In today’s corporate landscape services continue to be delivered faster and cheaper than ever before. This commonly results in organisations increasing the number of vendors used for differing and new services affecting how large the supply chain has potentially become. It still remains true that the most commonly outsourced services are either technical (information technology) or financial (accounting services) in nature, but make no mistake the list of services is actively growing year on year.
In our experience that supplier and contract consolidation activity and cost containment continue to dominate discussions and is a top-of-mind issue for most organisations that we speak to. During what has possibly been one of, or the most turbulent year for businesses in recent living memory impacting for all industries around the globe, with some being impacted more than others global supply chain resiliency has been tested by major events such as BREXIT and COVID-19 Pandemic. The second has been responsible for a number of supply chain complications and failure in parallel seeing a monumental increase in the numbers of home workers worldwide during the last 12 months causing an already emerging trend to hockey stick. Governing practises need to be updated and digitised to cope with this as it is unlikely to return to what it was previously, meaning new ways of working will need to be adopted.
This increased proliferation of vendors used by an organisation seeking a competitive advantage and cost efficiency needs to balance this to ensure they don’t suffer from vendor bloat, where there are simply too many vendors to manage effectively and some that offer little value.
High-performing CPOs who successfully hit more of their key objectives than their lesser-performing counterparts approach this challenge not only by conducting a typical consolidation programme that is run in anger every few years or on a near cyclical basis which is at best an inefficient and concentrated task in itself and at worst the gains achieved don’t warrant the cost. But rather by embedding a continuous consolidation approach into the way vendors are reviewed and managed on a day-to-day basis and in line with their lifecycle and relative importance to the business itself.
In the Deloitte 2021 Global Chief Procurement Officer Survey1 it was noted that leading CPOs have a broader understanding of value and deploy a wider, more sophisticated set of levers to unlock, measure and protect value. They are reported to focus on high-quality relationships and influence across functions and supply markets, and they invest in agility by developing talent and accessing capabilities, knowledge and experience leveraging on-demand, hybrid service delivery models (e.g teams augmented with external support services. They utilise configured utility style services not fully customised end-to-end integrated solutions. They prioritise data both internal master data and external market intelligence to make fact-based decisions leveraging predictive analytics to find any hidden opportunities and emerging risks.
The start of 2021 saw a new top priority emerge for CPOs with 78% thinking that Driving Operational Efficiency is the top priority for the year closely followed by Reducing Costs, 76.4% and Digital Transformation 76% with the largest increase up from 63% in 2019. Innovation with 72% was the only other new entry.
The findings outlined in the Deloitte 2021 Global Chief Procurement Officer Survey will need to play a part in any meaningful vendor consolidation exercise and like any new journey careful consideration should be given to how to approach this and ultimately where you want to end up and by when.
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