Reimagining the procurement function and the role of the CPO

By:  Etosha Thurman, the Chief Marketing & Solutions Officer

More than two years after the COVID-19 pandemic rocked our world, and with the global impact of Brexit and the war in Ukraine, continuous strain on supply chains is a daily occurrence.From halted manufacturing, airport and seaport shutdowns, and interruptions in the delivery of raw materials and finished goods – the topic of supply chain disruption is now “small talk” at any event. 

Procurement departments have been forced into crisis-management mode, working overtime to help companies alleviate disruptions by finding alternate sources of supply and responding to changing consumer trends and demands. These disruptions bring to light the crucial role of Chief Procurement Officer (CPO), and how the position has evolved in recent years.

Driving digitalisation

In the past, the role of procurement was to acquire goods and services that enabled companies to operate profitably. It has since evolved from being a subset of the supply chain function, where the focus of CPOs was to drive down costs, to an enterprise-wide capability that helps shape business strategy and supports organisations with critical goals.

These days, procurement isat the centre of value creation,and the modern CPO has an important voice in key business decisions. To continue driving real value for the entire organisation, CPOs need to automate mundane tasks by embracing digital transformation.

This transformation is happening, according to a new report based on an Economist Impact study sponsored by SAP. The report,Chain reactions: building value in procurement through digitalisation,finds that investment in digital technologies is a top priority. In fact, 82% of respondents in EMEA registered modest to significant rises in digital transformation budgets. Among the EMEA respondents, Covid-19 was cited as the major driver of digitalisation in procurement.

With increased budgets to work with, CPOs must recognise the areas that require the greatest level of attention. Intelligent cloud-based solutions can replace complex steps with guided processes that direct users to make the best spend decisions and eliminate manual and paper-driven processes. By doing this, CPOs can dedicate their full attention to strategic value-add activities such as risk-scenario planning, trading partner collaboration, shaping mutually beneficial outcomes, integrating environmental, social and governance (ESG) goals into their operational systems, and shoring up supply chain efficiency.

Embracing supply networks

Going a step further, CPOs have an opportunity to help their companies move away from linear supply chains that rely on a limited number of trading partners. Supply networksopen supply chains using technology and data analytics to provide continuous, real-time information and a holistic view of all areas of the business. This includes visibility into all trading partners, such as suppliers, logistics and services providers, asset operators, and maintenance contractors.

This wider visibility enables organisations to move beyond local markets to become part of a global network that continues to grow as more companies join. Business networks are multipliers for buyers, sellers, shippers, carriers, and maintenance providers. They help companies expand into new global markets, find new customers, uncover new opportunities, and secure the suppliers needed to support these new business models. In addition, with a global network of suppliers, organisations can be more agile,which means CPOs have increased power to mitigate risk in times of disruption, reducing stock-outs and revenue loss.

Improving supply chain visibility

No longer a “nice to have,” sustainability has become a prerequisite to doing business. CPOs have a key responsibility in guaranteeing businesses can successfully achieve their ESG goals. According to the Economist Impact report, reducing waste and lowering energy consumption are the top two ESG priorities for CPOs or their equivalents. And, according to SAP’s research with Opinium, consumers are now paying more attention to the supply chains of the brands they buy from, with 83% of consumers saying they would be more likely to purchase from a brand that supports and sources from local suppliers. Additionally, 83% would be willing to compromise on delivery times, have less choice, and pay more for ethically sourced products.

Leveraging a digital business network will allow CPOs to obtain extensive visibility into the interconnected activities of trading partners at all tiers of the supply chain. Not only does this improve transparency, but it also allows organisations to identify new suppliers that can drive ESG priorities forward within their companies.

With companies facing more pressure than ever before, CPOs are demonstrating how they can navigate disruption and drive a seamless and successful procurement strategy for their organisation. Key to this success is embracing digital tools that allow CPOs to focus more on strategic activities, and less on operational tasks like invoice processing, vendor management, and contract approvals. In addition, organisations should consider pivoting to agile supply networks to ensure business continuity and greater collaboration with partners.

Ultimately, the CPOs who are quick to embrace the power of technology will stay ahead of the competition, while accelerating their recovery from these challenging times.