cost saving ideas for companies Outsource by Molly

12 bombshells from Deloitte’s Global Chief Procurement Officer Survey 2018

5th March 2018

Okay, the title may be slightly sarcastic. Not because we don’t agree with the findings of Deloitte’s Global Chief Procurement Officer Survey 2018 or because we don’t respect the organisation or what they produce; on the contrary in fact. The survey has, for the past 7 years, very much mirrored our (extremely none-scientific way of measuring; chatting to clients and handling enquiries from prospective clients) own findings; the majority of businesses and charities are looking for help with cost reduction.

Savings, across a business, can be achieved in numerous ways. And it doesn’t have to be done by cutting corners, receiving inferior products or services (or service) or by putting unachievable targets or pressure on employees. However, the notion of “cost reduction” or “cost saving” does tend to get some negative coverage from procurement commentators. But the fact remains that, “savings” is a Procurement KPI and most people are looking for opportunities to make them.

Deloitte’s Global Chief Procurement Officer Survey 2018 findings;

1. Cost Saving is a top business strategy according to procurement leaders

Cost reduction (78%), new products/ market development (58%) and managing risks (54%) remain the top business strategies for procurement leaders, all of which we’re huge advocates of.

2. Procurement leaders are constantly looking at ways to implement savings

61% of procurement leaders (survey-wide/ global respondents) delivered better year-on-year savings performance than 2017 with 56% of procurement leaders in Europe stating better year-on-year savings.

3. Some procurement leaders class their procurement function as “excellent”

23% of procurement leaders, within the Business and Professional Services industry, believe the effectiveness of their procurement function as a business partner is 'excellent', which is no surprise; the role of procurement should be continually delivering value.

4. Businesses which buy and sell products see a high value in buying function

36% of procurement leaders, in the Consumer Business industry, believe that their procurement function is highly effective, and that procurement is highly regarded internally and seen as a key business partner contributing significant strategic value - significantly higher than the overall response of 24%. But of course, businesses in this sector will see high value in the procurement function (higher than the average!) when the entire business model will be based on buying (and of course selling) products. Whether it’s GNFR (Goods Not For Resale) or not, everyone within the business is going to understand procurement. Well, in theory at least.

5. Oh.

Only 22% of procurement leaders, within the Energy and Resources industry, believe their teams have the necessary skills to deliver on their procurement strategy. This genuinely is a bit of a bombshell as it’s the lowest across all industries despite a higher-than-average spend on training in technical procurement skills. Outsourcing their procurement could be an option!

6. Managing risk is top of the pile in an industry that assesses and manages risk

Managing risks (81%) has now surpassed reducing costs as a key business strategy within the Financial Services and Insurance industry and that many more CPOs (40%) attach importance to cybersecurity and data privacy compared with the overall average of 18%. In an industry that sells cyber insurance and/ or is heavily regulated regarding data privacy.

7. Mmmmmm, is it coincidentally low?

Procurement leaders have differing views about savings performance within Government and Public Sector: 50% indicated improvement on the previous year savings. This is significantly lower than the global average of 61%. Is this a coincidence or is it simply that there are fewer companies who bid for these tenders (or procurement projects) due to the complexity and investment in both time and money? By their own doing, is this sector making suppliers not work as hard due to the significantly reduced competition?

8. Healthcare and Life Sciences through up a thought-provoking statistic

88% of the respondents, within the Healthcare and Life Sciences industry, say procurement team members are embedded in cross-functional teams to better understand internal stakeholder requirements. This is highest across all industries. This is a fascinating statistic. It’s likely due to the complex nature of some of the products and services they’re sourcing and buying. But wouldn’t all businesses/ sectors be better taking this approach?...............

9. The Manufacturing industry seems to be making a particular function feel a bit unloved

Within the Manufacturing industry, only 23% of procurement leaders feel 'highly supported' by their executives. This is the lowest across all industries. These figures are no surprise to us having a number of clients, within this sector, and the conversations some have with us.

10. Technology may have more precedence within the industry which includes, “Technology”

11% of procurement leaders, in the Technology, Media and Telecommunications industry, have no formal training planned: this is higher than the overall average of 7%, but is this purely because this industry put far more precedence on technology rather than the human equivalent of a process and so would naturally look to invest there instead?

11. Visibility within procurement is a sight for sore eyes it seems

As many as 65% of procurement leaders have limited or no visibility beyond their tier one suppliers. While visibility of the supply chain is crucial for businesses to ensure factors such as meeting regulatory requirement and risk planning, currently just 6% say they have full transparency of their entire supply chain. How worrying! Regulatory compliance and risk planning can’t and shouldn’t be taken lightly. There are major implications, for organisations across all industries, for not meeting regulatory and corporate social responsibility requirements and for the identification and mitigation of supply chain risks. Improved transparency of pricing, supplier locations and critical dependencies can help procurement leaders deliver greater value and avoid potentially significant regulatory, reputational and operational risk.

12. Outsourcing is a solution within procurement

Across the Europe region of the 2018 survey, the use of outsourcing as a procurement solution has remained constant since 2017 (at 10%) - halting a decline from 14% in 2015. We’d be fascinated to know what the UK alone figure was. 72% of procurement leaders are spending less than two per cent of their operating budgets on training and development programmes for their teams, compared to 66% in 2017; are more turning to outsourced procurement? We’ll know more on this come the 2019 Deloitte Global Chief Procurement Officer Survey………….

Conclusion

Procurement isn’t about cutting a currant in half. It’s not about squeezing every last penny out of suppliers and business partners (to the point where products and service drops off as well as risk increases). It’s more than just cost saving and compliance. It's about building relationships with internal stakeholders and external suppliers, drawing strategic insights from data to help others and using unique talent to solve problems. It’s about building strategic partnerships that can take your business to the next level.

We’re not so naïve to think that our interpretation and opinion on the 2018 survey is the only one. We’re naturally all going to read the facts and figures that we can all apply to our own businesses and service offerings within procurement. However, cost saving, again, features on numerous occasions and is always high up. So like it or loathe it as a KPI; it’s here to stay. And like we’ve stated on numerous occasions, even for efficient businesses, existing supplier relationships (and the complexities of some of these!), different processes (and the soft savings associated with changing them) and constantly evolving technology, products and services etc. all present huge opportunity for cost reduction. Constantly evolving technology, products and services are doing just that; evolving, developing, growing, changing, progressing and advancing. And so even for procurement professionals who do their jobs perfectly well, cost reduction is and will always be a KPI. After all, why wouldn’t it?

"We're not so naïve to think that our interpretation and opinion on the 2018 survey is the only one. We're naturally all going to read the facts and figures that we can all apply to our own businesses and service offerings within procurement. However, cost saving, again, features on numerous occasions and is always high up. So like it or loathe it as a KPI; it's here to stay."