Deloitte survey shows cost control a top priority

20 April 2016

Deloitte survey shows cost control a top priority for procurement leaders

Increasing risk and uncertainty, a widening skills gap and the challenge of digital technology all concerns for chief procurement officers

Cost control is the top priority for chief procurement officers (CPOs) as they look to sustain business growth and achieve value for money in a slowing market, according to a recently released Deloitte global survey.

The Deloitte Global CPO Survey 2016 – entitled Procurement: at a digital tipping point? – profiles the views of senior procurement leaders from around the world on the key issues facing the procurement function. This is the fifth edition of the survey, providing unprecedented insight into CPO sentiment drawing on the largest sample yet of 324 CPOs from 33 countries around the world, including New Zealand.

Almost three-quarters (74%) of CPOs surveyed identified cost reduction as their top priority for 2016, up from 69% the previous year. To help them achieve this they are primarily focusing on strategies for consolidating spending, increasing supplier collaboration and restructuring existing supplier relationships.

Deloitte partner David Lovatt says perceived risk and uncertainty are driving these results.

“Forty-five percent of CPOs reported a rise in procurement related risk, such as volatility in emerging markets and geopolitical uncertainty affecting their supply chain, and 55% reported an increase in external financial and economic uncertainty,” says Mr Lovatt.

“These are causing procurement leaders to shift back to a more conservative focus compared to recent years.”

The survey also identifies a widening talent gap as a key concern for CPOs. Sixty-two percent of respondents reported they did not believe their teams have the skills and capabilities to deliver their procurement strategy, compared with 48% two years ago and 57% last year.

At the same time, respondents reported reduced training and recruitment budgets. In this year’s survey 29.5% reported spending less than 1% on their training budgets. This compares to only 3.2% reporting this level of spending on training in 2012.

“On the talent side, we’re seeing training budgets being cut and a push towards outsourcing as a way to plug the skills gap. This trend is most prevalent in the largest organisations, where 40 per cent are expected to pursue outsourcing for some element of their function,” says Mr Lovatt.

Despite these challenges, Deloitte’s research shows an increase in digital technology spend, perhaps suggesting that CPOs are looking at innovative solutions to address their business problems. Seventy percent of respondents reported investing in self-service solutions for procurement, up by more than one-third in a year. Investment in mobile, cloud and social media is also increasing in the procurement function.

These statistics suggest a shift to digital but careful work needs to be done first as 60% of CPOs admitted they do not have a clear digital strategy.

“The key will be to get this strategy in place first, so the right technology is being used in the right way. Done correctly, a digital strategy can improve accuracy, speed and outcomes,” says Mr Lovatt.

“But this is potentially a double edged sword – digital can either reinvigorate or replace procurement’s role. It’s up to the CPO to set the strategy and lead the change, or risk being left behind,” he concludes.

To read the full report, go to www.deloitte.com/nz/cposurvey.

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