Today, we feature our ongoing coverage of this year’s 18th-annual CPO-themed report, where my team and I continue our nearly two-decade-long dialogue with chief procurement officers (CPOs) and other procurement leaders.
The report is based on research by Ardent Partners and represents a comprehensive, industry-wide view of what is happening in the world of procurement and captures the experience, performance, perspective, and intentions of 341 CPOs and other procurement executives.
Our post today examines the shift toward cost savings prioritization and the impact that has on procurement teams, as well as the steps to maintain profitability and competitiveness while investing in growth initiatives.
Priority Deep Dive — Once Again, Savings Is Job One
The role of the Chief Procurement Officer has evolved significantly over the last quarter century. For example, in 2009, the almost solitary focus of CPOs was on cost savings, but over the years, priorities have shifted towards supplier relationship management, digital transformation, and sustainability. However, recent supply chain disruptions and inflation have once again placed a greater emphasis on cost savings.
Cost savings have always been a key priority for procurement, and for good reason. By reducing costs, procurement can help their enterprises to maintain profitability, increase competitiveness, and invest in growth initiatives. However, over the years, the focus on cost savings waned as CPOs have sought to deliver value through other means, such as supplier relationship management and innovation.
The COVID-19 pandemic caused significant supply chain disruptions that triggered inflation, placing pressure on organizations to reduce costs. As a result, the number of CPOs who prioritize cost savings nearly doubled from the previous year. In 2023, cost savings remain the top priority for 46% of all CPOs.
The ongoing shift to prioritizing cost savings in 2023 will impact procurement teams in several ways. Teams will need to re-evaluate cost-saving strategies, be adaptable to changing market conditions, balance cost savings with supplier relationships, and explore cost-saving technologies that benefit the environment. In the near term as pricing will trump any “nice-to-haves” in the 2023 sourcing cycle.
Procurement teams can help organizations maintain profitability and competitiveness while investing in growth initiatives by taking these steps.
CPO Priority Deep Dive: Digital Transformation
Over the past few years, many CPOs have embraced digital transformation to drive operational efficiency and deliver strategic value to their organizations. Digital tools such as spend analytics, eSourcing, eProcurement, and contract management systems enable procurement teams to operate more efficiently, improving productivity and reducing costs. A digital transformation initiative should enable procurement to become more data-driven, leveraging analytics to gain insights into supplier performance, market trends, and spend management. This data can then be used to make more informed procurement decisions and support the overall business strategy.
Digital transformation enables procurement to better manage risk and compliance by providing increased visibility into the supply chain. This allows procurement to identify and mitigate potential risks, improving supplier risk management and regulatory compliance. It also empowers procurement to track and monitor supplier performance, ensuring that suppliers are meeting performance expectations and delivering value to the organization.
Overall, digital transformation is critical for CPOs to drive procurement performance and deliver strategic value to their organizations. By leveraging technology to automate processes, gain insights, and improve decision-making, CPOs can achieve cost savings, enhance supplier relationships, and improve risk management and compliance.
Next week, we’ll be looking at part one of procurement’s biggest achievements over the last 25 years.
RELATED RESEARCH
CPO Rising 2023: CPO at the Crossroads
CPO Rising 2023: The Top Risks Facing Procurement in 2023
CPO Rising 2023: The CPO’s Agenda for 2023
Procurement Experts on CPO Rising — Changing Mindsets for Digital Transformation
The Key Themes for the Modern CPO’s Agenda (#5 – Digital Transformation)
