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Deloitte unveils its 2021 Global CPO Survey, finding that agility is needed to manage today’s risks — and rewards

04/26/2021 By


Deloitte has released its latest Global Chief Procurement Officer Survey, titled “Agility: The Antidote to Complexity.” The CPO Survey comes out every two years to gauge the priorities, performance, capabilities, perceptions, plans and perspectives of roughly 400 CPOs around the world.

The 2019 edition of the study focused on complexity as the major headwind to procurement performance, and the 2021 edition focuses on agility as the critical emerging competency to addressing this complexity/risk.

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There is a ton of insight in the CPO Survey about the nature of the actual pandemic risk impacts, the perceived risks beyond the pandemic, and the plans for addressing those risks. Supply chain resilience is the antidote to supply chain risk, and resilience has both a dimension of agility related to recovery and business continuity, but agility also means moving faster and earlier with better intelligence and the ability to transform faster to build new capabilities (which leads to better predictable performance). So, I’ll focus on the agility aspect of the study.

Agility isn’t a new idea, but the study describes it holistically, with examples such as:

  • Actively monitoring fast-moving stakeholders and supply markets
  • Predicting and prioritizing a seemingly endless stream of risks and opportunities
  • Decisively orchestrating internal/partner resources to quickly and flexibly respond
  • Configuring upstream supply chain and procurement itself to become more agile
  • Transforming the culture to be one of build to evolve versus built to last

So, it’s basically about moving at the speed of stakeholders (and their customers) AND supply markets to increase value and reduce risk — and doing it in the midst of a pandemic and post-pandemic! 

The study showed that this value is still reflected in cost-reduction priorities (in terms of spend and operating cost/efficiency), but coming out of the pandemic, the focus is clearly on growth and supporting key stakeholder priorities to enable that. This is why digital transformation, innovation and new product/service introduction (and the enabling risk management and CSR competencies) are the next five cited CPO priorities.

An interesting new twist to the 2021 Deloitte Global CPO Survey is that Deloitte has created two peer groups to see if firms that exhibit agile traits actually perform better (in the face of complexity):

  • A “high performer” peer group based on a balanced scorecard of performance (sort of a poor man’s benchmark) made up of performance-to-plan, stakeholder influence (on seven dimensions plus C-level influence), “cust sat,” active sourcing influence, and efficiency (managed spend per procurement FTE)
  • An “agility master” peer group with a dozen agility-centric capabilities, including:
    • Level of alignment to changing stakeholder objectives and metrics
    • Process-oriented practices (e.g., sourcing criteria addressing supply risk)
    • Alternative resourcing models (e.g., on-demand category expertise)
    • Improved talent and talent management processes/practices
    • Utilization of agile development skills, including for procurement transformation
    • Supply market intelligence to improve sensing and prediction (i.e., agility isn’t simply about being reactive)
    • Practices related to supply chain resilience and risk/compliance management
    • Predictive analytics and advanced technology to improve rapid decision-making

The CPO Survey found a strong correlation between the performance index score and the agility capability score, and the differences in those groups are shown throughout the study. The study also assessed what CPOs are measured on (and where they spend their time) and it found that the best firms iteratively expand their services, scorecard elements, talent bench and digital capabilities (which can be tools or flexible service offerings that are cropping up). This iterative approach is part-and-parcel of the agile development approach that is coming into procurement just like Lean/Six Sigma did 15-20 years ago.

CPO Survey and Next Gen Digital

The study found that digital capabilities were a big differentiator for the most sophisticated organizations that were using advanced analytics and RPA platforms to aggressively transform clunky workflows to more sophisticated “guided” experiences for casual users (with an eye towards autonomous) and equally sophisticated analytics looking broader and deeper downstream into customers (e.g., per enterprise-level digital projects) and upstream into the supply tiers. For example, high performers were 95% more likely to have high visibility into their tier 1 suppliers and twice as unlikely to have low visibility into their tier 2+ suppliers with respect to risk. More impressively though is the difference between the level of full adoption of “next gen” tech (which is becoming “current gen”). The report cites that high performers:

  • Are 4-5 times more likely to have fully deployed advanced analytics/visualization
  • Are 10 times more likely to have fully deployed RPA solutions
  • Have fully deployed predictive analytics capabilities (12% vs. 0% for others)
  • Are 18 times more likely to have fully deployed AI/cognitive capabilities

Those are some big differences! RPA is aggressively pursued in P2P and analytics were found the most valuable in spend/savings analysis (for 75% of firms), process performance (44%), market intelligence (43%), cost modeling/forecasting (42%), supply risk and compliance/fraud (both around 35%) and working capital (16%). Interestingly, predictive analytics are still somewhat nascent in terms of delivered value (30% citing).

To Suite or Not to Suite

In terms of S2P technology strategy, I’d hate to disappoint anyone looking for a definitive call on the best of breed app versus best-of-breed suite versus ERP debate. The general consensus is some form of hub-and-spoke model with the hub being ERP (which is an integrated suite unto itself) or S2P suite (with ERP relegated to G/L and maybe some AP) surrounded by best of breed apps. It’s the age-old trade-off between top-down desire for data consolidation and standardization (which more broadly was actually the number-1 cited strategy for enabling agility … so that everyone is working off the same page) with the desire to support deep process/category improvement with specialist tools and services.

As an aside, the notion of a nice mix-n-match app ecosystem of best of breed tools all working together with APIs, microservices and a magical integration hub is still a siren’s call leading to the rocky shoals of data integration despair. That said, the most sophisticated firms are creating process integration layers and analytics layers using new types of platforms, but the biggest challenge that even they are having is the data and especially the master data (e.g., suppliers and contracts), which leads to the next issue.

