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CPO Masters of Agility (Part 1) — Actionable Answers to Complexity

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It’s nearly impossible to overstate the impact of COVID-19 on our personal and professional lives over the last year. Friends and colleagues in India are currently experiencing unprecedented hardship with the pandemic, and although we’re all connected globally, we can only succeed with leadership, empathy and determination. Businesses like Deloitte are playing a role here, and luckily, we have a secret weapon called the supply chain that can help, especially with Procurement leaders who can harness the power of their employees and their suppliers to rise to the massive complexity facing us right now. But we need to move faster to meet the moment and prepare for a different future than we envisioned a year ago.

Even when the pandemic subsides, complexity is here to stay, and this is why we chose “agility” as the theme for our just-released 10th annual Global Chief Procurement Officer Survey titled “Agility: The Antidote to Complexity.”

CPOs, of course, cited the economic impact and other effects of COVID-19 as the biggest concern, but supplier resiliency/supply continuity was next in line (48% of CPOs citing this as a top 3 concern) because supply chains are getting bogged down with risks from all angles that CPOs similarly cited: trade wars, tightening credit (affecting suppliers), emerging market volatility, etc. Every week seems to bring a new problem: chip shortages, container capacity, jammed ports (and canals!), geopolitical strife, regulations, commodity volatility, climate volatility and continued pandemic-related risks that continue to morph (just like the coronavirus itself).

Complexity factors and Procurement KPIs

Interestingly, though, the two biggest complexity factors ranked just below supplier resiliency in our study were “internal complexity” (e.g., organizational silos, non-standard processes) and “managing digital fragmentation.” While there are plenty of complexity headwinds to overcome, there’s also “good complexity” in terms of Procurement delivering broader and deeper value. The good news is that Procurement has improved its stakeholder influence performance by 15% across seven influence areas. Even so, there’s clearly still room to improve given that only 37% of Procurement leaders are rarely involved in digital strategy (and just 39% for innovation).

More broadly, in this year’s study we actually measured the extent that 10 critical KPIs showed up on the CPO scorecard and the extent that Procurement was performing to plan against this “balanced scorecard” (we also considered other metrics, such as stakeholder satisfaction, active sourcing influence and labor productivity). We used the top quartile performers on this scorecard to segment our “high performers” and then we sought to actually formally quantify agility as a set of capabilities (e.g., dynamic resourcing models, deep market intelligence, stakeholder alignment elements, agile development skills, predictive analytics, etc.) and see if those top quartile agile organizations (aka “agility masters”) actually had higher performance in the face of complexity.

Spoiler alert: The answer is a resounding YES!

Basically, the agility masters are able to move at the speed of stakeholders and supply markets to quickly “size the prize” and capture the value — and then systemize that value capture in Procurement’s expanded service stack.

And any excuse to add value, evolve and transform is a good one!

For example, corporate social responsibility (CSR) is a major corporate thrust these days, and Procurement is stepping up as a lead “steward” to protect the brand (and not just supply assurance) upstream in the supply chain. This is why 63% of high-performer Procurement teams are measured on sustainability compared to 36% of their peers. The CPOs of the high performers also rated themselves 13-44% higher on CSR performance compared to their peers.

CPOs rank their priorities

Let’s be clear, though: Cost savings/avoidance is still foundational to Procurement’s brand (especially during a pandemic) and the top KPI, as well as the top priority alongside operational efficiency. Yet, this focus is also a means to an end. The top performers and agility masters are aggressively pursuing digital transformation (the No. 3 priority) to free themselves from tactical activities to help them pursue innovation and support new product/service introduction (the No. 4 and No. 5 priorities respectively) alongside key suppliers.

Coincidentally enough, the top two strategies that CPOs expect to deliver the most value over the next 12 months are supplier collaboration and digital transformation. These two strategies are complementary: digitally transform supplier management while also using digitally enabled suppliers to help procurement itself transform (e.g., using new agile managed service models to allow Procurement to flex with stakeholders and supply chain demands).

And, oh by the way, bi-directional supplier information was the top supply risk mitigation strategy! Suppliers are truly the gateway to value creation and value protection. The area of strategic supplier management and extended network design/analytics are red hot right now out in the trenches with our clients.

Time for a reality check though: The required Procurement transformation to get to this required level of agility is a big ask. Digitalization is key to getting there, but real transformation requires a lot more. I’ll discuss the bigger “HOW” question in a follow-up piece, but for now, check out the actual report if you want to read ahead on how to not just get agile, but also BE agile, think agile and live agile (i.e., per agile development) to spin up your Procurement transformation.

Deloitte’s 10th annual “Global Chief Procurement Officer Survey” is available online here.

Join us for a webcast on June 16, where we will explore the top findings and discuss how becoming more agile helps build competitive advantage, deliver sustainable performance results and enable organizations to identify and mitigate their most challenging risks.

Ryan Flynn is a principal with Deloitte Consulting LLP and a lead author of Deloitte Consulting’s 2021 “Global CPO Survey.” He can be reached at rpflynn@deloitte.com.

As used here, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of Deloitte’s legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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