executives, they are unsure whether they are contributing significant strategic value.

Compared with last year, more procurement leaders believe that their teams have sufficient capabilities to deliver on their procurement strategy, but they are still not the majority. And while they have high hopes for the potential of analytics to transform their profession, only a third of them are taking advantage of such technologies.

These insights come from Deloitte’s 2018 Global Chief Procurement Officer Survey, now in its eighth year. Deloitte surveyed 504 procurement professionals from 39 countries and representing a range of industries.

There are a number of notable trends. Only 49% of respondents are confident in their teams’ ability to execute their procurement strategies, but this in fact marks a reversal in the trend of decreasing confidence, as the chart below shows.

Source: Deloitte

“It's been a real challenge for procurement organizations to get the right level of talent over the past several years, and that’s been reflected in the survey results,” says Ryan Flynn, principal at Deloitte Consulting. “We’re not entirely sure what caused the reversal this year, but there may be a couple of factors at play. We are seeing companies starting to turn over their longer tenured talent as people have retired or moved on to other positions. They are now starting to bring in younger talent that are analytically adept and more familiar with digital tools.”

He continued: “We're also starting to see the fruits of CPOs focusing on building a talent pipeline, and we've heard anecdotally that companies have been partnering with local colleges and universities to ensure that procurement is part of the curriculum.”

Yet, procurement leaders are spending less on talent development. The report finds that 72% of respondents spend less than 2% of their operating budgets on training and development programs, compared with 66% last year.

Flynn suspects that companies are still operating in a cost-cutting mode, but he worries about the implication for procurement’s ability to keep up with digital technologies. “Given the rise of digital and new technologies coming across the organization, that could be an inhibitor to companies deploying new digital solutions if they're not spending money on training,” he says.

Another interesting takeaway from the report is that the percentage of procurement leaders who are lukewarm on the potential of digital technologies has increased. This was one of the most surprising findings for Flynn, who noted that two years ago there had been a significant jump in the number of CPOs who planned to invest in digital technologies.

The mood this year, however, is different. Only 6% think that their digital procurement strategy will help them fully deliver on their objectives and improve enterprise value.

“The other finding that I was thought was surprising was the drop in supplier collaboration as a tool moving forward,” Flynn says. “Fewer procurement leaders (23%) consider supplier collaboration as a strategy to drive value over the next 12 months, as compared to 26% in 2017. Because of the growth in the economy, CPOs are being asked to contribute more to the top line through innovation in the supply base and M&A activity. But this requires a lot of collaboration, so it was unusual to see the number of CPOs who said they would use this paired with the ask to support the growth agenda.”

Industry Overviews

This year’s respondents represent nine industries, from manufacturing and energy to public sector and real estate. Here are some industry-specific highlights:

  • Seventy percent of procurement leaders from the business and professional services industry reported improved year-on-year performance, higher than the overall average of 61%.
  • Public sector procurement, on the other hand, had a less sanguine year, with only half indicating improvement in savings performance.
  • More than one in five respondents representing the business and professional services industry said that their company has no approved digital strategy in place.
  • Thirty-nine percent of procurement leaders from the consumer business industry say that they have “good” or “full” transparency for their supply chain beyond Tier-1 suppliers, higher than the overall average.
  • In contrast, only 26% of respondents from the healthcare and life sciences industry reported “good” or “full” transparency.
  • Respondents from the energy and resources industry reported a decrease in the level of perceived executive support, with only 35% believing their executives to be “very supportive.”
  • However, the lowest level of perceived executive support is in the manufacturing industry. Only 23% of procurement leaders reported feeling “highly supported.”
  • Procurement leaders representing the financial services and insurance industry are more preoccupied with managing risks in 2018, compared with reducing costs.
  • Only 8% of respondents from the financial services and insurance industry said that increasing cash flow is a “strong business priority,” notably below the 40% average.
  • Eighty-four percent of procurement leaders in the technology, media and telecommunications industry said that their procurement function is highly effective, and 54% do not believe that their teams have the necessary skills to deliver on strategy. 

Regional Overviews

The report concluded with snapshots of region-specific data. Here are some key findings:

  • Seventy-one percent of North America-based procurement leaders reported better performance than last year, higher than the global average.
  • North America’s procurement leaders view reducing costs, managing risks and introducing new products and services or expanding into new markets as their top three priorities.
  • Seventy-three percent of South America-based procurement leaders indicated better performance than last year, a significant increase from 43% in 2017.
  • South America’s procurement leaders value cloud computing more than the global average but view analytics as a less important technology area compared with their peers.
  • Only a quarter of EMEA-based procurement leaders view their executives as “very supportive,” compared with 40% in 2017.
  • Sixty-one percent of Asia Pacific-based procurement leaders do not believe their teams have the capability to deliver their strategy, but this figure has been falling steadily since 2014, when it was 81%.
  • Asia Pacific’s procurement leaders sees data quality — or lack thereof — as the biggest barrier to adopting digital technologies.

Check out the full report here.

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