Your Data is Still Trash

Yes, the “I” in IT is still broken. With the criticality of analytics, especially real-time analytics and predictive analytics, the data being used is therefore by definition critical, but the data quality is problematic at best. It is like having a garage full of sports cars, but yet you are filling them with dirty fuel. Similar to the 2019 study, “quality of data” is the number-1 barrier to the effective application of digital technology in procurement. Poor integration across applications is number-2 and the lack of budget, ROI, and IT resources/support are numbers 3, 4, and 5 respectively.

Of all the data areas, the most challenging is supplier-related data because it’s not just AP-centric vendor master data or broader supplier data for sourcing and performance management, but also for supplier risk and compliance tied to enterprise/SCM risk and compliance. Suppliers are the gateways to the supply markets and n-tier supply chains, so, getting this right bakes risk into core procurement processes and also tangibly supports enterprise GRC efforts and supply chain risk management alike. For example, consider:

  • Supplier risk is used as a core part of supplier selection criteria during sourcing at 62% of high performers, 77% of agility masters, and only 29% of the rest
  • Measuring suppliers on transparency, e.g., suppliers’ support of business continuity planning (BCP) and managing their next tier of critical suppliers, is done by 36% of top performers, 39% of agility masters, and only 14% of the rest
  • Advanced technology (RPA, AI, predictive analytics, etc.) is being deployed within supplier risk/compliance management at 35% of high performers, 45% of agility masters, and only 15% of the rest

So, mastering the flow of information with/across suppliers is key to developing intelligence and managing risk AND reward. And the pandemic has amplified supplier/supply chain risk while supplier/supply chain compliance is also ratcheting up due to regulatory requirements, NGOs and consumer/shareholder demands for supply chain transparency to ensure business continuity and brand preservation. The study also spells out the priorities for six different CSR elements being extended out to the supply base. 

Supplier Management has Come of Age

The study showed that CPOs feel that supply assurance (and supplier resilience) is the top risk issue to address coming out of the pandemic, but they also feel that digitally enabled supplier engagement/collaboration is critical to generating broader value. The study showed that enhanced supplier information-sharing was the top supply risk mitigation strategy (75%) ahead of activating alternative supply sources (70%) and shoring up inventories (50%) during the pandemic, but it’ll be mission-critical to enabling post pandemic business objectives for growth in times of complexity and uncertainty.

Supplier management includes not just information management, performance management (e.g., quality management), relationship management and risk management, but also the collaboration and innovation needed to deliver customer facing innovation, growth and brand enhancement. For example, in the area of supplier innovation, consider Unilever’s announcement of a new laundry detergent that uses feedstocks derived from a new supplier’s bioreactor process that ingests carbon emissions.

Also note that episodic sourcing processes are slowly transitioning to becoming subsumed within a continuous supplier management process that also dovetails with enterprise/IT risk and compliance processes getting extended out to suppliers — and the supply chain risk management processes being integrated back in. It’s also where various service providers such as BPO, ITO, MSP, DaaS, and basically anything served up as a service (“XaaS”) get managed and get safely woven into operations. “Safely” is the operative word here. Also note last week’s data breach and ransomware attack on one of Apple’s key suppliers. Cyber security with supply chain partners is becoming all-consuming. Infosec sections in vendor RFIs are sometimes becoming orders of magnitude greater than the performance requirements. 

These XaaS managed services are also key to an emerging “agile operating model” that is highlighted in the study. We simply don’t have the space or time to outline all that here, but you should check out the study to see how some of the legacy BPO, contingent workforce and talent management models are giving way to more flexible operating models being adopted by the high performers and agility masters.

Survey: The Many Faces of the CPO

Deloitte developed a “four faces” model for CFOs in 2011 that they’ve adapted to the CPO in 2021: Operator, Steward, Catalyst and Strategist. In the study, the allocation of the CPO’s time in these roles (and also their time and that of their FTEs in three buckets: strategic, operational and transactional). These time investments are a good proxy for maturity along the procurement transformation journey, but a transformation is ultimately driven by a strategy that itself is driven by a strong mission/vision. As you might expect, a strategic transformation mindset was more prevalent in the CPOs of the high performers and agility masters groups. While 27% of the agile high performers (the intersection of these two groups) saw procurement as mission-critical, 41% of CPOs see the function as literally “a way to change the world by reshaping global supply chains” (compared to only 17% of the rest).

Procurement will only be able to pursue this lofty goal by extricating itself from the “tyranny of the tactical” and building agility into its operating model and the underlying resources: technology, analytics, data, people, etc. — whether internally or externally provisioned. 

As a capstone, the CPO Survey also provides 26 recommendations/actions to support five mega recommendations related to agility:

  1. Gap assess your internal agility
  2. Define a truly balanced scorecard
  3. Build and execute against a comprehensive digital road map
  4. Build collaboration muscle
  5. Adopt an agile mindset (and even methodology)

So, check out that final section of the study.

As procurement continues to professionalize itself as a digitally-enabled service provider and strategic business partner, the iterative nature of the virtuous “procurement flywheel” (basically similar to the Amazon flywheel as we wrote about here) seen in all great transformations is one that should inherently build agility that spins up the flywheel even faster. As the great American cyclist Greg Lemond once said, “It never gets easier, you just go faster!” 

The 2021 Deloitte Global CPO Survey has much more data than I’ve covered here and is an absolute must read for any CPO or serious procurement professional or provider. It’s also been an honor to be involved again in this latest study as a design partner and author, and I hope that you’ll find it valuable. There’ll be many more insights to be unlocked from this study, but if you have any questions, please feel free to leave a comment below. 

How do you find the right procurement technology and vendor for your company? Spend Matters’ new 5-step “Procurement Technology Buyer’s Guide” can help — with how-to documents, checklist templates and other tips.

CPO - Chief Procurement Officer