CPOs share eight ways to confront the global ‘polycrisis’

24 March 2023

Procurement should insist suppliers planning price rises provide evidence of their increased costs to remove the temptation to profiteer, CPOs advise.

This is just one recommendation in a new guide which outlines eight ways CPOs can confront geopolitical, inflationary and disruptive challenges.

The guide, which describes the current multi-disruption landscape as a ‘polycrisis’, was produced by research provider Procurement Leaders.

It compiles insights and lessons learned from CPOs across a range of sectors, and contains predictions for the year ahead. 

Procurement Leaders said: “Procurement has a vital role to play in tackling the challenges that businesses continue to face.

“From simmering geopolitical tensions to soaring energy costs and staff shortages, the challenges faced by businesses in recent months have been complex and interlinked, and procurement has a key role to play in tackling this ‘polycrisis’.”

The guide recommends eight actions for CPOs:

1. Secure executive buy-in

Nestlé chief procurement office Patricia Stroup said: “The last couple of years have really shown businesses the value of procurement – not just as a purchasing function, but in terms of the strategy of procurement and the value it brings in managing risk. Our executive team has acknowledged the procurement team’s work in keeping product on the shelf, managing cost and managing inflation.”

2. Cost efficiency needs to stay key

Despite its growing internal profile and an acknowledgement procurement can deliver on different priorities, the guide suggests cost efficiency must remain significant to the profession. CME Group chief procurement officer Chuck Hatsis said cost isn’t going anywhere, adding: “It’s always going to be sexy to save money”.

3. Lift any hiring freezes

Randstad global CPO Estelle Remise suggested hiring freezes had delayed the recruitment business from shifting towards a more centralised model. Remise said her department needed more resources to support these strategic initiatives and deliver value to stakeholders. Remise said: “Risk, sustainability and diversity are company priorities, but if I cannot hire my head of projects…we can only do so much with the resources we have.”

4. Dive-deep across tiers

According to satellite service provider, Inmarsat, it had to track suppliers across multiple supply chain tiers to keep up with disruption – and argues others should do the same. CPO Tim Snow said component shortages had forced his team to go seven tiers deep. He added: “Often limited availability of the smallest, cheapest little thing, like a 20c chip, can prevent us from launching a satellite and earning billions of long-term revenue, so we need to understand how we can mitigate this.”

5. Tackle profiteering by understanding input costs

Procurement should tackle cost by asking suppliers to provide evidence of cost increases and the impacts of inflation on output expenditure. One anonymous procurement practitioner said they were forced to do just this after they became aware of some suppliers attempting to “profiteer” from high inflationary pressure.

6. Build strong relationships

At multinational chemical company DuPont, it said close supplier relationships allowed it to best deal with issues surrounding inflation and supply disruption. CPO Miguel Gonzalez said his procurement team was strongly integrated with the rest of the business, enabling strong internal relationships as well.

7. Collaborate to support ESG

ESG won’t happen if it works in a silo, argued the guide. It said companies must work together to define and implement standards. AstraZeneca CPO John Dixon said: “It’s critical that organisations who tend to use the same suppliers are connected…It’s an absolute imperative for us to work collaboratively.”

8. Innovation cannot die

Strategic imperatives could risk getting pushed into the long grass if procurement focuses too much on firefighting, said Bob Murphy, CPO of IBM, innovation. Creativity, he added, is the key to moving past the polycrisis and maintaining success. Murphy said: “We’ve been extremely engaged with our design and development teams so that, if we could not get one component, we could find others of a similar nature.”

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