According to LinkedIn Economic Graph Research, chief procurement officers (CPOs) were one of the fastest growing C-suite hires, seeing 15% growth in 2020. This is no surprise considering how a modern procurement strategy has become a vital element of business success, particularly with many organizations struggling with widespread supply chain disruptions.
Etosha Thurman is Chief Marketing and Solutions Officer for Intelligent Spend and Business Network at SAP.
Recent disruptions across international markets have provided an opportunity to reposition procurement as a center of value creation that can unlock supply chain efficiency through the implementation of technologies, such as predictive analytics and automation of paper-based processes, to increase competitive advantage. With procurement’s refreshed position as a crucial business function, it is important to understand what the role of the CPO looks like now and how it will likely evolve going forward.
Pivoting to supply networks
The responsibilities of procurement and supply management have now far exceeded the traditional activity of sourcing goods and services that allow a business to operate in a profitable and ethical manner. Procurement is now an enterprise-wide activity, aided by digitization, with CPOs accountable for functions varying from supporting margin and delivering supply assurance, to executing environmental, social and governance (ESG) goals and cultivating innovation within their supplier community.
Procurement leaders are turning their focus towards how their function delivers greater value in a changing business environment. At the most basic level, this means evaluating developments to improve supply chain visibility and resilience. This has been made increasingly important in the face of supply chain disruptions caused by Covid-19, Brexit and geopolitical events which have highlighted vulnerabilities in the processes, policies, and supply chain structures of many businesses.
CPOs have gained influence within their companies as their role – and allocated budgets – have shifted to focus on driving digitization to enhance transparency, reliability, and efficiency in supply chains. Utilizing digital business networks to help diversify suppliers is another way CPOs are increasing the flexibility of their operations. With procurement now viewed as an avenue to create increased value and ensure continued access to essential resources, rather than a financial or operational function, the CPO has become a key operator for modern businesses. They are playing an important role in shaping business strategy and driving value – especially vital in times of uncertainty and disruption.
For the CPO to adopt a more strategic role, it is essential that businesses support digitization. A new report, Chain reactions: building value in procurement through digitization, written by Economist Impact and sponsored by SAP, indicates that from a financial standpoint, investment in new technologies are a priority, with 82% of respondents in EMEA registering modest to significant rises in digital transformation budgets. Among the EMEA region respondents, Covid-19 was cited as the major driver of digitization in procurement with 70% citing it as the reason.
With increased budgets to work with, CPOs must recognize the areas that require the greatest level of attention. Intelligent cloud-based solutions can replace complex steps with guided processes that direct users to make the best spend decisions and eliminate manual and paper-driven processes. By doing this, CPOs can dedicate their full attention to strategic value-add activities such as risk-scenario planning, trading partner collaboration, shaping mutually beneficial outcomes, integrating ESG goals into their operational systems and shoring up supply chain efficiency.
Improving visibility and real-time performance updates into all trading partners including suppliers, logistics and services providers, asset operators, and maintenance contractors is also crucial for businesses to unlock a holistic understanding of suppliers’ capabilities. This allows for better planning and mitigates the risk of supplier failure, enhancing organizational flexibility and agility. Interacting as part of a cloud-based business network, that shares complete visibility of suppliers, vendors, distribution centers, warehouses, transportation companies and retailers will enable the use of data-driven insights. These ensure CPOs can determine future trends and spot issues quickly while reacting more rapidly to unpredictable demand or disruptions.
Improving supply chain visibility to ensure customer success
Sustainability is no longer a nice to have but is now a prerequisite to doing business. CPOs have a key responsibility in guaranteeing their business can successfully achieve its ESG goals. According to the Economist Impact report, reducing waste and reducing energy consumption are the top two ESG priorities for CPOs or equivalents. And according to SAP’s research with Opinium, 79% of UK consumers today have more awareness of how supply chains impact product availability than before the pandemic. They are now paying more attention to the supply chains of the brands they engage with and 83% of consumers would be more likely to purchase from a brand that supports and sources from local suppliers. A further 83% would also be willing to compromise on delivery times, have less choice and pay more for ethically sourced products.
Future-thinking CPOs must determine inefficiencies across their supply chain and collaborate with like-minded sustainably driven suppliers. Leveraging a digital business network will allow CPOs to obtain extensive visibility into the interconnected activities of trading partners at all tiers of the supply chain. Not only does this improve transparency but it also allows organizations to identify new suppliers that can drive ESG priorities forward within their companies.
Amidst ongoing supply chain uncertainty, and the procurement function undergoing a fundamental transition into a catalyst of value creation, CPOs have a critical role to play in guiding their respective businesses toward procurement success. CPOs must spearhead a transition away from inflexible and inadequate procurement models to more agile supply chain networks supported by digital solutions to drive transparency, collaboration, automation, and predictive capabilities. There are numerous efficiency benefits to be gained from digitization, which ultimately allows CPOs to support the evolution of their business into a more intelligent enterprise.
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