The Major Procurement Risks with High or Moderate Impact

In our last series, which kicked off with our post where we told you that you don’t need to read another state of procurement study for the next 5 years, we noted that Deloitte recently released their annual latest and greatest CPO Survey with the help of Spend Matters, that was designed to highlight, among other things, the latest and greatest “observations, challenges, and trends” in Procurement, but that, in reality, just highlights the same problems, priorities, and barriers it found in the past 9 editions, just like every other annual survey in Procurement.

There’s no embellishment here. We mean every other study that has come before for years because:

  1. the doctor has been reading them.
  2. the doctor went back through 15 studies in detail that were released in the past five years and a few other related papers published in the same timeframe.

As part of this in-depth review, the doctor pulled out, for each of these 20 papers (which included papers from the usual suspects like Kearney, CapGemini, E&Y, PWC, and Everest), the

  • Top Barriers/Roadblocks to Success/Challenges
  • Major Procurement Risks with High or Moderate Impact
  • Primary Concerns/Strategic Priorities for Procurement Leaders
  • Significant Skill Competency Gaps/Support Needs

After doing so, the results were that, for the Deloitte study, analyzing the:

  • top barriers, of the 10 quoted in 2 or more of the papers, 7 are in the Deloitte study,
  • major procurement risks, of the 7 quoted in 2 or more of the papers, 5 are in the Deloitte study, and
  • primary concerns, of the 13 quoted in 2 or more of the papers, 8 are in the Deloitte study.

Moreover, if we were to abstract the barriers, risks, and concerns one level and start looking at the underlying systems or processes that would need to be addressed, the similarities would be even more significant.

More importantly, they aren’t changing much year to year, and aren’t going to change much for the next decade at least.

A year ago I penned a post where I pointed out that before you get all excited to learn about trends for fall conference season, with the exception of:

  • Gen-AI being the new fluffy magic cloud
  • Fake-take (sorry, intake) being the new dangerous and dysfunctional dashboard

the majority of trends that have been discussed for the past year are the same trends that were discussed ten years ago (and SI has the blog history to prove it, especially since it doesn’t purge over half of the blog history on a site upgrade and/or migration).

This is because the core purpose, and thus the core priorities, challenges, and risks, of Procurement haven’t changed in decades. The systems have evolved, the processes have become more complicated, and the global supply challenges haven’t been this bad since the nineties, but the core HAS NOT changed (and, to be fair, has NOT changed since the first manual was published in 1887 and has NOT changed much since cross-continental trade began thousands [and thousands] of years ago).

Which means we don’t need any more annual surveys on these issues (every 5 years would be more than enough, and even then you might find that the only movement is related to the hot tech of today vs. the hot tech 5 years ago, as SI did when it did its trend analysis last year).

In our last series, we also noted that we weren’t going to bore you by digging up two decades of studies and showing the same issue lists again and again, because that’s not the problem. The real problem is that these core issues still aren’t adequately addressed after decades of these “studies” being published, even though it’s the same issues again and again that come back year after year after year, sometimes with a vengeance when an unexpected natural disaster or pandemic strikes, a war breaks out, or a fan of the Gilded Age believes that tariffs are the cure-all and starts global trade wars.

However, before you can solve these problems, or anyone can put forth a solution, you need to understand what these issues are, why they keep coming back, and acquire some insight into how you might deal with them once and for all and finally move the needle forward.

In our last series, we focussed on the barriers to success. In this series we are going to address the risks. The seven risks that keep coming up over and over again, where five of them are top risks in the Deloitte study, from most referenced to least referenced, were:

  • Loss of critical talent/limited talent availability. ([00], [04], [05], [12], [19])
  • Natural/Man-Made Disasters ([04], [12], [14], [19])
  • IP/cyber attacks ([00], [03], [10], [12])
  • Rising cost/ spend pressures/inflation ([00], [04], [19])
  • Supply shortages/constraints / Competitive Alternatives ([00], [04], [12])
  • Regulatory compliance issues ([00], [04], [12])
  • Corruption/Fraud ([02], [04])

It is hoped that you enjoy the coverage!

Finally, remember to review our article on why You Don’t Need To Read Another State of Procurement Study for the Next 5 Years! if you want to dig up the referenced papers.

