Consulting firm Deloitte is out with results of its 2020 "Flash survey" of procurement executives. Here are the highlights.
Supply Chain Digest Says... |
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| About 47% percent of survey respondents said they are planning to expand their overall supply base, while 25% of respondents plan to consolidate |
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The report notes early on the "The COVID-19 pandemic has created a "black swan" environment for organizations to navigate, requiring many to rethink the, supply chains they have built over decades."
Key trends Deloitte calls out from the survey data include:
Cash in King: As is always true in crisis periods, companies are focused on managing/conserving cash. That includes new efforts at cost reduction. Deloitte finds two in three companies globally now expect to pursue cost reduction efforts over the next 12 months, compared with 38% before the pandemic began. In addition, the percentage of respondents pursuing cost reduction targets greater than 10% increased to 66% from 41% compared with pre-COVID-19 levels.
Teams Matter: Deloitte says two of the three most critical success factors for procurement organizations to navigate the pandemic revolve around employees and teams, including workforce safety and effective virtual working, In addition, the overall effectiveness of teams and their ability to sustainably deliver on the organization's biggest priorities, such as cost and risk management, requires CPOs to build and deploy effective talent strategies.
Fighting Fires: Surprisingly, data quality and visibility, digitization/analytics were respectively only ranked as the 8th, 9th, and 11th most critical success factors to navigate the pandemic. Deloitte says that is surprising given the role of such tools in effectively navigating disruptive events and quickly responding to risks within the supply chain. Deloitte surmises that procurement organizations have focused their efforts primarily on addressing pressing concerns presented by the pandemic.
Increasing Supply Chain Visibility: The flash survey found only 50% of procurement organizations had high or very high visibility into their tier 1 suppliers, while 90% of organizations rated visibility into their extended supply networks as moderate to very low. This is potentially very concerning for boards of directors and CEOs, Deloitte says, as 55% of them are now held accountable for risk. The report notes most supply continuity failures are attributable to issues beyond tier 1.
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To Consolidate or not to Consolidate: About 47% percent of survey respondents said they are planning to expand their overall supply base, while 25% of respondents plan to consolidate their supply base. Of those looking to expand, 31% ranked "refining geographic supplier base" as the top approach to tactically implement the expansion, followed by 24% who ranked "shift to nearshore/regional" as their top approach.
Varying Thoughts on Supply Base Consolidaton
Sixty-four percent of those who are planning to consolidate also ranked "refining geographic supplier base" as their No. 1 approach. Deloitte says this infers one of two possible situations: Either these organizations will run global tenders to identify the optimal commercial arrangements, or they will strategically and tactically predetermine which suppliers they want to consolidate in regions that reduce potential risk exposure.
In the end, Deloitte says top performing procurement organizations are characterized by:
• Having higher visibility into both tier 1 and tier 2 suppliers
• Being twice as likely to prioritize digitization and a day-to-day focus
• Being seven times more likely to slightly expand their overall supply base in response to supply-side vulnerabilities.
The full report is available here: 2020 CPO Flash Survey
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