Five priority actions for Chief Procurement Officers in 2024

The year 2024 will continue to see companies reviewing their procurement operating model and aligning it with the organization’s strategic objectives. Key priorities for CPOs will include the clear definition of value creation and effective management of category centers of gravity. First, this means identifying which part of category spend should be influenced by procurement or delegated. Second comes assessing the complexity of managing those categories and adequate collaboration levels across local, regional and global interfaces. Then CPOs will need to calibrate the trade-offs between the efficiency of centralized operations with the stakeholder and market proximity that comes from local presence.

The journey to elevating procurement performance starts with reflecting on values and objectives. From maximizing buying power to fostering partnerships or operational resilience, the possibilities are endless. Procurement leaders need to evaluate which structures, capabilities, skillsets, and enablers will help them meet their objectives and play a key role in advocating the value of such transformation toward internal and external stakeholders.

2. Understand and leverage GenAI

The October 2023 EY CEO Outlook Pulse Survey showed that CEOs globally recognize the potential of artificial intelligence (AI) and 70% of CEOs surveyed believe they must act immediately on generative AI (GenAI) to avoid losing out to competitors. However, 68% find it challenging to develop an AI strategy due to uncertainties around GenAI.

AI, particularly GenAI, has the potential to overhaul procurement processes, allowing Chief Procurement Officers to apply it at every step for more efficient and effective results. It can help in crafting data-driven policies, automating performance tracking, planning talent development, and integrating digital strategies in leadership and steering activities. AI can also drive efficiencies in category strategies and sourcing activities and transform supplier data into an actionable plan for strategic procurement activities.

Operational procurement teams can use it to automate tasks like purchase order creation or invoice matching, thus freeing up time for more strategic tasks. Finally, procurement excellence teams can also benefit from AI's advanced analytics for benchmarking performance within the organization and the industry, identifying areas for improvement, and continuously driving procurement towards operational excellence.

Adopting GenAI is not just about digitalization, but a complete upgrade of the procurement process, fueling efficiency and redefining procurement in a tech-driven world.

3. Establish strategic supplier partnerships

The procurement function does not operate in isolation. Among multiple stakeholders, both within and across organizational boundaries, suppliers play a fundamental role. In this context, a constant priority for leading CPOs must be the establishment of tangible and strategic partnerships.

One of the available instruments to foster such partnerships is the Vested sourcing methodology, a proven and science-based approach based on in-depth research from the University of Tennessee.

The model promotes business relationships that are more than just transactional. It encourages procurement and suppliers to define mutual benefits and shared value foundation, nurturing a spirit of collaboration and symbiosis. In practice, procurement leaders can diffuse outcome-based economic models for procurement contracts that focus on the “what” rather than the “how”, creating an environment that shares both risks and rewards and maximizes the value of innovation and continuous improvement.

The application of such models can span vast industry spectra and partnership scenarios. From global facility management services to third-party logistics provider or energy management partnerships, Vested sourcing can be utilized by procurement leaders seeking to create durable and collaborative alliances with their suppliers.