Breaking Down The Barriers: Insufficient Business-Wide Support/Resistance to Change

We’re continuing our foray into the top barriers to success that we outlined in our top barriers post that chronicles the barriers that keep coming up over and over again in every Procurement survey in our effort to ensure that you don’t have to read another state of procurement study for the next 5 years. Finally, we have to deal with the Resistance!

A Brief History …

As per our discussion of the Organizational and/or Technical Execution Support Capability barrier, and the siloed ways of working barrier, with each successive innovation, business, and process improvement, processes and tasks became more complex and required more education and experience to perform. As a result, with each successive innovation, each department became more and more narrowly focused on their functions, and, correspondingly, educational programs became more and more focused, the employees of each department learned less and less about the other functions, tasks, and requirements outside of their domain.

Simultaneously, as organizational departments diverged further and further apart as their processes, equipment, software, and budgetary needs became more and more distinct, the share of the pie each received decreased. The departments were stretched thinner and thinner, and their ability to adequately function was often at risk as much as that of Procurement and Supply Chain.

The Problem

As a result, stretched thin and without a deep understanding of Procurement operations, most departments have little incentive or capability to properly support Procurement.

The Necessary Realization

“You scratch my back and I’ll scratch yours, first.”

You have to demonstrate how you can make their jobs easier and get better results. They won’t learn Procurement because, until they understand why it exists and what value it can deliver, they don’t even want to give you the time of day.

This means that you will have to learn their functions, understand their major pain points, and which of Procurement’s capabilities and values to promote to that department.

For example, Marketing doesn’t care about saving money — if they have the budget, they have the budget — because their metric is eyeballs and engagement and inbound uptick, and that requires creativity — and the best creatives cost the most, so, dear Procurement, please go away. It’s up to Procurement to understand that and explain to Marketing that they’d have more money for creative if they broke the quotes down into creative and non-creative expenses, and understood the market rates for standard services and consumables and only paid market rates, not ridiculous mark-ups as part of bundled quotes. It’s up to Procurement to explain to Marketing that 200 GSM C2S sheer finish paper is 200 GSM C2S sheer finish paper. Recording equipment is very comparable as well. There are average labour rates for recording engineers, camera people, etc. And that they can save Marketing money where talent doesn’t count so that Marketing can hire better talent or do more campaigns.

This also goes for Legal, R&D, Manufacturing, HR, and every other department that needs to procure goods and services. Legal will need help with understanding not only standard rates for standard services but how matter costs break down. HR will need to understand average rates for consultants in IT, Utilities, etc. where there are average rates. R&D will need to understand which suppliers can produce similar custom parts with better assurance of supply (and Procurement can steer to the subset that are more cost competitive). Etc.

The Technological Requirements

The technological requirements are considerable and require supply chain aware sourcing and sourcing aware supply chain and expertise from source to sink and back again on both sides.*

This concludes our initial series on the top Procurement barriers that keep getting repeated in every survey, and now you don’t need to read another survey on procurement barriers for at least five years! After a short break, we’ll be back with the major procurement risks!

*A final reminder that if you want guidance in the short term, hope that your favourite provider reaches out to Bob Ferrari of Supply Chain Matters or the doctor and enables us to focus on writing the series (or in-depth e-book) explaining what modern Procurement and Supply Chain Tech needs to look like (and how it needs to be implemented) to address the challenges, reduce the risks, and address the priorities versus just dripping out tidbits as free time permits.

Breaking Down The Barriers:Competing Priorities/Overcommitment/Lack of Buy-in

We’re continuing our foray into the top barriers to success that we outlined in our top barriers post that chronicles the barriers that keep coming up over and over again in every Procurement survey in our effort to ensure that you don’t have to read another state of procurement study for the next 5 years. Today it’s a matter of priorities.

A Brief History …

Once upon a time, in the Industrial Revolution and the Gilded Age that followed, there was only one priority for a business. Make profit. That was it. The rich controlled the businesses, the government, and the economy, so their only priority was their priority, and their priority was to stay rich and get richer. (Now, it could be argued that this is the situation today, and in many countries, it certainly is, again, but there was a period of time that it wasn’t.)

