The following Supply Chain Matters guest contribution is provided by Rohit Kumar Nair, Associate Director, Marketing at Zycus Inc.
Do you recall the 2008 recession?
Well, of all things it impacted, it brought about a change the way chief procurement officers were operating until that year. In this blog commentary, and after a careful analysis of several research reports from leading consulting firms, we have highlighted what we view as the top four challenges for CPOs and how they are expected to deliver on the same for better business impact.
Improve Compliance Management
Compliance is one of the key concerns in procurement strategies. Of the reports we studied, one third of the CPOs believe that internal obstacles (unclear guidelines, limited liability, technology barriers, etc.), resistance to change in employees and suppliers, and price considerations are some of the key compliance issues.
Now, non-compliance would mean huge loss in company’s savings and so, in 2018, CPOs are expected to work toward eradicating obstacles including policy consolidation, compliance education, accountability intensification, enhanced non-compliance detection and correction, improved supplier relationship management, and implementation of innovative technologies.
Adopt Newer Technologies
According to a survey by Deloitte, 75 percent of CPOs are now convinced that they can in no way afford to be lagging in implementing a robust digital strategy. In fact, a recent report from Ardent Partners highlights that in 2017, the best-in-class procurement teams reported greater adoption of automated business applications compared to all other procurement teams, by an average of 30 percent.
In 2018, more effort will be made to utilize existing technology and harness the emerging ones with emphasis on analytics. Data harnessed by various departments provides insights that inform improvement in procurement. CPOs here will have to be discerning of inferior data collection, unstructured, unintegrated, and/or identical data, lack of analytics skills, and organizational barriers.
Technologies that are going to contribute to the success of CPOs are machine learning, automation, artificial intelligence, 3D printing (supplier samples, etc.) and blockchain. At a process level, analytic tools, industry research, staff-training, and hiring new talent are going to be part of the process.
And yes, needless to state, a symbiotic relationship amongst departments and decision makers is going to matter.
Focus on Supplier Relationship Management
In a survey report published by Capgemini, Supplier Relationship Management (SRM) is a key priority determined by 97 percent of the respondents of which only 15 percent stated that they have a unified corporate SRM strategy. We believe that SRM should be the collective aim for all CPO’s in 2018.
In the path of improved supplier , two challenges that trouble CPOs are internal stakeholder misalignment (over 50 percent) and lack of clear business case for SRM (41 percent). It has been observed that the failure to demonstrate and to quantify direct and indirect incumbents of a unified strategy makes it more challenging wherein the solution to reach a comprehensive SRM strategy demands involvement and alignment with the main stakeholders.
It is no exaggeration if it is said that the value of SRM exceeds traditional savings, which along with increased data availability, will help CPOs demonstrate the need to invest in an SRM and build support strategies for all support functions (marketing, finance, IT, C-suite). It is also important to note that a third of CPO responders cite technological capabilities, talent difficulties and an unrestrained number of suppliers as . If there’s a way to handle these challenges, enhanced supplier segmentation is necessary to help in better organization of the supply base, assessment and improved supplier . To facilitate this, there is a need for new tools, better use of analytics and smart outsourcing.
Determine Global Influences
Like everything else affected by a rapid shift in global trends by large and small organizations, procurement too is affected in the marketplace and in 2018, it is likely to continue as is.
Today, if you are aware of the market in China where they transitioned from ‘manufacturing’ to ‘services’, you would know how it has already affected the CPOs worldwide. A surge in pricing in China, the emergence of India, Vietnam, and Bangladesh along with the protectionist and isolationist political trends such as Brexit, campaigns in France, Italy and Germany are strong determinants for CPOs to understand which way the water runs.
To conclude, CPOs will have the above four challenges (compliance management, early adoption of technologies, focus on SRM strategies and influence of global trends) and may, in addition, have to manage a number of other industry or company specific challenges in 2018 and thereafter. But it’ll be a great start to begin conceptualizing solutions to the challenges already discussed above. In 2018, CPO’s will need to acknowledge the top four challenges outlined, and develop specific approaches for each.
About the Author:
Rohit Kumar Nair is Associate Director Marketing at Zycus Inc., a provider of Source-to-Pay automation technology. With close to 10 years of experience covering multiple facets of marketing in the IT & Health Care domain, Rohit currently leads the product marketing initiatives for the Procure-to-Pay solution suite at Zycus Inc.