This transcript has been lightly edited for clarity.
What themes should chief procurement officers (CPOs) focus on to unlock new value sources in a volatile era?
Tarandeep Ahuja: We are seeing procurement leaders focus on five key themes to drive sustainable competitive advantage in their organizations today:
First, a full adoption of digital and AI, both as a source of identifying new opportunities and also generating efficiencies across the supply chain.
Second, creating supply chain resilience to more effectively face the shocks and disruptions that are hitting their organizations.
Third, collaborating with suppliers very differently to drive co-innovation into their businesses.
Fourth, fully embedding environmental, social, and governance (ESG) principles in their sourcing process.
And finally, an opportunity for procurement to rethink its operating model and serve as a connector in how the function works with stakeholders internally, as well as suppliers in the external market and the ecosystem.
With trade tensions fluctuating, how can digital and AI tools help pivot sourcing strategies in real time?
Riccardo Drentin: CEOs, boards, and clients are actually requesting speed and depth of analysis from the procurement function. And we see more companies adopting and embracing the latest digital solutions in order to understand what might be coming, create scenarios, and even take action proactively.
I was inspired to see companies doing something they call spend digital twins—a concept they’re taking from engineering and manufacturing. Essentially the idea is to conduct supplier simulations and understand what a change in the macroeconomic environment, or a potential disruption, can influence. In minutes, a change in tariffs can be understood and its effects on the value chain taken into account, then measures can be implemented.
The second important tool that companies are spending time and budget on is about creating transparency in data. Data has been there a while, but many times is not easy to use—not cleaned, not categorized, and that creates a delay between the request and the actual answer. Now more companies in real time are cleansing data and enriching it with external market information—information that allows them to create much better scenarios.
How are procurement leaders shifting from transactional supplier relationships to co-investing in innovation?
Riccardo Drentin: Some of the macroeconomic changes, some of the latest innovations—for instance, in batteries and a few other industries—have required the procurement function to rethink the supplier base and the relationship it has with them.
The first trend is to go beyond cost. Innovations with suppliers that allow a more agile production footprint, require a more agile supply chain, is an area where we see a lot of discussion at the moment and a lot of investment coming in.
Tarandeep Ahuja: A best practice I’ve seen at one of my client’s is they’ve set up joint teams with their suppliers to reimagine what their products would look like on three dimensions: How do you reduce cost, improve quality, and drive sustainability and carbon emission reduction?
Another interesting example I’ve seen of collaboration with suppliers to drive environmentally friendly outcomes is a consumer goods company working with a waste manufacturer and a plastics manufacturer to create a joint venture across the value chain to build recycled plastic bottles that the consumer goods company then uses in its supply chain.
Riccardo Drentin: Of course, cost is still one of the main elements for procurement. Innovation in the product that can make it a superior final product for the client, and therefore increase margin, is the second area where there is a lot of activity and investment currently.
