CPO Rising 2023: Top CPO Strategies - 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 explores the leading procurement strategies that CPOs are harnessing to deliver value and elevate the function within the enterprise.

Top CPO Strategies

The potential of procurement to unlock greater value hinges on the implementation of transformative strategies that effectively harness the collective resources and capabilities of a diverse array of stakeholders, organizations, and trading partners. While the business pressures facing procurement teams have shifted greatly since the pandemic, the top strategies that procurement leaders have prioritized have remained fairly consistent.

For example, the top CPO strategy in 2023 is to pursue a digital transformation (38%). Since 2017, getting more from technology has been the top CPO strategy because it offers the clearest way to scale procurement expertise across a large enterprise. The industry’s transition from manual processes and legacy systems to digital automation seems inevitable, and yet, progress has been generally slow and incremental. CPOs must take the next year or two to rethink their approaches.

Digital transformation needs buy-in from various internal business leaders for it to be successful. Likewise, securing procurement investments, communicating the value of procurement, and containing costs in sourcing and supplier initiatives cannot occur in a vacuum. Procurement and supply chain efficiency is a team sport and involves multiple business units. With the average total spend under management still below 70%, procurement’s focus on communication and collaboration strategies is paramount. That is, in part, why 38% of respondents cited improve internal communication and collaboration with line-of-business leaders and budget holders as the second most important strategy.

A new leading strategy entrant in 2023 is implement strategies that impact cash flow (33%), including terms renegotiation, demand management, etc. Today’s inflationary environment is placing greater pressure on margins. Enterprises are looking much closer at their bottom lines and going back to the negotiation table with suppliers if needed. Since the beginning of the pandemic, forecasting demand and balancing inventory remains a challenge. However, shipping and production delays are easing, providing for more accurate demand sensing and cash flow advantages.

Other top strategies also include improving staff capabilities through better training and retention practices (29%). Businesses and procurement need top-tier talent to thrive and more are doing that with skills-based hiring, direct sourcing of talent, and the use of an extended workforce which can be a pragmatic way to expand support without incurring permanent costs.

Overall, these CPO strategies highlight the many challenges and opportunities facing procurement professionals in the coming year, and underscore the importance of staying agile, adaptable, and proactive in the face of changing market conditions and emerging trends. With the right strategies in place, procurement leaders can position their organizations for success in the years to come.

Next week, we’ll examine procurement capabilities essential to operating strategically with stakeholders and enterprise functions.