“If there were one word to describe the scenario chief procurement officers (CPOs) are facing in 2019, it would be complexity.”
So begins the latest in-depth procurement report from Deloitte – the Global Chief Procurement Officer Survey 2019. And the theme of complexity is one that runs throughout the entire report.
Deloitte’s CPO Surveys often throw up a lot of interesting findings, but this year’s seems to be particularly definitive on the major issues that are facing CPOs and senior procurement leaders in 2019 and beyond – namely increasing complexity and the subsequent risks that are created by the uncertainties brought by complexity, and the need for better data and governance in order to master digital complexity and empower digital transformation.
Below are some of the charts from the report that break down these issues in more detail.
Different types of procurement complexity
The report splits procurement complexity into four sub areas – namely External Complexity, Internal Complexity, Talent Complexity, and Digital Complexity.
In order to overcome the obstacles that these areas present, procurement functions need to “shift toward a proactive mode of addressing complexity directly.”
To do this, they must seek to eradicate so-called ‘bad’ complexity wherever possible (e.g. where risks can be predicted or mitigated), and embrace ‘good’ complexity, which refers to business processes that can be exploited positively in order to increase procurement’s influence on other stakeholders in other areas across the organisation (e.g. capital expenditure, enterprise risk management).
The report suggests that the need to proactively address these areas of complexity head-on stems from the fact that “procurement can’t credibly lead help lead the transformation of the business unless it can address complexity and transform itself.”
By preparing fully for the kind of ‘bad’ complexity that often originates outside of the organisation, and exploiting the opportunities to increase procurement’s influence presented by ‘good’ complexity, organisations can position themselves as complexity masters.
These organisations, unsurprisingly, are able to outperform other organisations in key areas, as seen in the chart below from Deloitte’s CPO Survey.
Implementing digital procurement transformation
In terms of digital alignment, Deloitte’s findings show that actually, the majority of CPOs – 58% of all organisations, and 74% of complexity masters – are actively aligning their digital strategies to both their own goals, and those of the organisation as a whole.
Furthermore, around half of all organisations’ CPOs (and 55% for complexity masters) collaborate closely with their IT partners to drive their digital strategies forward.
This is hugely beneficial because, as the survey says, CPOs can play a major role in helping CIOs “to bring new capabilities to the organisation, while remaining within budget and managing third parties to reduce risk and noncompliance.”
However, there is bad as well as good news, as even though most CPOs are aligning their digital strategies with their wider organisations, they are still being held back by one major issue – data.
This is clearly outlined in the following chart, in which poor master data quality, standardisation and governance are identified as the biggest obstacles in the way of procurement functions overcoming digital complexity.
And, as if to drive the point home further, the quality and accessibility of data was also seen as a major roadblock standing in the path of the adoption and application of technology for procurement functions, far ahead of the other issues that were cited. This is shown in the following chart.
What these findings make clear is that, while there is understanding and willingness on the part of most CPOs that everything – namely overcoming complexity, adopting new systems and enabling effective digital transformation – all hinges on great data and governance, the real problem is sorting out that data in the first instance.
To read the Deloitte CPO Survey 2019 in full, click here.