Procurement: At a digital tipping point?

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

Rising levels of risk
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.

Widening skills gap
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.

James Gregson, EMEA head of sourcing and procurement at Deloitte, commented: “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. 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.

Gregson, added: “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.

“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.”

Specific UK statistics**:

• Levels of risk:
  • Reported levels of risk are largely unchanged from last year, from 32 per cent to 31 per cent.
  • 40 per cent reported an increase in external financial and economic uncertainty.
• Talent and skills:
  • 65% of CPOs do not believe their team has the skills and capabilities to deliver their procurement strategy.
  • Training budgets for 20% per cent of respondents are now less than one per cent of total operating budgets.
  • 8 per cent of UK CPOs have found it significantly more difficult to attract talent in the past 12 months.
• Digital technology:
  • 77 per cent of UK CPOs are investing in self-service portals; 54 per cent are investing in cloud based computing; 33 per cent of are investing in social media.
  • Only 13 per cent of UK CPOs reported that procurement has a clear digital strategy aligned to the needs of the wider organisation.
    

End

Note to editors
*The “largest” organisations have an annual turnover in excess of US$50bn.
**UK sample is based on 48 respondents with combined annual turnovers of £415bn (US$596bn).

About the global CPO survey
Conducted in association with Odgers Berndtson, the global CPO survey is an annual survey of chief procurement officer’s across the world. The survey comprises a benchmark indicator of sentiment in the procurement function. The report is based on data received between 2011 and 2015. This edition contains responses from 324 of the most senior procurement leaders from 33 countries, who have a combined annual turnover of $4.4 trillion.
See the full survey at: www.deloitte.co.uk/cposurvey2016.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.