Deloitte: Is procurement at a digital tipping point?

6 April, 2016 – Rising risk levels and a skills shortage are amongst procurement leaders’ main concerns, according to Deloitte’s global chief procurement officer (CPO) survey recently launched.

Forty-five per cent of CPOs reported a rise in procurement related risk, such as volatility in emerging markets and geopolitical uncertainty affecting their supply chain. Fifty-five per cent reported an increase in external financial and economic uncertainty. Of all the industries surveyed, consumer business respondents were the most concerned, given procurement’s role to ensure product availability in locations now affected by uncertainty, instability and security risk.

Deloitte’s research also shows resourcing continues to be a challenge. Sixty-two per cent of CPOs said their team does not have the skills and capabilities to deliver their procurement strategy, yet just under half of CPOs reported that attracting talent in the last 12 months has been difficult. One-third reported that their training budgets are now less than one per cent of total operating budgets, one-quarter of what might be considered best practice.
 
“Risk and the widening skills gap are clearly a concern for CPOs. Weakness in global economic metrics and heightened levels of geopolitical uncertainty are two of the major themes for CPOs this year,” said Siebe Butter, Middle East Supply Chain Leader. “On the talent side, we’re seeing training budgets being cut and a push towards outsourcing as a way to plug the skills gap. This trend is most prevalent in the largest organisations, where 40 per cent are expected to pursue outsourcing for some element of their function.”*

Time for a digital transformation
Despite these challenges, Deloitte’s research shows an increase in digital technology spend, perhaps suggesting that CPOs are looking at innovative solutions to address their business problems.

“Digital technology spend is on the rise, with 70 per cent investing in self-service solutions, up by more than one-third in a year. Investment in mobile, cloud and social media is also increasing. These statistics suggest a shift to digital, but careful work needs to be done first as 60 per cent of CPOs admit they do not have a clear digital strategy,” Butter added. “The key will be to get this strategy in place first, so the right technology is being used in the right way. Done correctly, a digital strategy can improve accuracy, speed and outcomes. This is potentially a double edged sword – digital can either reinvigorate or replace procurement’s role. It’s up to the CPO to set the strategy and lead the change, or risk being left behind.”