Deloitte report finds leaders don’t have enough visibility of their supply chain

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Deloitte report finds leaders don’t have enough visibility of their supply chain

Greater scrutiny needed to comply with Modern Slavery Act

07 March 2018: Deloitte’s 2018 Global Chief Procurement Officer Survey, out today, finds that procurement leaders don’t have enough visibility of their supply chain, which could lead to issues with the Federal Government’s Modern Slavery Act, expected to become law this year.

The Deloitte survey found supply chain transparency is poor, with 65% of procurement leaders surveyed globally having limited or no visibility beyond their tier one suppliers.

John O’Connor, Deloitte APAC Sourcing and Procurement Lead Partner, says this could be a problem for companies operating in Australia when the proposed Modern Slavery Act becomes law. “The Act focuses on companies who make $100m in total global revenue,” he said. “There are many Australian companies that will be affected. They will be required to report annually on their efforts to address modern slavery in their operations and supply chain.”

“Our report findings show that organisations are leaving themselves exposed to potential supply chain disruption and margin erosion by having limited visibility of their supply chains beyond the first tier. Improved transparency of pricing, supplier locations and labour practices can help procurement functions deliver greater value, whilst avoiding significant regulatory and reputational risks.”

The report also recommends a clear shift in focus towards greater innovation and value in procurement practices. This will require an acceleration in the pace of change especially in approaches to leadership, talent and digital procurement.

“A focus on Procurement has continued to successfully deliver short-term savings to organisations,” said O’Connor. “As the economy improves, the function has a pivotal role to play in increasing supply chain transparency and delivering cost reduction.”

“Procurement leaders have the opportunity to deliver value through improved transparency of suppliers and supply chains, attracting and developing the right people and driving new digital capabilities,” said O’Connor.

Some of the key findings from the report are:

  • Cost reduction (78%), new products/market development (58%) and managing risks (54%) remain the top business strategies for procurement leaders
  • 61% of procurement leaders delivered better year-on-year savings performance than last year
  • 51% of procurement leaders believe their current teams do not have sufficient levels of skills and capabilities to deliver on their procurement strategy
  • The most common leadership traits in procurement are acting as a role model, collaborating internally and externally to deliver value and delivering results. Conversely, strategic leadership traits such as positive disruption, leading digital transformation and innovation are not widely evident
  • The extent to which modern technologies are used in procurement is low, with only one-third of procurement leaders using technologies such as predictive analytics and collaboration networks
  • High performing procurement leaders out performed their peers in Executive Advocacy, Leadership, Strategic Decision Making, Talent Capability, Digital Procurement, Supply Chain Transparency and Balanced Scorecard capabilities.

Recognising that focused and deliberate action is critical for procurement to be successful, this year’s report outlines a ‘To Do’ list linked to high performance, to help accelerate existing and new procurement ideas, plans and results.

Globally over 500 procurement leaders completed the survey from 39 countries representing organisations with a combined annual turnover of $5.5 trillion. In Australia 24 leaders from ASX 200 companies completed the survey.

For the past seven years, the survey has provided a global benchmark of the sentiment of procurement leaders and an insight into the key themes and challenges facing procurement, including market dynamics, value and collaboration, talent and leadership, and digital procurement.

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