By Rich Hoffecker, Product Director at The Red Flag Group
This time last year The Red Flag Group® collaborated with ProcureCon to conduct a study on the direction that 2018 would take for technology and the strategic transformation of procurement departments. In a survey of chief procurement officers (CPOs) we asked about current and future plans that affect how their departments run.
In this article I reflect on some of the themes that came out of the 2018 study, and provide commentary from my experiences talking with clients and industry professionals over the past year.
A predominant theme among the surveyed CPOs was a desire to centralise procurement technology and processes. In response to the question ‘How important is centralisation to procurement?’, 61 percent of respondents saw centralisation as important or very important. This is not surprising, given that there are many financial and speed-to-action efficiencies in conferring activities like policy creation and supplier onboarding approvals to a central authority.
This trend is consistent with many conversations that I’ve had with clients over the past year. As procurement processes and supply chains grow in complexity and overall expense, leaders are looking for ways to centralise the core competencies within their departments.
One head of procurement at a large energy company stated that the key to controlling expense is centralising and standardising systems and processes, as this allows teams to leverage efficiencies across the entire process.
Standardisation does not come without challenges, however. A compliance leader who oversaw supply chain integrity at a large European medical supplier commented that while many aspects of a program can be centralised, the process should also consider the advantages of local knowledge in some scenarios.
A clear message from the CPO survey was that a significant investment is being made in automation and technology, with 33 percent of CPOs reporting this priority in transformational projects. This, of course, is not new or particularly novel – efficiency-delivering technologies have been the go-to strategy for decades, and likely will be for the foreseeable future.
Artificial intelligence and blockchain continue to draw the big hype, but old-school block-and-tackle systems (like master data management) are what really make a difference. Over the past year I’ve talked to several clients who saw the biggest returns on investment coming out of simple automation projects that took largely manual tasks and streamlined them into triggered workflows.
Not surprisingly, in the year of the EU General Data Protection Regulation (GDPR), cyber and data security continue to be seen as a significant risk, with 66 percent of CPOs calling this their biggest concern. This was consistent with nearly every organisation I talked with throughout 2018. We discussed it at conferences and workshops, we wrote articles about it; GDPR was driving the big story in not only the compliance world, but in supply chains, vendor management, marketing, sales and pretty much anywhere data is shared.
While there will probably be less noise about personal data privacy over 2019, data and cyber security looks to continue as a top-of-mind motivator for business leaders. Defining and implementing a data security and breach-preparedness strategy should be a firm part of your 2019 third party integrity risk management strategy.
A client I recently spoke with talked about the challenges he has had mapping as-is data sharing.
‘Getting the right people in the room is essential,’ he said. ‘Having the technology experts talking to the business experts really opened our eyes to the fact that we didn’t know for sure what data we were sharing with each vendor, or which ones had access to what data sources. Understanding that allowed us to develop a strategy about how we could manage our data sharing risks.’
I’ll close with a final observation about a key recommendation from the CPO survey.
Procurement is in a position to influence risk management strategies in a majority of cases. Increasingly, organisations are being held accountable for integrity issues hidden in the layers of their supply chains and CPOs should leverage their influence to push for automated solutions to help identify and mitigate exposure to these risks.
CPOs and supply chain leaders are emerging as influential forces when developing risk assessment and mitigation programs. With their in-depth knowledge of vendor networks and operational processes, they have been in a position to look holistically at the environment and potential risks. In many of the organisations that I’ve worked with, the seat at the table has evolved into a lead role owning the integrity risk across the supply chain. I envision that this evolution will continue into 2019 and beyond as organisations find that tapping into these knowledgeable leaders leads to stronger programs and practical implementation strategies.
Get a free download of the 2018 procurement department study here.
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