There are a couple of quite interesting facts that prove Procurement to be the captain, guiding the journey to recovery post-crisis. According to McKinsey research, in the five years immediately following the 2008 global financial crisis, total return to shareholders for companies with top-quartile procurement capabilities was 42 percent higher than the companies whose procurement operations were in the bottom quartile. In addition to this, companies with top-performing procurement functions saw valuations return to pre-crisis levels with an average of 3 years faster and improve EBITDA by 3 percentage points more than bottom performers.
In a case of history repeating, Procurement once again is the torch bearer for organisations looking forward to normalise cash flows, increase profitability and thus return to normalcy. Below are some of the key skills that next-gen procurement leaders must hone in order to make the function a strategic value driver.
1. Accelerated digitisation with a key focus on next-gen technology
Post pandemic, who adopted the new normal the most successfully? Those leaders who embraced digital transformation. Thus, the focus to accelerate digitisation in the Procurement function must remain unabated. The key focus must be on predictive technologies like AI, ML and NLP. As per a recent survey, 40% of board directors have moved digital business-related budgets from central technology and IT budgets to business functions. This is to enable greater autonomy and agility.
2. Focus on supplier relationships with a key focus on the sustainability agenda
Accordingly, the time is right for procurement to take centre stage and create benchmark KPIs to ensure sustainability in global supply chains. Ensuring responsible sourcing is a primary need of procurement teams now. Tech can play a pivotal role in ensuring the right suppliers are onboarded as partners, reducing carbon footprint and enabling the circular economy.
There is a growing trend of focus on net new customer acquisition post slow-down. This will play a significant role in determining an organisation’s growth trajectory. Thus, customer centricity and advocacy will be the primary driving force to enable leaders to achieve this goal. By 2025, customers will expect products that offer dynamic, proactive, and even prescriptive personalised experience. The difference between B2B and B2C markets is becoming increasingly obscure, giving rise to customer demands in products and services. In the landscape of Procurement, feature parity among suite solutions is notable, so to create a niche segment on its own, product offerings should be personalised experiences for the end users – not just a feature checklist.
4. Risk management
Today supply chains typically include multiple cross-border strategic partners that help in the execution of business goals. The challenge of supply chain risk management is exacerbated by globalisation and the increased complexity of operations. As per the McKinsey report, “In Supply Chain Risk Management, organisations often don’t know where to start.” Thus, it is imperative to have a best practices framework in place, which includes a consistent supplier management process, encompassing operational efficiency, centralised contract management, and quick identification of failed suppliers.
5. Elevate the strategic performance management of your team
Procurement and supply chain professionals are no longer seen as operational since the function infiltrated boardroom discussions and strategies. It is at the forefront, leading the charge; it’s controlling major business decisions during a period of record inflation, geopolitical conflict and supply chain disruptions. It is therefore time for Procurement leaders to leverage their augmented position and drive change.
Given that CPOs are busier than ever before, they have transcended to a new persona – C²PO (Chief Cognitive Procurement Officer) – with all the skills outlined above, but also coping with the paradigm shift that procurement has undergone in the past couple of years.
The Chief Cognitive Procurement Officer persona aims to tackle varied challenges in modern procurement. C²PO focuses on enabling the team to focus on strategic goals, while automating tactical routine work. He/she uses prescriptive and predictive analytics for smarter decision making, leverages software tools providing a compelling user experience (UX) to drive adoption across the enterprise, as well as enabling sustainable procurement. It is time procurement leadership leveraged four key drivers of value: autonomous software, intelligence with analytics, effective supplier relationship management, and customer centricity.
That’s why Zycus in partnership with Procurious is hosting a CPO Roundtable, CPO Live: Unlocking Growth Amidst Uncertainty. In this engaging session, we will be exploring a range of strategic issues that Procurement leaders are facing:
- Powering Procurement with AI
- The Chief Cognitive Procurement Officer: Agenda for Procurement Digital Transformation
- Next-Gen Procurement: Driving Value with Risk Management, Customer-centricity, and Sustainability
- Lead the Room: Communicating in Moments that matter
Register now to secure your spot amongst your peers and come away with a range of views on current issues, new ideas and fresh thinking shared by other senior procurement professionals.