Deloitte and Coupa discuss how CPOs are leading the way on agility

agility Pixabay

On May 13 two leading organizations from a) a procurement transformation and b) a procurement technology perspective got together to talk through what they’re seeing with their customers regarding how digital is fundamental to making their business operations resilient, and how “agility” is core to making this happen.

The Master of Ceremonies of this 60-minute webinar was our own Chief Research Officer, Pierre Mitchell, who remarked that: “agility is no longer a buzzword, but a business necessity, and leading CPOs are showing the way.” He was joined by Michael van Keulen, Chief Procurement Officer at Coupa and Max Goralnick, Managing Director at Deloitte Consulting to consider why that is shaping up to be the case.  These speakers are deeply experienced and engaging.  Michael ran procurement at lululemon and VF while Max is a colonel in the Marine Corps reserves (with 20 years of active duty) and also a 16 year ‘veteran’ at Deloitte (i.e., no shortage of real war stories).

Drawing heavily on the results of the 2021 Deloitte Global Chief Procurement Officer Survey, where 400 CPOs from around the world shared their insights (and of which Pierre Mitchell was a co-author), the three experts give their “from the trenches” insights on how digital is delivering agility to reduce complexity. That complexity comes from broken supply chains, volatile supply markets, constrained spending and impatient demands from stakeholders – and even suppliers, as they go on to explain.

How do you find the right procurement technology to help with business agility? Spend Matters’ new 5-step “Procurement Technology Buyer’s Guide” can help.

“Procurement is sitting right on the edge as we dig deeper into our supply chains, giving it a birds-eye view of the whole hemisphere in which we live and participate,” Pierre explained. “This is why procurement people are intrinsically linked to the success of business continuity and resilience going forward. Never before have we heard the word ‘supply chain’ mentioned in so many ways and by so many media, and that’s because of the real risk that’s sitting out there right now that organizations are having to deal with risks the likes of geo political, cyber security, commodity pricing fluctuations, and more.”

He invited Michael and Max to speak to the subject of risk and agility and give their observations on the market, one where 56% of CPOs say they have suppliers facing bankruptcy, where 36% are experiencing performance failures, where 33% have lost revenue through supply shortages, and where 30% saw a negative impact on working capital. It’s not a picture of resilience and supply continuity.

How can firms deal with risk and build resiliency?

“It’s whack-a-mole out there right now”— Max likens it. “And that’s not what I’d recommend. As we move forward we really need to look at risk — in all its size and complexity, as we’ve seen before with the likes of tsunamis, volcanoes, and now the pandemic — across every industry. You have to take a deliberate approach to all elements of it. That means finding the most critical risks to your organization, developing plans for them, and understanding as much as we can about the unknown.”

“We’ve been proactive about getting the tech to help deal with this and bringing it into the spend management space,” says Michael. “What I can say is that it starts with full spending visibility into the supply chain and an understanding of your level of dependence on raw materials and have plans in place even for those you think won’t be affected by disruption.”

This is where diversity has its day. Where once concentration of supply allowed you to leverage spending, we are seeing diversity as a critical aspect to a broader risk and compliance landscape of business requirements — risk is not a siloed thing, it affects everyone.

Pierre then discussed the internal/external risk challenges and asked what the biggest issues are around the complexity. There is general consensus that we must really understand the scale and source of the risk we have with our suppliers, and we must take in all the differing views while also “challenging everything” so that we can “un-knot” ourselves from the complexity and the “tyranny of the tactical” so that we can focus on what’s really important and strategic.

There is also clear alignment that we must look at the end-to-end process — procurement must not just look upstream. Signing the contract is the beginning of the process and we must see the whole thing – through to managing the ongoing relationship and ongoing continuity of supply and performance: which is everyone’s problem!

Remember cost is just one outcome in the value discussion

Pierre made a few references to the CPO study results and highlighted that ‘agility’ (and the ability to understand what agility really means) was a common thread. It is the core to enabling a broader understanding of value (above and beyond cost savings), maintaining ecosystem relationships, reducing lead times, improving working capital, gaining better results and basically getting things done faster and at scale.

Michael affirms that driving costs is not the primary focus and “North Star” for procurement. Cost is an outcome of value, and is certainly critical now in a very challenging market today, with the crosswinds of inflation and supplier demands for price increases making cost avoidance a major topic.

Max agrees but highlights that establishing a system for measuring this ‘value’ is not easy. First the challenge is how we define value, then understand how our stakeholders define value, and what procurement value brings to the whole organisation. “The best we can do,” he says, “is make good assumptions that everyone can agree on.” So it’s not surprising that the CPO study showed that driving operational efficiency has snuck above reducing costs as a priority for the next 12 months as all functions strive to free themselves from legacy processes/technology and focus on the broader business.

Understanding business objectives

Speaking of the broader business, CSR and innovation also made leaps upward on the CPO priority ladder.

Both of our experts work in industries where innovation, CSR, and risk/compliance are critical, and both agreed that the way for a CPO to please both Finance and the CEO is to make sure you fully understand the business strategic objectives, so that you can take them to the cross-functional stakeholders and accelerate them.  For example, the CSR/ESG issue for the business is critical to customers and brand, and procurement is in fact supporting this with diversity & inclusion, but also making the supply base more diverse on multiple dimensions (especially for innovation).

To do that you need to build a rich collaborative process and you need the visibility to be planning for at least three years ahead. Procurement is well positioned because it sees the complexity of all the business units, Finance, Legal, IT and so on. And with its helicopter view it can not only align to stakeholders, but also coordinate between them and bring a common face out to suppliers.

The experts on the webinar got deeper into this and offered advice on how to achieve it, especially related to the topic of SRM, and why it’s becoming an even bigger topic for the CPO than ever before. SRM seems to be experiencing a perfect storm of sorts, including supplier information, supplier collaboration, supplier innovation/ecosystems and according to Michael, achieving value by being smarter together (adding the quip “none of us is smarter than all of us”) and leading to the conclusion that what procurement needs to be is a chief value officer to harness this internal/external community intelligence.

Key takeaways to tackling risk and becoming a strategic advantage for your company

The webinar participants provided some quick takeaways:

  • Look downstream as well as upstream -- procurement needs an end-to-end view
  • Risk, like the Suez disruption, will always occur, don’t sit back and wait until it happens
  • Understand the business’ strategic objectives and understand the difference between procurement strategy (guiding procurement internally) and strategic procurement (helping improve the business strategy by tapping supply market innovation)
  • Use analytics — learn what your leading indicators are for your business and use the power of community to enhance your data (it’s hard to do but analytics can meet you where you are now)
  • Take the time to talk to and understand your critical suppliers — invest empathy and development for greater returns, like innovation
  • Put people, process and technology first — and on the same level of importance
  • Hire the right talent to support your objectives – there is still space for everyone but new and necessary skillsets are coming into play

This was a deep and interesting discussion and this is but a snapshot with our own takeaways. It filled the 60 minutes so unfortunately there wasn’t time for Q&A. However, if you have any questions related to the discussion please submit them to:

pierre@spendmatters.com     mgoralnick@deloitte.com

You can listen to the webinar in full on-demand here.

 

Download the Coupa community-powered BSM report to understand the ‘Suite 16’ KPIs that benchmark your digital transformation across procurement and finance to spend smarter.

And download the Deloitte Global 2021 Chief Procurement Officer Survey with results and advice on using agility to understand and address CPO priorities.

 

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.