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Category: Procurement and Sourcing

Becoming a Supply Chain Complexity Master in Procurement Delivers Outsized Rewards

 


Getting Rid of Bar Complexity, Embracing Good Complexity

 

Oct. 31, 2019
SCDigest Editorial Staff


There is a general consensus that supply chain requirements and processes continue to grow in complexity.

That certain is true in the procurement domain. Factors include a pullback in globalization and the related trade and tariff wars, and an environment that puts a premium on risk management even as the number and types of risk seem to be growing.  What's more, the responsibilities of procurement executives continue to expand in most companies.

Supply Chain Digest Says...

Complexity masters were grouped from those companies in the survey that were in the top quartile in performance and also in the top quartile of complexity.

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"Procurement organizations today shoulder an expansive and intricate set of responsibilities, and each new task that arises from these responsibilities adds another node to an ever-growing network of complex initiatives and challenges to address," say the consultants at Deloitte, in their just released 2019 version of its annual Global CPO Survey.

While CPOs as usual have a mandate to reduce costs and risks, their ability to execute is a different story, Deloitte says.

"Many procurement leaders are finding it hard to weigh competing demands for their limited resources," report says. "They're having trouble determining how best to meet their supply-related commitments alongside more ambitious goals such as strategic business partnering and innovation contributions. They also struggle with frequent fire-fighting."

Sound familiar?

Deloitte says there are two types of complexity that procurement organizations face: good and bad.

"Bad complexity" introduces risk and hampers procurement performance Deloitte says, and should be rigorously weeded out. For example, supply chain disruption events from natural disasters to geopolitical strife and cyberattacks have all raised perceived supply market risk in the last year.

But Deloitte says more than 50% of organizations in its survey say they have zero or minimal effectiveness in using commercially available digital tools to spot and predict risk in supply markets.

Conversely, "good complexity" can be exploited to expand procurement's influence in the enterprise beyond its traditional focus on spend management toward a broader engagement model and service offering.

Deloitte says this includes efforts to more broadly influence business stakeholders in strategic areas, such as capital expenditures and enterprise risk management, as well as more deeply influencing stakeholders through demonstrated leadership in corporate development.

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How do we get rid of bad complexity in procurement and embrace good complexity?

Deloitte says it comes down to one key initiative: digital transformation.

"If CPOs master this core area, they will be able to achieve mastery over all other forms of complexity," the report says, adding "No longer simply a buzzword, digital transformation is becoming an imperative for top-performing procurement organizations. What's more, digital transformation has become core to business transformation."

And there are financial rewards from mastering complexity.

The report includes the chart below, which shows how what is calls "complexity masters" significantly outperform other companies along a number of procurement measures.

 

Complexity masters were grouped from those companies in the survey that were in the top quartile in performance and also in the top quartile of complexity.

Deloitte says predictive analytics is a key digital technology embraced by procurement leaders.

In the end, Deloitte says, "CPOs who can become digitally enabled "complexity masters" will be able to deliver value in lockstep with the business - no matter what storms and headwinds build up."


Do you agree there is good and bad complexity? Is procurement digtiziaiton the key - or overblown? Let us know your thoughts at the Feedback section below.

 

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