By Elizabeth Rennie
Talent shortages, technology limitations, and geopolitical risks are procurement professionals’ foremost business concerns, according to the recently released “Deloitte Global Chief Procurement Officer Survey.” The report reveals information gained from the responses of 239 chief procurement officers (CPOs) and company directors from 25 countries. Specifically, more than half of CPOs believe their teams lack the skills necessary to deliver effective procurement strategy and are experiencing issues with their systems and tools; and one in four respondents fears the impact of geopolitical risks.
“Talent is an increasingly important issue,” says Brian Umbenhauer, principal of Deloitte Consulting. “In the past, procurement functions could deliver strong savings by focusing on a small number of core activities—category management and strategic sourcing, in particular. There now is a need for broadened capabilities and the ability to shift into new gears quickly.”
The skills that respondents said were most lacking include leadership, influence, communication, and relationship building. In addition, CPOs are looking for people who can support the drive toward greater innovation, such as the ability to use analytics.
Richard H. Malone Jr., CSCP, is CPO at WET Design, a manufacturer of water features and large-scale decorative fountains that was founded in 1983 by former Disney Imagineers. He believes talent shortages will continue to be an issue until the supply chain and operations management industry develops a better awareness of the profession. “Supply chain procurement career awareness could begin at the high school level, with school counselors providing literature on the full supply chain spectrum,” he says.
He notes that there are quite a few graduate-level programs that produce top talent; likewise, many business universities promote supply chain programs—but only once students are in their second year of study. “Effective talent is critical to agility and value generation,” Malone says. “Team members with a deep understanding of mechanical products or commodities are scarce. Advanced negotiation skills are lacking. Talent in the supply chain disciplines and, in particular, procurement processes can drive five times the value generation if people are trained properly.”
Faced with this challenge, CPOs must decide whether to recruit new talent or retrain current employees. In Umbenhauer’s view, training presents “the most effective lever.” He says most organizations have not made the people investments necessary to support their procurement agendas. In his view, this issue typically stems from failing to find—or being unwilling to devote resources to—the right balance of classroom, online, and in-the-field curriculums; or as a result of procurement not being recognized as value-adding and, thus, struggling to get the required funding.
“Unfortunately, our survey shows that only 13 percent of CPOs consider training a top priority,” Umbenhauer says. “This is interesting, as 57 percent [of respondents] suggest they do not have the right skill sets on their teams to deliver expected results. This is how procurement sometimes gets a perceived bad brand reputation. Organizations need to develop their procurement people strategy and execute it. The marketplace is only going to get more challenging.”
Efforts to recruit and train workers must be supported by advancements in procurement technology, as this will enable organizations to better manage scale and complexity. Umbenhauer believes CPOs often are stuck in a mind-set of improving procure-to-pay capabilities and choosing only the solutions that integrate with existing systems. “If CPOs are to meet the expectations of their organizations, they should take a more innovative approach to analytics and technology,” he explains. “There is a disconnect between where we feel procurement should be investing and where it is currently investing.”
In fact, when asked about the most important criteria for selection of new procurement technology solutions, 60 percent of CPOs surveyed chose integration with existing technology as number 1 or 2, compared to only 9 percent who put ability to support big data at the top.
Malone also sees this trend at his company and agrees that, as procurement teams aim to meet ever-changing customer demands, they will need data and analytics. “Leaning on information technology solutions—whether home-grown or bolt-on tools—will be required to understand spend profiles and trends related to quality, cost, and delivery,” he says.
Paul Noel is senior vice president at procurement solutions provider Ivalua. He also sees many CPOs “caught up in their own organizational improvements” and says they must clear those hurdles. “Many procurement organizations are still trying to get a handle on the mechanics of procurement,” he says. “They cannot spend the requisite time to be strategic.”
Noel goes on to explain that the very nature of procurement is to exist on the edge of internal systems while facing outward to the supply organizations—all of which have their own systems. “Every interaction, every transaction is an integration touch point,” he says. “Those integration touch points are sometimes points of failure—a scary but descriptive term.”
According to the survey, CPO perceptions of risk are shifting, with 25 percent of respondents now listing concern about geopolitical risk. Deloitte’s Umbenhauer says procurement-related supply chain risk undoubtedly has increased—from retailers who can no longer ship to stores in previously benign locations to energy firms grappling with sanctions to cyber threats endangering information security.
“In Deloitte’s experience, when crises occur, the single-biggest shortcoming in procurement is lack of planning,” he says. “The survey shows that just half of CPOs play an active role in the wider risk management practice, and their level of investment in related technologies and processes remains low.”
Umbenhauer goes on to say that, at a bare minimum, CPOs should look to provide teams with training that will enable them to identify the symptoms of financial distress and to access support.
At his company, Malone sees risk in many different forms. He believes organizations should have in place risk matrices on all critical suppliers, contingency plans, and disaster preparedness agreements with partner firms. “Supply chain as a whole—and procurement as a subset—must play in risk management,” he adds. “Understanding the value chain and contribution of suppliers is critical.”
Noel agrees that procurement is central to risk management. “With all the reliance modern corporations have on their supply base, one could make a strong argument that the supply chain is the biggest area of risk in the organization,” he says. “There are thousands of independently run inputs to your organization with very little oversight or realization of their impact on the viability of your company.”
Moving up the value chain
One positive note the survey reveals is that almost one-third of CPOs see themselves as highly regarded growth drivers in their organizations. “This emerging frontier of procurement will continue to develop CPO roles beyond looking at the unit cost of inputs and into a tactical role that positions procurement as a service provider and value integrator,” Umbenhauer explains.
In his role as a procurement solution provider, Noel says he often sees CPOs and their teams only get noticed when something goes wrong in the supply base they manage. He is thus enthusiastic about this shift toward more strategic functions for procurement professionals—even crediting it as a potential talent generator. “It is passion for the job that brings talent,” he says. “And the best way to foster that is with a regular and healthy dose of recognition of their value to the organization.”
Reprinted from APICS Extra (2/25/2015) - http://echo4.bluehornet.com/hostedemail/email.htm?CID=29340678163&ch=2B51A2F802F3E87276989B8D2A74B135&h=377ecda91eb8653fd22b3d73f2245d90&ei=7L94wfmRN