Procurement currently stands at the intersection of a shifting landscape marked by unprecedented challenges and abundant opportunities. In order to capitalise on these opportunities, teams must evolve. They must embrace agility as a means to respond swiftly to market fluctuations and unforeseen disruptions, effectively navigate the complexities of global supply chains, and proactively address the growing emphasis on sustainability goals. This dynamic environment demands a procurement approach that is not only adaptive but also forward-thinking, enabling organisations to remain competitive and resilient in the face of change.
Gareth Paul, a Director in BIE’s Value Chain & Procurement Leadership Practice, spoke to Mark Smith, Procurement Vice President, Digital & Talent Supply at bp, Barbara Buttinger, Senior Vice President of Procurement at Siemens Energy, David Wylie, Commercial and Procurement Director at Thames Water and Rachael Legg, Group Chief Procurement Officer at Lightsource bp, to explore current priorities, and the opportunities they present, for the CPO to play a key strategic role in the organisation.
Digital transformation
The acceleration of digital transformation is reshaping the very core of business operations, and the integration of cutting-edge technologies is reshaping the very essence of how procurement processes are deployed. In a recent survey, Deloitte suggested that 72% of CPOs have identified digital transformation as a key imperative. Which is no surprise – the trajectory of digital transformation in procurement is unprecedented.
Mark Smith is hugely passionate about the role of digital in the transformation of procurement. “With the role of procurement having never been so broad – covering cost, risk, sustainability, and growth – it is essential that we use the rapidly growing array of digital procurement solutions to do more with less. Capital is flowing to procurement technology start ups like never before, and with the ability of AI to really unlock the value of procurement data, now is a really exciting time for CPOs to be relooking at all of their core activities through a fundamentally transformational lens,” he explains.
Operational Efficiency
CPOs are facing a unique set of challenges as they navigate this changing landscape, with organisations having to uncover enhanced value from existing resources while operating tighter budgets. This change in dynamic has seen a sharp increase in organsiations shifting focus towards prioritising operational efficiency. This in turn has led to organsiations having to delicately streamline operations by fostering innovative technology and automation solutions to drive more effective business partnerships and margin improvement.
Mark Smith mentions that “Organsiations are currently facing the challenge of redefining their business models whilst expanding into new products, services, and locations, all while undergoing a transformation of their existing legacy operations to enhance organisational efficiencies”.
This is particularly prevalent across the private equity market where numerous firms are reassessing portfolios and resetting value creation plans. This has resulted in the demand for a number of senior appointments to drive strategic focus on cost containment and operational efficiency, providing a more robust foundation for future expansion. However as Barbara Buttinger points out: “This drive is causing conflict between cost containment and resilience as customers remain very cost conscious and markets very competitive.”
Supply chain resilience and risk mitigation
Whenever there is a degree of uncertainty in the business landscape or the economic climate, flexibility is key. Organisations that can adjust easily or pivot quickly have the strategic and tactical advantage.
Procurement leaders have had to remain agile, adapt to changing regulations, and closely monitor global trade dynamics and geopolitical shifts. They are embracing digital technology to build further resilience, respond quickly to market changes and enhance visibility into their external supply chain. This has led to a further appetite for investment in integrated digital solutions.
Stronger visibility of the external supply chain allows procurement teams to manage proactively and mitigate disruptions. They can assess potential risks coming down the line and get a clearer picture of exactly where the organisation may be vulnerable. Recognising this challenge, Barbara Buttinger recommends: “Building a more collaborative way of working into your supply chains”.
However, looking further ahead, David Wylie puts forward the point: “Whilst we have certainly seen the return to more localised supply chains as risks and geopolitical events have incentivised organisations to bring supply closer to home, I wonder how much of a long-term trend this might be. There is a cost to localisation and I suspect we might see the reversal of that in maybe five years in highly competitive markets as people reassess the risk versus cost trade off (largely depending on how the world sees China over that period).”
ESG as a competitive advantage
Investment houses see no conflict between ESG and value. In a recent survey by PWC of more than 150 private investment houses, more than 80% believed ESG performance was ‘in line with the pursuit of returns.’ A third said ESG was a primary driver of value creation in more than half their recent deals, and 53% said they frequently chose not to pursue deals because of ESG factors. As a result, CPOs are under pressure from the very top to deliver a strong ESG proposition.
It is imperative that ESG investment aligns with the board objectives. It cannot be a siloed effort and has to be integrated into the overall corporate strategy for true success.
According to Rachael Legg: “ESG has a significant positive impact on fundamental business issues and associated long-term success, like corporate reputation, opportunity management, and more. It can also help identify both immediate and long-term risks, and give you time to mitigate them. Furthermore, an effective ESG strategy features enhanced customer and investor acquisition, reduced disruptions and losses, greater workforce productivity and organisational resilience, and it identifies those new market customers and product services and revenue streams.”
In conclusion
Procurement is now, more than ever, a driving force behind organisational success. It’s not just about cost efficiency; it’s about strategic value and innovation. In a constantly evolving business landscape, procurement leaders must be visionaries, pioneering change, and steering their organsiations towards sustainable growth and resilience. It’s a thought leadership role, guiding the way in an ever-changing landscape.
If you are interesting in joining BIE’S procurement community, attending our events for procurement leaders and receiving future thought leadership content on the topics covered this article, please reach out to Gareth Paul.
