Procurement is growing far beyond its traditional support role in purchasing business materials and supplies.
CPOs who did well are those that went and located latest sources of supply or who focused on protecting revenues or margin, relatively than focusing exclusively on cost.
Roman Belotserkovskiy, partner
McKinsey & Co.
Klaus Staubitzer, chief procurement officer and head of supply chain, Siemens AG
“Recent events, just like the Covid-19 pandemic and concentrate on sustainability, have given us the chance to determine procurement and provide chain as a key value function as an alternative of an easy support function,” Klaus Staubitzer, the chief procurement officer and head of supply chain at technology and engineering giant Siemens AG, says in a brand new report on procurement industry trends from Economist Impact and business software company SAP SE.
However the report notes that living as much as that “key value” provider role isn’t easy and requires more coordination amongst procurement and other business departments as firms take care of ongoing supply chain threats, resembling the armed conflicts in sea lanes that arose after the pandemic.
The report, “Across the procurement-verse: changing trends within the procurement function,” relies on a first-quarter 2024 global survey of two,307 senior executives across various business operations, including supply chains, financial management and human resources in addition to procurement.
The report asserts that while most executives recognize that procurement departments have made notable strides in collaboration with other departments, “procurement teams have considerable room to enhance collaboration skills.”
“While 75% of executives agree that procurement collaborates effectively with the business on problems with strategic importance (up from 53% last 12 months), only a fraction of those (18%) have high confidence in procurement doing so, and only 14% have high confidence in the appliance of procurement insights across the organization,” the report says. “Procurement has yet to realize the complete trust of stakeholders on this area.”
The report, citing crucial trends in AI and provide chain diversification, also asserts:
- Procurement’s success in digitalization increasingly rests on its ability to adopt and master emerging technologies.
“Accelerating digitalization is the very best procurement priority for the vast majority of respondent organizations over the following 12-18 months, and AI adoption is a centerpiece of those efforts, cited by 44% as a top technology priority,” the report says. “The respondents clarify AI should play a key role in improving procurement process automation.”
- Procurement teams are searching for a balance between centralized and decentralized operating models.
Asked about procurement operating model changes in the following 12-18 months, survey respondents said their intentions were roughly evenly split between two directions: “One is increasing the role of centers of excellence (CoEs), which support best practices in strategic sourcing, knowledge management, performance tracking and other areas. The opposite is adopting a center-led model, through which the central procurement team makes decisions in key areas while leaving business units to make a decision on unit-specific procurement matters. CoEs complement and support a center-led approach.”
- Businesses look to scale back supply chain risk in the long run by prioritizing supplier diversification — a priority cited by 40% of surveyed executives.
“Within the shorter term, meanwhile, firms are putting stronger emphasis on supply-base consolidation (26% in 2024 v. 10% in 2023) given the push to construct trusted relationships to beat supply-chain challenges,” the report says.
Procurement and provide chain teams are also using latest technology applications to enhance how they ensure getting the precise products for his or her organizations.
Pushing procurement’s more priceless role
For instance, the report notes that Siemens uses “a digital twin (a digital model of a real-world product, object or process) to research, with precision, the fabric cost of the parts it purchases and the way they’re produced.”
The report adds that Staubitzer’s team at Siemens now also uses the tool to find out the CO2 emissions of those parts in addition to the carbon footprint of the supplier’s entire operations. The survey uncovered an identical trend, noting that 46% of CPOs “prioritize carbon footprint mitigation, greater than any of their counterparts.”
“Our suppliers are sometimes surprised that we now have a greater breakdown of those details than they’ve from their very own calculations,” Staubitzer says.
Roman Belotserkovskiy, a partner within the Austin, Texas, office of the worldwide management consulting firm McKinsey & Co., says the inflation trends lately have provided a chance for procurement teams to display their value and increase their prominence.
“CPOs who did well are those that went and located latest sources of supply or who focused on protecting revenues or margin, relatively than focusing exclusively on cost,” he says within the report.
Belotserkovskiy has also observed a rise within the variety of CPOs presenting to their board of directors — one other sign of increased prominence.
“That was very rare two or three years ago,” he says.
Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. [email protected].
Enroll
Enroll for a complimentary subscription to Digital Commerce 360 B2B News, published 4x/week. It covers technology and business trends within the growing B2B ecommerce industry. Contact Mark Brohan, senior vp of B2B and Market Research, at [email protected]. Follow him on Twitter @markbrohan. Follow us on LinkedIn, Twitter, Facebook and YouTube.
