Procurement executives continue to focus on cost cutting and talent

27 February 2017

Procurement executives are predominantly focused on cost reduction, managing risks and new product/market development, finds a new study. Value creation is focused on consolidating spending and increasing competition. Procurement departments continue to face talent challenges however, although large numbers of departments are not focusing investment into developing their staff.

To gain insight into the current state of affairs in the procurement arena, Deloitte, in associate with Odgers Berndtson, surveyed 480 leaders in the industry, working at companies whose total combined revenues top $4.9 trillion.

Prioritisation of business strategies over the next 12 months

Chief Procurement Officer (CPOs) continue to strongly prioritise cost reduction, cited by 79% of respondents as a priority for their business strategy over the next 12 months. Managing risks takes second place, with 57% of respondents naming it a strong priority and almost the rest naming it as somewhat of a priority. New product/market development is cited as a priority by 52% of respondents.

Other areas of priority include increasing cash flow and expanding organically. Areas of less concern include expanding by acquisition, with 21% saying it is a strong priority, increasing capital expenditure, cited by 18% as a strong priority, and disposing of assets, cited by 13% as a strong priority.

CPOs will continue their focus of generating value through traditional levers

The research also considers how CPOs will go about creating value in the coming 12 months, compared to last year. The top most cited lever is consolidating of spending, cited by 40% of respondents, down from 43% last year. Increasing competition comes second, mentioned by 35% of respondents, and up slightly on last year’s 32%. Specification improvement remains relatively stable on last year, at 28% in 2017, from 29%.

Increasing supplier collaboration has fallen out of favour among respondents, down from 39% last year to 26% this year. Focus on reducing total life cycle/ownership costs too has become less interesting to respondents, falling from 30% last year to 26% this year.

The areas of least focus for the creation of value are in the area of managing commodity price volatility, cited by 11%, the outsourcing of non-core procurement activity, picked by 12% and reducing transaction costs, cited by 21%.

Comparing savings performance to business partnering effectiveness across industries

The study further explored the savings performance to business partnering effectiveness across industries. The study found that energy & resources, manufacturing and healthcare and life sciences performed well, managed to turn strong business partnering into strong savings performance.

Technology, media and communications performed poorly in their ability to leverage business partnering and saving performance.  

Talent gap in procument

Another area taken under scrutiny by the analysis is the current talent environment faced by CPOs across the industry. The research points to a continued gap in their teams skills, inhibiting them from delivering on their procurement strategy – around 40% say that they have the skills they need, compared to 60% that believe skills are lacking.

The result for 2017 reflects previous years’ results, although it falls somewhat behind the result of 2013, when 52% of respondents said that they had the necessary skills.

Investment in new talent development

Millennials are making up increasingly large proportions of procurement departments. The number of departments where around half (41% to 60%) of staff consists out of millenials stands at 18%, while 36% of the functions have a share of between 21% to 40%.

While companies are attracting more and more millennials to their businesses they are not training them to meet their specific skills shortages, with around 25% of companies surveyed spending less than 1% of their procurement budget on training. A lack of training and development, according to an earlier survey, is one of the primary reasons for dissatisfaction among millennials.

When training is available, it tends to be in the form of encouraging the procurement team to take part in non-procurement training, cited by 59% of respondents, the development of a procurement academy and/or procurement training curriculum, cited by 54% of respondents, and engaging in placements within the rest of the business, cited by 43% of respondents.

The authors state, "Whilst there is an increased requirement for leadership and digital skills there is limited change in the investment or approach to close the talent gap. With improvements in technology enabling automation, the skills of the past will not deliver the needs of the future – organisations should look to attract and develop the next generation of procurement leaders who will act as innovators, challengers, and digitally minded-thinkers"

Related: CFO increasingly focused on human capital.


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Maine Pointe: How 3D printing will impact the global supply chain

21 March 2019

3D printing is touted as one of the most disruptive developments in manufacturing and beyond. UK-based Simon Knowles, Chief Marketing Officer at Maine Pointe, reflects on the impact the innovative technology can have on supply chain management. He outlines potential benefits of the technology and five ways it will impact the supply chain. 

Also known as additive manufacturing, 3D printing is a process which uses a three-dimensional digital model to create a physical object by adding many thin layers of material in succession, subsequently lowering cost by cutting out waste. This is radically different from current, subtractive production methods where up to 90% of the original block of material can be wasted. Although we tend to think of it as a new technology, the first 3D printer was introduced nearly 30 years ago. 

So far, issues such as durability, speed and protection of intellectual property rights have prevented 3D printing from entering mainstream manufacturing. However, the industry is making rapid advancements and it’s only a matter of time before we see it significantly impacting global supply chains and operations. According to the Global Supply Chain Institute (GSCI), "some supply chain professionals predict 3D printing will eventually rival the impact of Henry Ford’s assembly line.” This technology has the power to help companies significantly reduce costs, overcome geopolitical risks / tariffs, improve customer service, reduce their carbon footprint and drive innovation for competitive advantage.

