Two thirds of procurement leaders have limited or no visibility beyond their tier one suppliers, according to a survey.
The Deloitte Global CPO Study 2018 found just 6% of respondents had full transparency of their entire supply chain, while 65% had limited visibility or none.
Brian Umbenhauer, principal and global head of sourcing and procurement at Deloitte, said: “It’s both a worrying and opportunistic finding that two in three procurement leaders have limited visibility beyond their tier one suppliers.
“This has major implications for organisations across all industries, particularly for meeting regulatory and corporate social responsibility requirements and for the identification and mitigation of supply chain risks.
“Improved transparency of pricing, supplier locations and critical dependencies can help procurement leaders deliver greater value and avoid potentially significant regulatory, reputational and operational risk.”
Overall, cost reduction (78%), new product/market development (58%) and managing risk (54%) remained the top business strategies for CPOs in 2018.
The survey found 61% of respondents delivered better year-on-year savings performance in 2018 compared to 2017, while 23.5% reported worse performance.
The strategy most CPOs were focusing on to deliver value over the next 12 months was consolidating spend (37%), followed by reducing total life cycle/ownership costs (32%) and increasing competition (31%).
Global risk ratings from procurement leaders fell over the year, with lower risk ratings for a China slowdown, credit conditions, the eurozone economy and worldwide terrorism. Uncertainty and the outcomes of trade negotiations, such as Brexit and NAFTA, were the leading market risks for CPOs.
Lance Younger, EMEA head of sourcing and procurement at Deloitte, said: “The slight improvement in economic sentiment has not altered the overall willingness of businesses to take on additional risk. As ever, risk remains, from Brexit in Europe, to protectionism and the perils of asset and credit bubbles. The optimistic market sentiment presents procurement leaders with an opportunity to achieve greater value through growth-focused innovation and supplier collaboration whilst continuing to deliver cost reduction and manage risk.”
The survey found 17% did not have a digital procurement strategy and of those who do, less than one third believe it will enable the function to deliver significantly on its objectives and improve enterprise value.
Talent was also a stumbling block, with half of CPOs (51%) saying they did not believe their teams had sufficient capabilities to deliver on their procurement strategy.
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