LVMH Wines and Spirits CPO on the Future of Procurement

It's been a challenging period for the procurement industry, which has faced the likes of COVID-19, geopolitical tensions, supply chain shortages, rising costs, ESG compliance pressures and cybersecurity risks. 

While many in the industry say they're yet to witness such a challenging period, Dominique Lebigot, CPO of LVMH Wines and Spirits, is less convinced. 

“Yes, there has been this pandemic, the COVID crisis," he says, speaking to McKinsey. "So, of course, we have gone through something that nobody has experienced before. Does it mean that the world is much more difficult and much more complex today? I’m not sure.

"Procurement has been a function that has been reinventing itself every ten years. Every ten years, the complexity was different.

With this in mind, Dominique highlights what the priority should be for CPOs heading into 2025: building awareness of what's going to happen in the next decade and preparing to face it. 

“We are now jumping, in the 2020s and up to 2030, into the next generation of procurement," he continues. "This next generation is clearly about impacting business growth, impacting sales or revenue generation.

"Tomorrow, it will be about quality and the frontier—this barrier between the downstream market or customer market and the upstream market or supplier market—will disappear. 

“Or we will not have upstream and downstream markets; we’ll have an external market and growth opportunities will have to be captured everywhere at 360 degrees.”

Buyers of the future

Whilst Dominique sees the perception of procurement changing inside companies at executive level, he feels the structure and organisation of the department will, in large part, stay the same. 

“They [executives] will look at buyers and the procurement function as an enabler for growth; to grow sales, and to grow profits, and to grow market share, and stock share,” adds Dominique. 

“That goes beyond negotiating prices. Managing external resources is about innovation; it’s about influencing and constructing the circular economy, reducing carbon footprint. It’s about exploring all those opportunities for the benefit of the company."

Dominque predicts that, rather than spending 80% of their time managing tenders and negotiating prices, buyers will spend their time managing ecosystems of suppliers over the next 10 years. This will mean managing all revenue generation and creating a circular economy.

“Those procurement activities will be different in the sense they will be less transactional and more strategic and business-oriented," Dominique goes on. "The buyers are going to develop business acumen.

“We're moving from supplier relationship management to supplier ecosystem management; and that's critical because, today, buyers are being asked to manage suppliers and, most of the time, tier-one suppliers. But tomorrow, managing ecosystems means understanding the entire upstream value chain far beyond tier one, two, three and so on.”

Elsewhere, Dominique sees AI as being beneficial in allowing buyers to dedicate more time to strategic influencing.

“I think we should all be very optimistic about what’s lying ahead of us,” he says, “AI technology brings new capacities, new software, new cognitive software that will help to very quickly automate transactions.”

In addition to helping organisations anticipate market volatility, among other things, Dominique sees the biggest impact of AI being the automation of transactions: “This will generate automatically new profiles for buyers and new activities.” 

Circular economies

Regulation surrounding ESG is undoubtedly becoming more restrictive and demanding.

Dominique highlights that, if the industry wants to be successful in implementing circular economy principles and reducing its carbon footprint, new leaders must step forward. 

“We all know that we are having the worst business stakes of global warming and CO2 reduction and we cannot ignore it any longer," he asserts. "We know that we can create value with those areas as well—not only with the customer and sales but with the image that we can bring for the company.

“We know that regulations are much more restrictive and more demanding, so it is going to bring additional cost. The only way for us to make those two priorities—reducing the carbon footprint and generating profit—is to organise the circular economy.”

A board-level topic

Ending the discussion with Mauro Erriquez, Senior Partner at McKinsey, Dominique contends that procurement should stop insist of being recognised as a leader by executive management. 

Instead, he suggests capturing power via its own leadership team. 

“We have never been asked by the CEOs to do something different—focus on costs, on innovation," he concludes. "And yet we have been able to drive those changes by ourselves, through our leadership. We will continue to do that, but it has to come from us."

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