CPO survey finds cost reduction is key

UP TO 79 percent of chief procurement officers said they would focus on cost reduction and risk management as their business priority this year as a means of mitigating against economic uncertainty and to realise their growth ambitions, with their priority being on leveraging digital platforms.

This is according to professional services firm, Deloitte’s annual Chief Procurement Officer (CPO) Survey.

The associate director of integrated operations delivery at Deloitte, Khutso Sekgota, said those CPOs who accelerated the adoption of predictive and cognitive analytics would enable end-to-end supply chain visibility and start using their data to drive decision-making.

“Most CPOs are already thinking about how to augment their existing tools by leveraging the cloud, analytics and robotics. The challenge for them will be ensuring that their investments are well spent,” Sekgota said. The survey was conducted

79 countries, including in South Africa. It found that companies were particularly interested in adopting predictive and cognitive analytics, such as leveraging cloud, analytics, and robotic software to drive decision-making processes.

In total, 60 percent of chief financial officers agreed that this digitised process should sustain cost reduction in parallel to a greater focus on risk.

It is important for companies to fine-tune their cost-related strategies.

Three-quarters of CPOs believe that procurement’s role in delivering digital strategy will increase in the future, with more than 65 percent saying that analytics will have the most influence. The impact of automation and robotics on their function will steadily increase from 50 percent today to 88 percent in five years’ time, and up to 93 percent by 2025.

However, 62 percent of the respondents claimed that there was still a large to moderate skills gap across analytical abilities. The acting chief procurement officer at the National Treasury, Schalk Human, said it was important for companies to fine-tune their cost-related strategies in times of weak economic growth.

“In a low-growth economic environment, companies need to implement cost-related strategies, including within South Africa, which requires cost-related strategies that are key to drive cost reduction, cost avoidance, cost containment and aggregation in order to lower unit costs and defer costs or even cancel contracts,” Human said.

In total, 75 percent of CPOs say that they had executive support, but most CPOs also believed that they could improve their effectiveness of business partnering. Most rate their current effectiveness of business partnering at less than 70 percent, and are targeting future effectiveness of more than 90 percent.