In a highly uncertain world, looking backwards to improve procurement will not be enough. It is time to look ahead, to reimagine and to reinvent procurement for the here and now.
Recently, 4C Associates in partnership with the University of Birmingham have conducted research designed to provide organisations with a health-check of their procurement function, to see whether it is set-up and ready to operate effectively to achieve its goals and objectives in the future.
Our survey confirmed clear linkage between the maturity level and level of savings achieved to increase profitability, showing that for every single step increase in maturity, savings increase between 43% and 118%. Over recent years organisations have demonstrated that they are capable of considerable change at speed when required, and the report provides recommendations on how to work your way up the maturity scale across all elements of the operating model.
Organisations that place value on defining a clear procurement vision and strategy, with roadmap, aligned to business goals with senior executives, are most successful in overcoming business challenges. This will have an impact on how it is viewed by leadership, stakeholders and suppliers and the role it plays in the organisation.
You can download the full report here:
Procurement Reinvented Annual Report
Key issues and challenges
The recent business disruption is reflected in the key issues and challenges facing most organisations. The top three strategic issues are supply chain uncertainty and visibility, sustainability and social value, as well as achieving increased revenues and profitability. Challenges on the CPO agenda included supply chain risk and resilience, spend cost reduction in unprecedented market conditions, data analytics and reporting capabilities, internal stakeholder engagement and sustainability.
The way that procurement has overcome the challenges with supply in difficult times means the function is increasing its recognition and credibility with stakeholders and across the wider business. With this comes increased pressures, challenges and responsibilities. Traditional cost-saving targets are not going to disappear as they will continue to be the predominant focus for many, but procurement’s value and reputation is significantly enhanced by delivering additional benefits beyond monetary savings.
Another key challenge for organisations is encouraging and accessing innovation from external markets. By building closer relationships with suppliers, procurement is in a strong position to identify and encourage innovation. Early market and supplier engagement is key to accessing and embedding innovation in the sourcing process, and recent events have highlighted the inadequacies of risk management activities within many organisations. The focus now needs to be on a broader scope of risks within a more robust risk management approach.
Spotlight on sustainability
Sustainability and social value concerns have evolved into an increasing global interest in issues of economic, social, and corporate governance (ESG). Within the sustainability area there are a range of topics on the agendas of CPOs including ethical sourcing, prevention of bribery and corruption, modern day slavery, reduction of waste and emissions, and greater energy efficiency.
It is evident that procurement’s sustainability approaches have considerable room for improvement and development, with only 4% of the respondents’ procurement functions possessing fully developed and comprehensive approaches to sustainability that are widely understood and consistently implemented across the function. The main drivers behind the development of a sustainability approach are the need to maintain a strong public image, compliance and regulation, however, the majority of organisations do not yet see sustainability as a means to deliver competitive advantage or reduce costs.
If you would like to understand more about how to improve the maturity of your procurement and supply chain function please contact Allison Ford-Langstaff, Managing Partner at 4C Associates.