CPO Masters of Agility (Part 2) — Making It Happen

In today’s business environment, it’s critical to move fast to stay ahead of your competitors and avoid constantly changing risks. For example, it’s hard to find labor these days — whether you’re a manufacturer looking for shop-floor staff, a logistics firm looking for drivers or a procurement organization looking for top-notch staff. The war for talent has returned, with a vengeance! Ramping up supply also is challenging, and so is managing thousands of supplier relationships through the source-to-pay cycle and beyond. This is why “agility” was the focus of our recently released 10th edition of the Deloitte 2021 Global Chief Procurement Officer Survey titled “Agility: The Antidote to Complexity.”

In my last blog post, I wrote about “the why” and “the what” of procurement agility, and now I want to focus on “the how.”

“The why” is generally about delivering value beyond cost savings in the face of risk and complexity (external and internal). This broadened definition of procurement performance is what we use to measure “high performers” among the nearly 400 CPOs surveyed by us. “The what” deals with moving at the speed of stakeholders (including external customers and not just internal budget holders), suppliers, and supply markets by delivering higher-impact services.

“The how” is about building and deploying the capabilities to deliver these services. In the survey, we measured the following agility capabilities to understand what the top quartile of “agility masters” do, including:

• Rapid alignment to changing stakeholder objectives and metrics
• Process-oriented practices (e.g., using sourcing criteria that formally incorporate supply risk)
• Agile resourcing models (e.g., on-demand category expertise) and improved talent management practices to hire staff that are resilient and are agile thinkers while also training for agile development knowledge, transformation skills and digital competencies (e.g., analytics)
• Supply market intelligence to improve sensing and prediction (i.e., agility isn’t simply about being quickly reactive)
• Practices related to supply chain resilience and risk/compliance management
• Predictive analytics and advanced technology to improve rapid decision-making in a sea of data

I’ll also make myself agile here and just focus on one process area that’s hot right now with our clients: SRM (supplier relationship management), or simply “supplier management” if you prefer brevity. I’ll also offer up some actionable recommendations based on what we’re seeing with our clients out in the trenches.

Agile Supplier Management

Supplier management is undergoing a renaissance right now for many reasons that the CPO Survey confirmed:

• CEO’s want digitally powered innovation to create growth and brand elevation. CPOs are listening and have cited digital transformation and supplier collaboration as the top two procurement strategies that will deliver the most value over the next two years. The agility imperative here is procurement helping “connect the dots” between customers, suppliers, R&D/product, IT, operations, etc. — that’s a lot of alignment to set up and bureaucracy to overcome! That said, tapping suppliers for innovation is a major thrust right now at the best procurement organizations that are vying to be “customers of choice” that enjoy the spoils of more focused supplier R&D toward their own customer-facing innovation efforts.
• Supply markets are obviously very tight right now, and supplier collaboration via SRM programs are becoming critical for collaborative total cost-reduction efforts, among other initiatives. Cost reduction hasn’t gone away as an enterprise priority, and the CPO study showed it basically tied with digital transformation for the No. 2 enterprise priority. There is also a strong need for operational supplier collaboration right now in supply/demand matching and inbound supply coordination given the erosion of supplier delivery performance right now.
• The study also showed that supplier collaboration and information sharing was the #1 risk mitigation strategy used over the past 12 months. We found that 62% of high performers and 77% of agility masters formally factor supplier risk into supplier selection criteria during sourcing (compared to 29% for the non-top-quartile companies). Similarly, 36% of top performers and 39% of agility masters measure supplier business continuity planning (BCP) — compared to 14% of the rest of firms.
• There is also an organizational and talent divide in supplier management. As strategic SRM becomes a critical partner management function, going beyond third-party risk management and outsourcing management, we’re seeing leading procurement groups develop SRM as a strategic competency, not just as a process for low-level supplier/contract compliance and operational supplier-performance management tasks.

