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Cost and risk 'top procurement concerns'

Feb 16
Tags: Deloitte, Strategy
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Cost and risk 'top procurement concerns'

Consultants working in procurement over the coming year are likely to see a strong business focus on cost reduction and risk management, research has suggested.

In its latest annual survey of chief procurement officers (CPOs), Deloitte found that more than three-quarters of respondents (79 percent) saw reducing costs as their number one priority. Almost half (48 percent) had ambitions to improve cash flow in order to fund growth.

Nearly six out of ten CPOs (57 percent) identified the management of risk as their key objective.

Focusing on the specific risks facing businesses, the study revealed that weakness and volatility in emerging markets is perceived as one of the major global concerns, along with growing geopolitical threats and the possibility of another eurozone crisis.

Uncertainty around Britain's exit from the European Union and the fallout of relevant trade negotiations were also fairly high up on the list of risks, particularly for UK-based companies.

The proportion of respondents reporting a re-emergence of procurement risk increased from 42 percent in 2014 to 54 percent this year. Potential threats to business procurement functions include price volatility, supply chain disruptions and supplier bankruptcy.

Lance Younger, UK head of sourcing and procurement at Deloitte, said the motivation for many CPOs focusing on cost and risk management is to support growth in an uncertain business environment.

He added: "So far, this is proving successful for CPOs, with 58 percent achieving better savings performance than last year. However, challenges with talent and poor adoption of digital technology still hinder progress. Unless addressed quickly, these could jeopardise the future of procurement."

As far as skills shortages are concerned, the survey found that six out of ten procurement leaders (60 percent) don't believe their teams have the necessary expertise to deliver their strategy. The vast majority (87 percent) agreed that talent is the single most important factor in driving the performance of their department.

With procurement functions diminishing in size but still subject to the same expectations, Mr Younger stressed that simply putting more responsibility on the shoulders of employees is not the answer. He urged businesses to make the most of new operating models and technologies.

"As the rapid speed of technological change continues to sweep over businesses globally, procurement is at a tipping point and must take advantage of high levels of executive support," he advised. "Digital will amplify great talent and strong CPOs must align the digital transformation of the function with ongoing business priorities."

Other findings from the Deloitte survey showed that three-quarters of procurement bosses (75 percent) believe their department's role in delivering digital strategy will increase over the coming years.

Around two in three respondents (65 percent) identified analytics as the technology that will have the biggest impact on procurement over the next two years. One of the biggest perceived barriers to growth in this particular area is the quality of data available.

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Image: iStock/Kenishirotie

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