John Mavriyannakis is a Senior Manager at Deloitte Canada and the Practice Leader in Sourcing, Procurement, and Settlement who recently gave a presentation on Empowering Modern Procurement as part of the Coupa One Vision Roadshow in Toronto. Through its regular CPO Surveys, CFO Surveys, and its Source-to-Procure experience across 1000+ projects for 300+ clients, which made it #1 in the Procurement Consulting provider in the global Procurement Consulting marketplace, Deloitte has built up a considerable understanding of the current state of Procurement (which it has captured in a number of publications, including Supply Chain Strategy, Winning With Your Supply Chain, the CFO Surveys, and Charting the Course: Why Procurement Must Transform Itself by 2020).
According to Deloitte, Procurement today is dealing with 4 major trends, which are going to continue for the foreseeable future:
Margins are getting tighter and organizations need to be looking at least ten years ahead to determine future (labour) arbitrage opportunities, which are becoming increasingly more difficult to leverage as emerging economies emerge and produce middle classes with higher wage expectations (and transportation costs increase to make up the difference). In addition, the fact that price volatility has increased 57% in the last 12 months hasn’t helped matters any.
Supply Chain Risk
Due to the increasing interdependence and extensiveness of supply chains, risk is increasing, as illustrated byt he fact that 85% of surveyed organizations experienced at least one large scale disruption in the last 12 months. The increased risk is a big issue given that companies announcing supply chain disruptions had a 30% lower supply chain return compared to the benchmark group.
Regulatory compliance issues have resulted in high-profile, high-cost shutdowns in recent years and with 2/3rds of CPOs admitting that their companies are only in the early stages of compiling information required to meet the recent SEC reporting changes, this is not a good state of affairs as the SEC reporting requirements are only one of a plethora of reporting requirements an international company that is importing and exporting on a daily basis around the globe needs to be compliant with.
Given that 76% of CPOs feel that their staffs’ skills need improvement or have a significant gap, talent is on the radar in a big way. And not just any talent — with 91% of the 60% of CPOs planning to change their operational model announcing a shift to center-led or centralized supply chain operations, this means that over half of the talent that is required needs to be effective in these type of Supply Management models.
So what does this mean? We’ll discuss tomorrow in Part II.