2023 is shaping up to be a challenging year for chief procurement officers, and they will need to tackle common key weaknesses to drive success.
Inflation, geopolitical turmoil, sourcing disruption and talent shortages are the top concerns for CPOs in the immediate future, according to the latest global procurement survey by The Hackett Group.
The survey reported that CPOs expect these crises, in part, will drive a 10.6% increase in workload that procurement will have to manage without significant increases in staffing or budgets.
So how can procurement teams get ahead this year?In such a challenging external environment, the answers are not immediately obvious.
However, the results of our annual Key issues survey – of more than 350 executives in finance, procurement, supply chain, human resources, information technology, and business services at midsize and large global enterprises – suggest the smartest procurement teams will focus on these three issues:
1. Enhanced procurement agility
They will ensure supply continuity is even more of a focus than it was two years ago at the outset of the pandemic, largely because of geopolitical turmoil. Companies are more aware now than ever that they need to guard against disruptions.
They need to ask, 'Are any of our suppliers the sole manufacturers of a critical component? Could some of them lose access to key raw materials?' They need to monitor their risks across a broader set of risk exposures at earlier stages of the supplier lifecycle, even when setting up a sourcing relationship, then continue to monitor and mitigate risks using real-time data and insights through the full supplier lifecycle.
At the same time, procurement teams have been managing hurdles posed by a varied macroeconomic environment, which has seen a year of record-level inflation with predictions of a possible economic showdown ahead in 2023. In short, procurement teams need to be able to pivot quickly to react to the myriad challenges being thrown up by the rapidly changing business environment of today.
2. Improved data analytics and reporting
As companies transform, they are building a capability to be able to see which of their suppliers could run into sourcing trouble or price volatility. Nearly one-half of all companies surveyed have large-scale deployments of spend analytics tools in place, and most of those that don’t (44%) have pilot projects underway.
Needless to say, not all of them will succeed. To attain this degree of transparency will require strong technical capabilities. The data sources need to stretch deep within the supply chain, and the data must be clean and reliable.
3. Recruit and retain talent
Talent management is the number one planned improvement initiative for procurement organizations in 2023, according to our research, and it exceeds all other initiatives. Despite the growing usefulness of automation and product tracking, companies will still need people – professionals who can interpret this new data; find new supply relationships; keep up with emerging stakeholder requirements for environmental, social, and governance performance; and forge the strong internal alliances a procurement team needs to build credibility with the C-suite.
The experiences of the past few years have taught many top executives something most CPOs have known for a long time: strong procurement teams are essential to the health of their company. In this period of uncertainty, all senior managers will be increasingly aware that procurement isn’t just about finding and buying materials and services. It’s about letting the CPO become the strategic business advisor the firm will need to thrive in this extraordinarily challenging decade. Are you ready?
Amy Hillcox is senior research director, and Vicky Kavan is a director at The Hackett Group.