Deloitte CPO Survey – Frustrating Graphics and Worrying Procurement Trends

The Deloitte Global CPO survey report is now available, and we’ve been taking a look at it.

Pretty much every large consulting firm does something like this these days, but this is definitely one of the better examples, conducted in conjunction with recruitment firm Odgers, which presumably gives access to a good list of senior procurement professionals who can be involved. So 480 procurement leaders from 36 countries around the world took part, representing organisations with a combined annual turnover of $4.9 trillion apparently.

There is a lot of interesting material here, but I have to say I found some of the graphics confusing to the point of total bafflement. What on earth, for example, does this mean? (Click for a better view). I’ve got a Maths-type degree but I’m baffled.

Anyway, the executive summary starts like this.

Growth ambitions are high in an uncertain market, the pace of change and increased uncertainty requires superior levels of funding. Defensive strategies being implemented by Chief Financial Officers (CFOs) are demanding rapid, sustained cost reduction in parallel with focus on risk from procurement. We are now seeing that the traditional procurement operating model probably has to change. This has been driven by a lack of talent and an increase in digital innovation.

Since 2011, when the first survey was carried out, the procurement function has “progressed slowly”. The report suggests seven priority areas:

  • Executive advocacy • Stakeholder alignment • Decision making • Talent strategy • Talent investment • Talent capability • Digital procurement.

We can’t help wondering whether such a focus on talent is because of the co-sponsor of the report (Odgers) – not to say it isn’t important, but to have three of seven priority areas around talent seems over the top - it all seems part of the same issue to us really.

Business partnering is key - but another incomprehensible chart means we can’t really say much about what the findings here mean. Yet a chart we could understand shows no correlation at all between business partnering effectiveness by industry and improving “savings” performance year on year, which somewhat undermines the point. Mind you, we have no faith in how 90% of organisations measure savings anyway, so that probably doesn’t matter too much.

The top four priorities for procurement have cost reduction at number 1, with 79% scored (79% of what we don’t know - there is little methodology given, just a snazzy graphic), then managing risk, then introducing new products / services, then improvement in cash flow at number four. But I’m not clear whether these are business priorities or procurement function priorities?

Anyway, that priority is not surprising but it is somewhat depressing that cost reduction has an even bigger lead than last time, even though global economies have improved. The view of procurement as largely a cost management function seems well embedded. Such a high rating for cash flow is interesting too – that is a an interesting and worthwhile priority for the function. But more worryingly – “with a drop from 2016 in supplier collaboration as a priority from 39% to 26% and a reduction in the restructuring of existing relationships in favour of increased competition, generating innovation and managing risk will likely become increasingly difficult for procurement".

And I think we commented last year on the endemic failure of CPOs – “60% of CPOs surveyed still believe their teams lack sufficient capability to deliver the procurement strategy”

Well sort it out, people! Or get out of the CPO role and let someone else who might be able to develop the right capability in their team have a go. This is YOUR responsibility, no-one else’s.

So generally, the report is worth reading but moderately depressing. There are some worthy strategic goals – and the Deloitte analysis does identify pretty well where procurement needs to go. The firm is undoubtedly one of the smartest of the big consultants in terms of their understanding of procurement. But the survey results paint a picture of a function still focused largely on “consolidating spend”, savings, and failing to invest in training.

Finally, we‘re a bit sick of hearing about how different and amazing millennials are. The research Guy Allen and BravoSolution did last year suggested that maybe they aren’t that different, but we still get this sort of thing here.

Key to this is finding a purpose which inspires millennials. The function should gain access to this new breed of innovators, challengers and digitally minded thinkers …

I suspect – as the father of a millennial – that there is whole lot of nonsense being talked about this generation. They’re generally more sensible than my peers were years ago, and obviously tend to understand tech, as most 50 year-olds do now, for that matter. But beyond that, they seem to share the same goals and principles we did when we were their age. We all wanted to change or save the world when we were 25.

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