How 3D printing will impact the global supply chain

Impacting the supply chain

Five ways 3D printing will have a massive impact on the supply chain and drive competitive advantage:

1. Decentralise production – The ‘portable’ nature of the technology will enable businesses to take production to local markets or customers faster. As a result, we will see a shift away from mass production in low-cost countries in favour of more local assembly hubs. Companies will have the capability to produce components closer to home rather than rely on imports. This is especially important during times of geopolitical tension, for example during a trade war, when the cost of purchasing components globally can increase rapidly.

2. Drive product customisation – As a tool-less process, 3D printing technology gives manufacturers unprecedented freedom to tailor offerings to clients’ specific requirements and enhance the customer experience. This will result in more agile supply chains which can rapidly adapt to changes in the market. Eventually, we could see design, production and distribution merge into one supply chain function with greater client involvement in the entire design and production process.

3. Reduce complexity and improve time-to-market – 3D printing technology consolidates the number of components and processes required for manufacturing. This will have a significant impact on global supply chains, decreasing complexities, saving on production costs, enhancing lead times and improving time-to-market.

4. Improve resource efficiency – 3D printing is a ‘greener,’ more energy-efficient and cost-efficient production method. It creates almost zero waste, lowers the risk of overproduction and excess inventory and reduces the carbon footprint. It takes ‘Just-in-Time’ manufacturing to a new level.

5. Rationalise inventory and logistics – As ‘on demand’ production becomes the norm, the need to transport physical goods across countries and continents will reduce. Combined with the lower number of SKUs required for production, this will have a major impact on warehousing and logistics and will have the potential to overcome tariffs. 

Tomorrow's technology, today

While 3D printing technology may sound like science fiction, it is actually science fact and it’s making its presence felt right now. Here are a few more real-world applications already a reality or just around the corner: 

Aerospace – It may surprise you to learn some non-critical 3D printed parts are already in use on aircraft. GE already have more than 300 3D printers and GE Aviation wants to produce 100,000 additive parts by 2020. The US Air Force has installed seventeen 3D printed parts on the C5 Super Galaxy, which could save tens of thousands of dollars. Other high-profile users of the technology include Airbus / EADS, Rolls-Royce and BAE Systems. Airbus is already talking about constructing entire airplanes with large scale 3D printers.

US Air Force has installed 17 3D printed parts on the C5 Super GalaxyMedical – The technology is already being applied to manufacture stock items, such as hip and knee implants, and bespoke patient-specific products, such as hearing aids, orthotic insoles for shoes, personalised prosthetics. Success stories include Open Bionics, a UK-based producer of 3D prosthetic arms which, in February 2019, secured a £4.6 million investment to take its business to the international market.

Automotive – Many automotive companies are already making use of 3D printing to help with prototyping. Ford has been using 3D printing technology since the 1980s. According to Ford's website, traditional methods would take four months and $500,000, but with 3D printing, the same process takes four days and $3,000. Future possibilities are almost limitless. In January 2019, 3D printer company BigRep unveiled the first 3D printed motorbike. The bike, which is not available on the market, took three days to print and cost just £2,000.

Construction – Although the technology is still in its infancy, significant advances have been made with the use of 3D printers in the construction industry as construction giants begin to see the potential of the technology. 3D concrete printing is developing rapidly, and the market is expected to reach $56.4M by 2021. More and more companies are starting up in the sector to create new, innovative projects. For example, Russian 3D printing manufacturer, Apis Cor printed an entire house in just 24 hours.§ 

Chemicals – There is an incredible opportunity for the chemical industry to innovate and drive new revenue streams using 3D printing technology. The industry could find itself at the heart of the manufacturing process as it works closely with 3D printer manufacturers to develop new materials specifically designed for additive manufacturing. Major chemical companies are already working directly with 3D printer manufacturers to invent new resins, polymers and powdered metals to take manufacturing into a new era. Chemical giant BASF is one of the companies leading the way with a dedicated 3D printing division and partnerships with a string of hardware OEMs, software vendors, and materials specialists.

Food – We could be seeing 3D printed food in restaurants or in our kitchen in the near future. Initiatives that mix 3D technologies and food are more and more numerous; this new manufacturing method would make it possible to create and mass produce food with more complex and original shapes and innovative recipes. It would also offer personalised meals to better adapt to the diversity of diets. Hershey's has already entered into partnership with 3D Systems to make a 3D printer for chocolate and other edible products though there is no word when the chocolate-making machine may be available.

Oil & Gas – Although adoption of additive manufacturing technology in the oil & gas industry is behind other industries, the technology has enormous potential in this industry. For example, 3D printing could allow organisations to access a bank of digital designs for on-site printing in the field. This will have a major impact on the speed and efficiency of equipment repairs and maintenance, reducing the necessity to either maintain physical inventories of spare parts on site or wait for them to be manufactured and transported to a facility. 

The market for additive manufacturing is predicted to reach $11,223 billion in 2019 and $41,587 billion by 2027. It’s an opportunity executives can’t afford to overlook.