whitepaper

Changing face of leadership in the modern procurement universe

by Ritoban Sengupta , Principal Analyst, Indirect Services

17 November 2019

Abstract

Introduction

In the rapidly changing paradigm of the procurement universe, as new technologies like cloud computing, artificial intelligence and Blockchain are coming to the fore, the role of the CPO within an organization has been undergoing a radical transformation and a need is felt whereby they will have to adjust accordingly. CPOs also face many challenges with regard to lack of transparency, ambiguous digital strategy, teams not possessing the requisite skills and ability to maintain a cutting edge in the technology era, etc.

This whitepaper will analyze how the role of the CPO has evolved in recent times with regard to tackling of risks, creation of more value, etc. It will also highlight what procurement leaders need in this new era, behavioral aspects required within a procurement team and how the challenges highlighted above can be effectively overcome.

Problem Statement

If CPOs are able to transform their role effectively to suit the changing environment, then they will go a long way in proving that their role has a critical impact on corporate performance.

This whitepaper will propose a solution for the following questions :-

What are the different business risks that an organization faces today and how can they be effectively overcome by CPOs in the current business environment?
How can more value be created by CPOs within procurement teams, in these changing times ?
How can challenges like lack of transparency and ambiguous digital strategy be overcome?
What do procurement leaders most need in this cha

Risks involved and ways of tackling them

Many CPOs know how to tackle traditional risks effectively, like losing a customer, shift in commodity prices, supplier not delivering desired outcome, etc but they struggle when it comes to managing new risks. Some of the new risks that procurement leaders have to confront are the exposure of complex global supply chains to social unrest or natural disaster, security of company’s data, etc

All companies have a list of risks, some of which involve procurement. Some of the methods which have been effectively employed by oganizations have been elucidated below:-

ways-to-tackle-risk

With the role of the traditional CPO evolving from being just a medium to help remove costs from the bottomline, to now facilitating growth in the topline, CPOs will look to utilize many of the automated processes and tasks to enable cost-savings. Some of the methods through which they can create value have been elucidated below:-

Creating more value within the organizations

Overcoming Procurement Obstacles and Challenges

The challenges that a CPO is facing today like a dearth of transparency and an ambiguous digital strategy have the potential to disrupt procurement departments, relationship with suppliers and also the organization of current supply chains. CPOs should try to tackle these challenges headlong to ensure that the procurement team moves forwards and the organization does not lag behind others. Some of the challenges and ways to tackle them have been elucidated below:-

Procurement challenges faced by procurement departments and ways to overcome them

	Challenges for procurement	Ways to overcome challenges
Lack of transparency	There is often a lack of transparency in both the supplier and buyer side. Sometimes supply chain transparency is so poor that 65% of procurement leaders have limited or negligible visibility beyond their Tier 1 suppliers The lack of transparency could be due to a variety of causes like poor communication, outdated systems, etc	The first step consists of being open about the goals to enhance transparency, both internally and externally. Once clear goals are established internally, it will permit one to approach transparency collaboratively leaving enough room for discussions about the current processes, partners and execution Externally one can have open lines of communication with suppliers, setting clear expectations for the future, which will be mutually beneficial
Ambiguous digital strategy	Only a minute fraction of procurement leaders believe that an effective digital procurement strategy will help them to deliver on their organizational objectives and value The procurement department has often lent support to the digital strategies of other departments over the past 10-20 years. Simply investing in technology is not enough as technology without strategy will lead to more problems rather than solutions	However, a large percentage of procurement leaders are striving to have a robust digital strategy in place which has the potential to transform the entire procurement operation If these methods are properly implemented, they have the ability to facilitate procurement enhance everything from data analysis to collaboration and team engagement

Procurement Action Plan

The role of procurement leaders has rapidly evolved over the ages. From a time when they were considered as more of a cost-saving centre, they have graduated to be more of centers which also generate profits and contribute to the topline of the company. With the evolution of new technologies like Blockchain and Cloud-computing, many diverse risks have emerged like security of company’s data, etc. Procurement leaders need to tackle these rsisks effectively. Some methods which can be implemented are appointment of a chief risk officer and introducing digital changes in procurement function.

Conclusion

In the coming years, as organizations undergo radical transformation in the wake of the digital revolution, the role of the procurement leaders will continually keep on evolving. They need to come up with effective strategies to nullify the risks involved and also create more value for organizations which go beyond cost-savings and process efficiency.

A holistic strategy needs to be created to lend support to investments in new technologies and tools that will enhance the effectiveness of organizations as a whole. Measures have to be taken to enhance transparency and engage internal and external stakeholders to ensure clarity of vision and quality of work. Al these steps and measures will ensure an atmosphere whereby both parties will mutually benefit along with the organization.

The challenges that a procurement department is facing today like dearth of transparency and an ambiguous digital strategy can also be effectively overcome by procurement leaders by implementing the right strategy. If procurement leaders are able to overcome the challenges that organizations are facing today, then it will be for the greater good of the organization as a whole.