CPO Rising 2023: Priority Deep Dive — Once Again, Savings Is Job One « CPO RISING – THE SITE FOR CHIEF PROCUREMENT OFFICERS & LEADERS IN SUPPLY MANAGEMENT

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, innovation, and sustainability.

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. This shift may also impact sustainable business practices 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.

CPO Priority Deep Dive: ESG Is Here to Stay

ESG initiatives have become crucial for organizations and are expected to remain so in the coming years. Consumers, employees, and investors are becoming increasingly socially conscious and demanding transparency and accountability from businesses. Failure to address ESG issues could result in reputational damage and loss of market share, while prioritizing ESG initiatives can lead to a competitive edge and attract new customers and investors. Governments and regulators are also focused on ESG issues and are implementing new regulations and guidelines that promote sustainability and social responsibility. Compliance with these regulations and demonstrating a commitment to ESG initiatives can avoid penalties and legal action.

Moreover, ESG initiatives have the potential to drive long-term value for organizations by reducing costs, enhancing efficiency, and improving reputation. Procurement will play a crucial role in supporting these efforts by selecting and managing suppliers that align with the company’s ESG goals, ensuring compliance with relevant regulations, and driving innovation in sustainable and ethical practices throughout the supply chain. This may involve collaborating with suppliers to identify opportunities for improvement, engaging with stakeholders to understand their expectations, partnering with internal teams to embed ESG principles throughout the procurement process, and tracking/reporting on ESG performance metrics. As investors and customers increasingly scrutinize companies’ ESG performance, procurement’s ability to manage ESG risks and opportunities will become a larger factor in the company’s reputation and financial success.

Next week, we’ll be looking at part one of procurement’s biggest achievements over the last 25 years.