Editor’s Note: Over the next few weeks on CPO Rising, we’re publishing some “best of” 2022 articles as we reflect on the year and prepare for the new year ahead.
Our weekly coverage of the CPO Rising 2022 Report continues as we examine the state of procurement. We’ll take a look at the hurdles that Chief Procurement Officers face in the near term and how to overcome them as the year progresses.
Business As (Un)Usual?
As of this writing, procurement’s long-term future remains bright, even if things look challenging in the near term. The COVID- 19 pandemic has cast a long shadow over business and society, and CPOs and their teams will have their work cut out for them if they are going to climb out from under it.
For procurement, 2022 will be a more demanding year as teams deal with the ongoing pandemic, inflationary (and budgetary) pressures, as well as greater supply chain risk, and an evolving team staffing model. Greater stakeholder support and the emergence of game-changing technologies will help counter some of those challenges. Preparation, agility, and an ability to drive value from data will be central to many procurement organizations as they advance through the year.
The procurement profession, like most others, has been broadly impacted by the COVID-19 pandemic. The core supply management work of finding, sourcing, and transacting with the highest-valued suppliers has entered the standard business lexicon — so too has “working from home.” Ardent Partners’ research reveals that post-pandemic, “business as usual” for most procurement pros (84%) will mean some version of hybrid work. Less than 10% of procurement teams plan to return to the office full time, while only 6% plan to be fully remote.
Time-Tested Strategies
In a remote or hybrid environment, collaboration has never been more important for procurement organizations seeking to build value-based partnerships both inside the enterprise and beyond it. Business leaders uniformly understand that while collaboration is but one of several links to success (technology is another one), it can be the most accessible and cost-effective means to elevate the enterprise to the next level of performance. As procurement groups seek to expand their influence and impact over spend, they rely upon internal budget holders for partnership and engagement. The top strategy for CPOs in 2022 is to “improve internal communication and collaboration” with executives and line-of-business leaders, identified by 37% of all procurement heads.
Thirty-seven percent of all CPOs have identified the pursuit of “digital transformation” by adopting new technology and/or improving the proficiency of current tech usage as a top 2022 strategy. Likewise, another 29% of CPOs seek to streamline their current systems and processes. And, with the talent wars raging in every sector, improving current staff capabilities (34%) remains an important way to “do more with the same” resources.
As the supply chain has become even more critical to business success, procurement has had to rethink the approach it takes to relationship management for at least the strategic/critical subset of its supply base. Despite inflation and supply assurance challenges, “improving external communication and collaboration with suppliers” (31%) and not “sourcing more” (24%) is the strategy preferred by more CPOs this year.
Procurement’s Barriers to Success
In 2022, the state of procurement is strong, bolstered by increasing proficiency, expanding engagement, and what is now more clearly understood within the enterprise as a direct impact on overall operations. That said, the average procurement department’s path to success is rarely easy and clear. In fact, the hurdles for procurement departments in 2022 remain sizable. In this year’s survey, respondents were asked to select their top three barriers to success over the next 18 months.
With rising inflation, CFOs are tightening their belts, so budgetary constraints is the top challenge for more CPOs (35%) than anything else. Procurement is rarely at the front of the line when it comes to gaining new investment and resources, so it falls to the CPO and the procurement leadership team to communicate the value generated by the department in a clear and consistent manner. Doing so will help bolster executive confidence that an investment in procurement can generate good returns. Of course, tighter budgets should also mean that procurement’s value to those that manage the budgets should increase. But, one-third of CPOs see their team’s difficulty engaging business stakeholders, budget-holders, and executives as a major hurdle.
The challenge of managing supplier performance and/or supply assurance more than doubled since last year, rising from 16% to 35%. It is clear that the stakes have been raised in the supply chain game and that procurement teams will benefit from clear team strategies and decisive leadership. Thorough preparation and tight execution will also improve the odds of winning.
The CPOs who have placed “digital transformation” at the top of their 2022 agendas have done so to attack a few of the top hurdles to their overall success. One of the most common challenges to the CPO’s ability to achieve their 2022 objectives is the need to close existing technology gaps (34%) and improve operations and performance as a result. Those participating in this study have shown higher interest in adopting more process automation tools in 2022 as technology becomes a more central part of the entire operation. That said, many teams (27%) still struggle to align processes and systems within the organization.
Finally, the war for procurement talent, amidst the pandemic and the Great Resignation, is one of the larger shifts that we have seen during the pandemic. For almost two decades, CPOs have decried the talent challenge as the primary hurdle to achieving departmental objectives. This year 26% of procurement executives noted a lack of headcount as a top barrier to success.
As the function becomes more focused on innovation, it will behoove procurement executives (and hiring managers that work directly with these leaders) to ensure that they are tapping into the world of non-employee labor…not only as a supplemental source of talent, but also as a value-added driver of expertise, skillsets, and fresh thinking. The prevalence of digital staffing (i.e., talent marketplaces, social networks, etc.) has allowed procurement leaders to better assess their current skill gaps, and, in an on-demand fashion, find and engage the best-aligned talent.
As the procurement function continues to move forward and expand its reach, talent remains the spark for transforming the impact of the unit. As such, new, agile talent sources, like independent contractors and freelancers available in new talent networks, must be tapped to bring specific expertise to core initiatives and help procurement’s full-time staff improve operations and performance. Strong hiring (via direct sourcing of talent) and staff retention capabilities will become more important for procurement teams as they push deeper into the 2020s.
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