This week’s webinar notes are from a December 2013 event presented by Coupa and CFO.com with featured speakers from Deloitte and Blackstone Group. The event is available on demand on CFO.com and if you are interested in the content, there are two Deloitte whitepapers you can download:
While the four trends defined by Deloitte’s John Mavriyannakis are new topics for procurement, he did offer some interesting updates, added to by practitioner commentary by Blackstone’s Scott Whitehill.
Trend #1: Margin Pressure
Companies are feeling increasing pressure on their margins - especially in manufacturing and in mature industries. Anyone looking to reduce labor costs by offshoring will need to look beyond Chain, as their rates are increasing. True low cost labor sourcing is shifting to locations such as Indonesia and North Africa. But taking steps to protect margins through savings does not mean that a straight lowest cost strategy is the best option. Total cost of ownership must be considered, with an emphasis on close attention to quality. Sacrificing in one place in order to save in another not only hampers efforts to save, it obscures where the additional costs will be felt. Whitehill articulated a common challenge for companies working with TCO, and that is the establishing the right metrics and KPIs for measuring quality.
Trend #2: Supply Chain Risk
As we have seen in the aftermath of the natural disasters over the last few years, many industries are affected by supply chain risk. The global business community has become increasingly interdependent because of the expansive supply chains they have built up. Active pursuit of supplier consolidation has not helped as it reduced the number of suppliers on contract in a given category. In fact, some companies don’t know how much consolidation they’ve already done. It is important to get visibility into which suppliers and categories represent the greatest risk as well as existing risk versus risk being created by in flight contracts.
Trend #3: Talent
CPOs continue to feel a skills gap in their teams. Having higher-level procurement leaders means that they are making more significant, more strategic commitments to the organization – but they still need to have the people with the right capabilities to execute their plans. Most companies will need to apply the combination of upskilling the existing team and leveraging automation. On the positive side, the trend to outsource procurement itself is slowing as companies realize that they are too integral to the operation. Whitehill echoed this sentiment, adding that they have made the conscious decision to keep procurement in house to maintain their ownership over culture and relationships.
Trend #4: Government Regulations
While only a subset of industries are affected by government regulations, companies across the board are seeing increased requirements for documentation and evidence from their Corporate Social Responsibility programs. Claims of all kinds are expected to be backed up with the appropriate data.
What is interesting about the four trends is that they indicate a large broad opportunity for the procurement function to increase their visibility and relevance. As futuristic as 2020 sounds, it is only 6 years away, making these observations more like just shortly advance notice on the areas where we need to focus our attention and effort. To put the timeline into perspective, Coupa was founded less than 8 years ago, and now they have a large presence in the procurement solution space. 2020 will be here before we know it.
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