But then workers, tired of giving up 9.5 of every 10 cookies made to their rich bosses who did nothing but sit around all day in their sitting rooms and lodges, rose up and formed unions. Despite the best efforts of union busters, these unions became prominent and workers slowly got rights. About the same time, the masses, who were pursuing votes for all (and I mean all, in the early days in some countries, only the rich men could vote; and while we all, hopefully, remember women’s suffrage, before that the working class men had to go through the same thing in many of these countries and, honestly, really should have been more understanding when the women demanded equal voting rights, but this is neither a history site nor a feminist site so we will end this discussion here), slowly managed to elect officials that cemented the rights of unions and the working class.

Initially this led to fair compensation and worker’s rights that had to be respected, but when it became clear that companies were not only poisoning workers with unsafe working conditions (starting with the creation of asbestos and then hazardous chemicals and pesticides and PFES and so on), but the environment as well, then you had environmental laws to contend with. Then when mass marketing mania began in the 1960s, consumers began to realize how much power they had when there were alternative options to meet a household’s needs (as the increasing pace of innovation meant that it was only a few years before a competitor came out with a competing product), and the importance of brand management magnified. Then you had more laws, and sanctions, around import and export as global trade expanded and so on. Of course, this led to the rise in Human Resources departments, Risk Management departments, and even Brand Management departments in the larger corporations. Moreover, let’s not even discuss “Diversity Initiatives”, which fall under HR in the many countries they still exist in (because they have evolved from equal “opportunity” through equal “outcomes” to “outcome targets” and that is NOT equal opportunity)!

The Problem

Now, for every decision that needs to be made, you have a profit priority, an environmental/sustainability/carbon priority, a risk priority, a geographic priority (near/friend shoring, forced or corporate mandated sanctions, etc.), a workplace safety priority, and so on — and the “top” priority is different for every single department. HR: worker well-fare. Procurement: savings. Supply Chain: supply assurance. Logistics: carbon or cost, depending on the country. Manufacturing: quality. Brand: ESG. And so on.

The Necessary Realization

It’s a mouthful, but its existed for decades: multi-objective optimization subject to absolute and preferred minimums and maximums, and the estimated cost of breaking a preferred minimum or maximum relative to the dominant priority.

Basically, the C-suite agrees on an overall hierarchy of priorities as well as absolute and relative minimums/maximums and goals for each priority that have to be adhered to by each department, who will, of course, strive to put their priority first (but can only be allowed to do so to the extent that the other priorities aren’t compromised).

This means that, for supply chain, they can optimize for supply assurance and on-time availability provided that they meet the:

  • organizational carbon target
  • geographic priorities
  • cost targets (based on contracts, procurement models, etc.)
  • quality and safety targets

and that they can only

  • go above the carbon target,
  • choose higher risk countries,
  • increase the cost, or
  • decrease the overall quality

if the percentage increase in assurance is double the increase in carbon (or some other agreed upon multiple), prevents a significant stockout loss, etc.

Then, all of this can be fed into an appropriately defined optimization model that will present one or balanced scenarios that meets the absolutes and only misses a goal if it’s necessary to hit another goal or brings about more benefit on one dimension than detriment on another.

While not everyone will see the solution that Procurement, Supply Chain, Logistics, or (Brand) Marketing comes up with as optimal, at least their baseline requirements will be met and it will be easier to get agreement and encourage collaboration.

There’s no perfect answer here as there will always be multiple viewpoints, but if you can show that you took everyone’s priority and requirements into account, it will open opportunities for collaboration and get everyone started on the same page.

The Technological Requirements

The technological requirements are considerable and require supply chain aware sourcing and sourcing aware supply chain and expertise from source to sink and back again on both sides.

A continuing reminder that if you want guidance in the short term, hope that your favourite provider reaches out to Bob Ferrari of Supply Chain Matters or the doctor and enables us to focus on writing the series (or in-depth e-book) explaining what modern Procurement and Supply Chain Tech needs to look like (and how it needs to be implemented) to address the challenges, reduce the risks, and address the priorities versus just dripping out tidbits as free time permits.

Breaking Down The Barriers: The Talent Gap

We’re continuing our foray into the top barriers to success that we outlined in our top barriers post that chronicles the barriers that keep coming up over and over again in every Procurement survey in our effort to ensure that you don’t have to read another state of procurement study for the next 5 years. Today’s topic: the talent gap!

