Home News Two-in-three procurement leaders “have limited or no visibility” beyond Tier One of supply chains

Two-in-three procurement leaders “have limited or no visibility” beyond Tier One of supply chains

by Brian Sims

As many as 65% of procurement leaders have limited or no visibility beyond their Tier One suppliers. That’s according to Deloitte’s annual Global Chief Procurement Officer (CPO) Survey. While visibility of the supply chain is crucial for businesses to ensure factors such as meeting regulatory requirements and risk planning, currently just 6% of procurement leaders say they have full transparency of their entire supply chain.

Brian Umbenhauer, principal and global head of sourcing and procurement at Deloitte, explained: “It’s both a worrying and opportunistic finding that two-in-three procurement leaders have limited visibility beyond their Tier One suppliers. This has major implications for organisations across all industries, and particularly so for meeting regulatory and Corporate Social Responsibility requirements as well as the identification and mitigation of supply chain risks. Improved transparency of pricing, supplier locations and critical dependencies can help procurement leaders deliver greater value and avoid potentially significant regulatory, reputational and operational risk.”

Managing risks is a priority for 54% of procurement leaders. CPOs are most likely to cite the uncertainty and outcomes of trade negotiations, such as Brexit and NAFTA, as a significant risk factor (33%). Overall, global macroeconomic risk ratings from procurement leaders have weakened over the past year.

As risk ratings fall and global inflation pressures are easing in most regions, CPOs are placing greater emphasis on innovation. 58% say that introducing new products/services or expanding into new markets is a priority in 2018, while 20% are looking to expand by acquisition.

Overall, cost reduction (78%), new product/market development (58%) and managing risk (54%) remain the top business strategies for procurement leaders in 2018.

Taking on additional risk

Lance Younger, EMEA head of sourcing and procurement at Deloitte, stated: “The slight improvement in economic sentiment hasn’t altered the overall willingness of businesses to take on additional risk. As ever, risk remains, from Brexit in Europe to protectionism and the perils of asset and credit bubbles. The optimistic market sentiment presents procurement leaders with an opportunity to achieve greater value through growth-focused innovation and supplier collaboration, while at the same time continuing to deliver cost reduction and manage risk.”

While CPOs show signs of an appetite for business innovation, progress and the adoption of digital tools and applications in procurement has been slow. 17% of procurement leaders don’t have a digital procurement strategy. Of those who do, less than one third believe that their strategy will enable procurement to deliver significantly on its objectives and improve enterprise value.

Talent is currently a stumbling block for the take-up of digital transformation. Overall, 51% of procurement leaders don’t believe their current teams have sufficient levels of skills and capabilities to deliver on their procurement strategy. Just 3% of procurement leaders believe their members of staff possess all of the skills required to maximise the use of available digital capabilities.

Despite this, investment in training is falling* and the commitment to developing talent paints a less than optimistic picture, with only 16% of procurement leaders focused on enhancing the digital skills of their teams.

Robotic process automation

Over the past year, there has been a reduction in the belief that technology will impact business in all areas** except for robotic process automation (RPA). 24% of CPOs believe that RPA will have a significant impact on business in the next two years, up from just 13% who said the same in 2017.

Younger concluded: “In order to see the real impact of digital transformation and benefit from it, procurement leaders need to review and refine their digital vision and strategy to make it more action-oriented, agile and scalable. Leadership is a key success factor. Leaders must be more disruptive, innovative and digital.”

*72% of procurement leaders are spending less than 2% of their operating budgets on training and development programmes for their teams compared to 66% in 2017

**Technology areas including analytics, renewal of strategic procurement tools, renewal of operational procurement, ERP platform renewals, digital (mobile, social media, web), cloud computing, cyber security/data privacy, emerging technology (eg 3D printing, Internet of Things, augmented reality, cognitive computing)

For more information view the full report

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