The Digital Divide in Supplier Management and Beyond

There’s also a major digital divide in supplier management (and in general) between the digital haves and the analog have-nots:

• Given the level of dynamic resourcing to identify alternative supply sources and dynamic supplier engagement to improve risk/compliance and performance, scaling high engagement across thousands of suppliers, often across the globe, is inherently creating a digital SRM imperative to fix the “SRM problem,” similar to how CRM is needed to scale CRM engagement with customers.
• SRM is extremely immature compared with CRM, and only 51% of the high-performing CPOs within the “agility master” group have fully deployed or scaled SRM collaboration digital technologies (compared to just 29% of others). Just compare your customer-facing CRM user experience to your supplier-facing SRM experience – it’s not even a close comparison. It’s bad enough that we actually decided to do something about it. Some of my colleagues have actually just created a “Supplier360” SRM solution based on Salesforce technology that is especially attractive (just for the supplier portal aspect alone) for companies that use Salesforce for CRM and/or have mixed S2P technology landscapes.
• More broadly, the “digital divide” is apparent in the area of more advanced technology (RPA, AI, predictive analytics, etc.) that is being deployed — e.g., within supplier risk/compliance management at 35% of high performers and 45% of agility masters compared to 15% of the rest of firms. Even so, we see all firms struggling to get their digital house in order for supplier data. Data was again cited as the No. 1 barrier in digital transformation — and this is as much an organizational/process issue as it is a technology issue.

Talent management is a big part of the CPO Survey, and I recommend reading the report in that area — but I’ll make a quick observation. Although there are some interesting findings about “agile resourcing” and the move away from traditional outsourcing and contingent labor models to more digitally enabled hybrid managed-service models, the biggest trend is to hire the best minds from the best supply chain schools and provide the best training models/tools (and increased investment) to build a world-class “special forces” team that loves change, challenges, new tools/techniques, etc.

In other words, the best groups have transformational CPOs that are strategists and catalysts that also want their teams to be the same.

Recommendations

Just as agile software development focuses on rapid iterations to deliver value quickly to customers, agile procurement is all about delivering rapid value improvements, but within a standardized framework and flexible technology that helps make the improvements reusable in the future. Within the study, we highlighted 26 recommendations in five major areas, but I’ll highlight one from each:

• Perform a gap assessment of your internal agility. Use any excuse to do it, whether it’s a “digital transformation,” a supply-risk health check or any other reason. We’ve conducted many process-mining assessments to really shine some sunlight on the complexity that creeps into purchase-to-pay (P2P) and other process areas. Let your data help you tell the story of your opportunities for you and use the power of visualization and analytics.
• Define a truly balanced scorecard beyond cost savings that aligns you to stakeholder-relevant metrics. Take an inventory of KPIs and capability metrics across your stakeholders and spend categories and see if you can broaden the value aperture based on this internal benchmarking (and external benchmarking) and pragmatic “art of the possible” — especially in joint planning meetings with stakeholders during the annual planning & budgeting process.
• Build and execute against a comprehensive digital roadmap that aligns projects/programs from IT, business units, Finance/Legal/Risk, Sales/Marketing/R&D, and Procurement. Align your PMO functions and “connect the dots” between these projects for visibility, demand management, and planning. Consider using some emerging low-code, intelligent automation and/or analytics platforms to connect these processes and data — especially if your strategy is focused on adopting best-of-breed specialist applications.
• Build your collaboration muscle to move beyond narrow sourcing-centric approaches (e.g., running e-sourcing “three bids and a cloud of dust” bidding events) to focus on end-to-end strategic partner management. Make sure to connect your SRM processes into related processes and stakeholders for these key areas: ESG, third-party risk management (and related IT vendor/asset/risk management), customer-facing innovation programs, supply chain risk and so on.
• Adopt an agile methodology, mindset and behavior set. Formally measure your staff and your suppliers on flexibility and commitment. But also get your procurement staff (beyond those working with IT) trained up and adopting/adapting agile development principles to sourcing, contracting, supplier collaboration and other areas to the extent possible where it makes sense.

There are many other recommendations buried in the report that deal with areas such as data quality, talent management, procurement technology strategies and others. If you like to learn by reading, then download the study here, but if you like watching video, then join us for a webcast on Wednesday, 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. I hope to see you there.

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.

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