A Brief History …

As we have previously noted in our discussion of category and market complexity, with each successive innovation, business, and process improvement, processes and tasks became more complex and required more education and experience to perform. As a result, with each successive innovation, the available talent pool shrinks. When you consider that traditional post-secondary programs haven’t kept up with the pace of innovation in business in decades, there’s a lack of formal training programs, mentorship programs disappeared decades ago (and every time there’s a workforce reduction, the older generation is the first to be let go or be bought out), and most businesses haven’t invested properly in training in decades, you can see that, for many traditional complex tasks, the talent pool is shrinking quickly.

But the lack of talent in traditional areas is just one side of the coin. The other side is that technology is progressing faster than even technology professionals can keep up. Combine this with the recent SaaS explosion in most corporations, with some large corporations using over 1,000 different SaaS applications, and the increasing complexity of “AI”-X applications, and the talent gap is expanding in tech as well.

The Problem

The problem here, as we expounded upon in our brief history, is multi-fold. There’s not enough talent in many domains, and in domains where there is talent, the rapid pace of development and innovation is still leaving top talent behind.

The Necessary Realization

In theory, the multi-fold solution is easy, but in practice, it will take a lot of human effort to realize, just like execution support can’t be solved overnight.

1) Bring Back Training

Stop trying to hire someone with all the skills and knowledge they need to do the job that is at least somewhat customized to your operation and start training again. Formal programs. Ensure all the materials are accessible online all the time so the parts your employees tend to forget (because they don’t perform the tasks regularly) are quickly and easily accessible.

2) Mentorship and Shadowing

Don’t wait until someone leaves to start looking for a replacement. Start training a replacement for a key position within three months of someone new taking the role via shadowing and mentorship. Make sure there is no task that relies on one person (even if always done by one person as it’s not demanding enough to require more than one employee) and that there is always a backup person. Stop trying to replace teams with agentic software and start trying to empower small teams with augmented intelligence so they can do the work of teams three, five, and ten times their size but still ensure the knowledge remains in the organization.

3) KMS: Knowledge Management System

Despite being introduced in the late 2000s, these never caught on and this is, honestly, one of the biggest reasons we have a talent gap today. Not only do most organizations not do enough planning around succession for those that perform key functions (it’s not just the C-Suite you need a plan for), but they don’t capture the key knowledge built up by long time employees who know how to run certain functions efficiently and effectively. That’s why performance degrades over time as people leave and new people are hired because the days when you’d join a company and stay for five, ten, twenty years or life disappeared with the last millennium. When organizations failed to properly capture this knowledge when the first round of massive layoffs hit in the dot com crash of 2000, and then never learned from it (and we saw the same mass exodus of senior, knowledgeable, people in the financial crisis of ’08), we ended up with massive increases in the “talent gap” as the knowledge required to forge talent suitable for your organization was lost. (On top of the fact that knowledge was increasingly leaking to China with the global outsourcing system.)

The reality is that unless the knowledge needed to run your business is captured, you’ll never have the talent you need, real or virtual (as these new-age AI-based agentic systems that will, according to the marketing, solve all your problems won’t work at all unless properly trained, and they can’t be properly trained unless the right data, processes, and organizational knowledge are appropriately captured — that’s a big reason these efforts continually fail and will continue to fail).

4) Augmented Intelligence Systems

For well-defined tasks for which mature (pre Gen-AI) agentic workflows exist that can be appropriately defined, controlled, and tailored, implement such systems to ease the burden on new employees as they attempt to learn the role and be productive and strategic.

The Technological Requirements

The technological requirements, especially for the KMS and the Augmented Intelligence Systems, are considerable and require supply chain aware sourcing and sourcing aware supply chain and expertise from source to sink and back again on both sides.

A continuing reminder that if you want guidance in the short term, hope that your favourite provider reaches out to Bob Ferrari of Supply Chain Matters or the doctor and enables us to focus on writing the series (or in-depth e-book) explaining what modern Procurement and Supply Chain Tech needs to look like (and how it needs to be implemented) to address the challenges, reduce the risks, and address the priorities versus just dripping out tidbits as free time permits.