10 actions CPOs can take to overcome procurement’s toughest challenges

The job of procurement professional has never been tougher. From supply chain disruptions to rapid price increases and decreases in transportation rates, from an inflation-ravaged goods economy to social media pressures affecting sales, the job has permanently changed. And not always for the better.

But earlier this year, McKinsey & Company attempted to tackle the challenges, providing a blueprint to success for today’s chief procurement officers.

“Some of the most important trends may persist well beyond 2023,” McKinsey wrote. “What’s more, the procurement function itself continues to face major changes that have made its traditional operating models obsolete. Front-running procurement organizations are increasingly distancing themselves from the rest of the pack, deploying their talent, capabilities, technology, and insights into the world’s complexity in ways that propel them far ahead of the rest of the pack.”

McKinsey argues that one-size-fits-all procurement models are no longer feasible in 2023, but rather a “category-level response” is appropriate.

“Procurement can play a critical role in solving today’s most pressing business problems, but it cannot do so on its own. Winning now requires an entirely new level of resilience improvement and value creation built through a coordinated enterprise-wide effort,” McKinsey notes.

The consulting firm went on to list “10 core actions” procurement professionals can take to face the challenges of today.

Those are:

1. Identify vulnerabilities with a 360-degree risk assessment

2. Gain real-time visibility through a “resilience cockpit”

3. Refresh category strategies and counter inflation push

4. Enhance risk-operating model

5. Optimize operations from end to end

6. Optimize energy consumption—short, mid and long term

7. Coordinate responses for integrated margin management

8. Redefine portfolio product design

9. Coordinate a holistic response through a central nerve center or control tower

10. Build new capabilities for resilience

McKinsey goes on to provide a deeper dive into each action. That can be read here.

Supply chain challenges, McKinsey argues, are now structural and could take several years to resolve themselves. Because of this, “transformative action [is] the only option for addressing volatility and disruptions.”

This provides great opportunity for procurement leaders, it says.

“The current context is a career-defining moment for CPOs. Procurement leaders who demonstrate value to the enterprise can become full-fledged strategic partners to CEOs, CFOs, and COOs,” McKinsey says. “No longer should CPOs be merely guardians of a portion of enterprise costs. Now is the time for procurement leaders to step into a new horizon of value creation.”

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