Coupa Software has continued with its virtual event series. The latest included their CIO Eric Tan (who is a Monash Graduate by the way) talking with Chief Procurement Officers from around the globe.
Here are a dozen reflections for Chief Procurement Officer priorities:
The challenges in the market can be encapsulated by two words "fear" and "uncertainty". Uncertainty is driving fear as we don't know what the next six to twelve months will bring.
Annual budgets are now revisited quarterly. CFO, CIO and CPO have monthly working sessions and decisions are made in an agile framework within organisational guardrails, allowing businesses to adjust to changing circumstances quickly.
There is greater dependency and alignment between CPO and CIO roles; those organisations doing this well are driving a competitive advantage over their peers.
The overall mantra within organisations is do less with less. Organisations are very selective with funded and progressed projects; they must genuinely matter to an organisation's digital transformation and IT modernisation.
Project selection has changed from 25 to 30 “possibles”, with 15 projects probably being selected. Now, it’s only the top five or so being selected, with resources concentrated on these projects rather than being spread across a broader program of work. Organisations rally together around these projects.
ESG (Environmental, Social, Governance) features strongly in many CIO conversations. CIOs must navigate what suppliers they should partner with beyond their technical pedigree. Are those partners doing the "right thing"? It is an excellent opportunity for a deeper partnership with the CPO to determine this.
CPOs are doubling down on business continuity, managing risk and supply chains. Those in manufacturing have to contend with some significant variables. For example, the cost of containers has reduced by 60% since the highs of the pandemic, yet still cost more than they did pre-pandemic.
CPOs with physical supply chains are very focused on costs, driven by a range of factors including inflation and the costs of capital to suppliers. Heavily financed suppliers are now sharply in focus. What suppliers could be in trouble? Have any of those suppliers innovated through debt?
The CPO community shared that understanding every node within your supply chain is vital. These nodes must be visible and manufacturing or supplier locations, distribution centres, plus industry nuances should be considered. The data is critical to help navigate various geo-political events; understanding the supply chain provides intelligence to consider optionality.
Supply chain discussions are happening with internal customers, and options being explored to maintain supply chain integrity. Optionality may not be different suppliers; it could consider lifting inventory levels. This visibility extends beyond tier-one suppliers.
New commercial excellence practices are being applied and organisations are discussing the circumstances and revising terms of their supply chains openly with customers – providing insights into what has changed within the supply chain through intelligence.
CPOs in the past would apply the Pareto Principle to understand the supply chain. The twenty per cent being the big suppliers or the areas of greatest risk. This has changed to drilling down into tier two and three suppliers to identify any possible problems. We live in a world where one widget could shut your plant down and partnering with the CIO to gather vital information has never been more important.
New product creation, in many cases, must have less dependence on China and integrate more local suppliers. Energy prices in Europe are also another factor to be considered. Many companies see Asia and Latin America as critical for continuity options.
In summary, great organisations have CIOs who know the macro issues and CPOs who understand the micro factors. By building a strong partnership together they are setting the foundations for 2023.
Coupa are regular clients of my Speaker Services!