‘Procurement needs to remain relevant as the economy returns to growth’

Will Green is news editor of Supply Management
9 December 2013

New product and market development have joined cost reduction as the biggest concern for CPOs, a survey has revealed.

The Deloitte CPO Survey shows that after years of focusing on cost reduction, buyers are “now being asked to support their businesses to expand as the global economy begins to recover”.

While cost reduction remains the number one priority for CPOs in the survey, new product and market development jumped into second place.

However, while almost nine in 10 buyers said they had delivered or exceeded their savings target, 61 per cent felt they were “only somewhat effective at delivering value to stakeholders”.

Nearly half put this lack of effectiveness down to a “lack of aligned objectives”, while 36 per cent said a lack of the right resource hindered their efforts. However, the fact that 56 per cent did not measure stakeholder satisfaction in the first place was “something that needs to be addressed rapidly”, said the report.

James Gregson, partner and head of sourcing and procurement at Deloitte, said this revealed a disconnect between purchasing departments and the wider business.

“Procurement needs to remain relevant as the economy returns to growth,” he said.

“You have a business trying to define success in a different way, and procurement is not talking that language. Over half of respondents said they didn’t communicate results outside the function.

“They have been pigeon-holed as the executer of cost reductions and that has limited their ability to address a broader set of issues.

“They really need to step up their game and throw away the traditional scorecard.”

The survey, covering 180 CPOs in 17 countries across the globe, also revealed half of buyers thought procurement risk had increased in the past 12 months and seven out of 10 planned to invest in technology in the coming year.

Gregson said CPOs needed to create teams “at the heart of decision-making”.

“Such a shift may require handing back, abandoning or outsourcing those activities that once defined procurement, but which are now seen as easy to replicate or adding little value,” he said. “Funding growth, mitigating its associated risks and working alongside the business to develop differentiated and robust supply models will be the indicators that demonstrate procurement’s ability to deliver value for their stakeholders in the years ahead.”

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