Search By Topic The Green Supply Chain Distribution Digest
Supply Chain Digest Logo

Category: Procurement and Sourcing

Supply Chain News: New Deloitte Study Says Procurement Undergoing Digital Revolution


After a Period of People Expansion, Procurement Now Being Asked to Do More with Less; the Two Tracks for Digitization


March 23, 2016
SCDigest Editorial Staff

The consultants at Deloitte are back with their fifth global survey of procurement executives, and while many of the results are not surprising, Deloitte says the rise of digital procurement strategies is emerging as a key focus area, supplanting talent management as the top strategic priority for procurement organizations.

Supply Chain Digest Says...

Perhaps surprising are the results showing that the interest in outsourcing procurement activities, all the rage in the mid-2000s and a bit beyond, seems to be cooling.

What do you say?

Click here to send us your comments
Click here to see reader feedback

In terms of survey population, Deloitte received 334 responses from senior procurement executives across 33 different countries, with combined revenues across the respondents companies of some $4.4 trillion annually.

In the introduction to the report, Deloitte says that "In much the same way as sales forces, channel management and consumer engagement have been transformed by disruptive digital technologies over recent years, so we expect the same to occur for the supply-facing assets of the business."

Of course, so called "e-procurement" technologies have been around for more than 15 years, so this must be referring to something different, right?

The report call out "cognitive analytics" for redefining scenario analysis, "crowd sourcing" for improving procurement's reach and creativity, and mobile analytics for real-time performance management as examples of these digital technologies in procurement, noting that "the potential for these digital solutions to transform the procurement value proposition is considerable."

It later adds that "It might be soon that the differentiation of leading procurement practice might be defined less by the war for talent, and more by the war for technology," noting not surprisingly that technology will increasingly automate most if not all of traditional procurement execution process that today are performed by humans.

We're not sure if this survey data point supports or doesn't the notion that technology capabilities will soon overtake talent as the key point of differentiation in procurement organizations, but a significant 62% of respondents said their teams lack the skills to effectively deliver overall procurement strategies. That's interesting.

From a more prosaic view, 75% of respondents put cost reduction as their top procurement priority, again in the top spot and about where it was two years ago in percentage terms after a dip in the 2015 study in what now looks like was simply a survey aberation.

In second place, well back at 46% of repondents pickng it as a top strategy, was supporting new product/market development, followed close behind by increasing corporate cash flow (45%) and supporting organic company growth (43%).

What tools will procurement executives use to reach these goals? That list is rather straight forward. As shown in the graphic below, consolidating existing spend, cited by 43% of respondents, topped the list, followed by increasing supplier collaboration and then – somewhat ironically – increasing competition among suppliers.



Source: Deloitte

In another interesting data point, 32% of respondents characterized their procurement organizations as being "excellent" at strategic partnerships with the rest of the business. 65% categorized those capabilities as "mixed," while just 3% placed themselves in the "poor" category. But with approximately two-thirds selecting the "mixed" status, there would seem room for a lot of improvement in this area, though we will note it takes two to tango.

(See More Below)



Deloitte says that for awhile, procurement organizations did not have too much trouble expanding their teams, because the return on that invesment in people was strong. But that situation has changed, as "procurement is being asked to do more with less, or at least do different things with the same team." Welcome to the supply chain club, we say.

We noted above the 62% of respondents who said their procurement teams did not have the talent to carry out the organization's strategies. That was up from 57% in the previous year's study, and is part of what Deloitte calls a five-year downward trend in matters relating to procurement talent.

"While recruiting efforts can be bolstered, as can training, we question whether the challenge is more fundamental," Deloitte writes, requiring CPOs to "look at ways of complementing their talent pool with new assets and tools," including some of the new digital technologies cited above.

Perhaps surprising are the results showing that the interest in outsourcing procurement activities, all the rage in the mid-2000s and a bit beyond, seems to be cooling.

As seen in the graphic below, interest in outsourcing dropped in all five procurement processes covered in the survey versus last year's results, and the area for which the highest percentage had interest, "operational buying," was selected by only one in four respondents.


Source: Deloitte

Back to the digital imperative, Deloitte says other executives in companies have a simple wish list: "Deliver more insight on-demand to inform my most strategic decisions; and at the same time, make day-to-day execution ruthlessly efficient, lightening quick and transparent."

Is that all?

Deloitte sees digital technologies as being essential to achieve these lofty goals, and says there are two paths to follow:

First are "upstream" or strategic initiatives, where such technologies as advanced analytics and crowd sourcing might be deployed. The second path relates to operational and transactional processes, where technogy will enable more self-service and automation of current processes.

"Procurement is effectively positioned to join the digital revolution," Deloitte concludes. "It can offer a radically different value propositon to the organization, one that removes the traditional process-led bottleneck and the need to allocate significant human resources to still essential transactional tasks."

Any reaction to the data in this Deloitte report? Do you see digitization of procurement as key? Let us know your thoughts at the Feedback section below.


Your Comments/Feedback




Follow Us

Supply Chain Digest news is available via RSS
RSS facebook twitter youtube
bloglines my yahoo
news gator


Subscribe to our insightful weekly newsletter. Get immediate access to premium contents. Its's easy and free
Enter your email below to subscribe:
Join the thousands of supply chain, logistics, technology and marketing professionals who rely on Supply Chain Digest for the best in insight, news, tools, opinion, education and solution.
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2023 - All rights reserved