Nearly half of CPOs are making permanent changes to their supply chain this year as a result of external developments.
Procurement Leaders’ CPO Compass 2023, in partnership with GEP, revealed 43% of CPOs have already started to make permanent changes to their supply chain as a result of recent events.
Just 6% of those surveyed are retaining existing supply chains.
Principal analyst Nick Heath said the challenges of 2022, “which was supposed to be the year when things started to return to normal” have “developed deep roots”.
Nick says the resilience of procurement teams will be called on again in the short term.
“Yet, while the experience of the pandemic years and the flexibility and problem-solving skills developed will have stood procurement teams in good stead, it has also exposed the areas that they need to address to sustain themselves as they tackle those problems and potential repeat events. It is clear that long-haul resilience needs to be at the core of the function,” he said.
New challenges calls for new talent
A reassessment of the function’s structure and looking outside of the function for new blood should be considered , says Nick.
“An element of that may involve bringing in people from different disciplines who can offer new insights and skills that can help the function meet its myriad challenges,” he said.
The report covers three pressing topics:
- Defying disruption: Building future-fit supply networks
- Enable, empower, elevate: Upgrading procurement
- Mapping the course to net-zero
Buyers walking a tightrope
The report states that inflation appears to settling into “ a brisk simmer” but despite this, consumer price indexes are expected to stay high in many major economies throughout 2023, presenting procurement teams with numerous challenges.
“Although the function has long specialised in tackling rising prices, buyers must work with suppliers and internal stakeholders to uncover creative ways of shielding both the business and its consumers from the worst effects,” the report says.
In highlighting the downstream impact on the supply chain, analytics firm Dun & Bradstreet, highlight the scale of the disruption:
- At least 374,000 businesses worldwide were reliant on Russian suppliers
- at least 241,000 were reliant on Ukrainian suppliers
- Globally there’s 14,745 Tier-1 supplier relations with Russian organisations and 7.6 million Tier-2 relationships
‘Just in case’ strategies preferred over just in time inventory
The report says the “just-in-time” inventory process, which worked effectively before the pandemic had lost its effectiveness during the recent turmoil.
As a result, a “just-in-case” strategy has become more favorable, as buyers struggle to find a balance between delivering cost savings and ensuring a steady supply of goods and raw materials during shortages.
“Now, a ‘just in case’ strategy appears preferable, as goods and raw material shortages challenge buyers to balance delivering cost savings with ensuring supply continuity,” the report said.
Data in demand
Procurement is increasingly recognising the importance of data in their efforts to increase transparency in the supply chain and operate with increased flexibility.
More than two thirds (85%) of respondents plan to expand their use of data to drive efficiencies in 2023.
More than half ( 53%) are adding to their existing automation processes, while a quarter will start automating for the first time.
Shaking off the “forgotten function” tag
CPOs and senior purchasing executives Procurement Leaders and GEP spoke with increasingly spoke of being brought into the boardroom during the “firefighting operations” of recent uncertainty.
But it is highlighted that this approach is not sustainable for the profession.
“It has become clear that procurement must shift from a reactive footing to one of long-term resilience, ensuring supply chains are robust enough to handle any significant upheaval.
Building the capacity to quickly detect, assess and respond to threats is crucial to building that resilience,” says the report.
Procurement people in demand
Nearly half of CPOs (47%) anticipate scarcity of labour will impact operations more in 2023 than it did last year.
“To support the function’s evolution, CPOs must increasingly look beyond their own discipline to find the skills required to meet new challenges, the report said.
Roles which appear to be the most sought after to improve the function’s impact, include
sustainability, finance, sales, IT and supply chain-related capabilities.
Download the Procurement Leaders’ CPO Compass 2023.