We learned a lot from the 2018 ProcureCon Annual CPO Study, which quizzed procurement leaders on everything from departmental goals to performance metrics to supply chain risk management. The most insightful results showed how CPOs enable stronger alignment with the organization at large. So, we dug out a few useful pointers. Here are the five top ways CPOs are moving to a value-driven, strategic approach.
Compared to the results of the 2017 CPO Study, more CPOs are building close strategic relationships with their fellow C-Suite leaders. As C-Suite leadership recognizes how their forward-thinking procurement teams capture and demonstrate value to the business, their willingness to collaborate goes up significantly.
That doesn’t necessarily mean procurement should report directly to the C-Suite, however. While 50 percent of last year’s respondents said they report within c-level ranks, only 18 percent do today. The more traditional approach is to report to finance, a department uniquely qualified to gauge procurement’s impact on savings and ROI.
Creative disciplines, including marketing and translation, used to create a little tension for procurement. People guarded creative categories assuming procurement wouldn’t understand. But in today’s world, all stakeholders are increasingly data driven. So what should CPOs do to earn credibility as a strategic partner? Get familiar with the KPIs of other business units.
We know that a truly strategic approach requires C-Suite buy-in, but it also requires working relationships with other departments. If procurement becomes more aware of their KPIs, CPOs can more clearly demonstrate value-driven results. Interdepartmental trust won’t blossom overnight. However, ProcureCon findings show that various businesses are increasingly unable to ignore the results procurement creates as its influence expands.
The overwhelming pressure to create cost efficiencies and develop leaner business models, which CPOs face in all industries, has left them no choice but to get involved in more sourcing categories. Fortunately, CPOs’ new ability to demonstrate value is creating a snowball effect.
The more categories route through procurement, the greater the economies of scale and more visible the business benefits. And as procurement takes on wider responsibility for spend within global organizations, the discipline has naturally gravitated toward centralization. According to the ProcureCon study, 37 percent of CPOs now manage a highly centralized model that consolidates control over as much spending as possible, while most others are center-led or allow autonomous local processes. Experts interviewed for the study have differing opinions on exactly how much of the process to centralize.
Procurement leaders involved in sourcing technology solutions aren’t the only ones who need to be tech-savvy. As opposed to just a few years ago, when procurement wanted more category strategy, CPOs and other leaders are making joint investments in technology together. Today, procurement needs to understand new roles in a digital procurement environment—and while knowledge of more spend categories is critical, understanding of technological impact takes CPOs’ influence a step further.
CPOs need to know three things about digital procurement operating models: what they look like, how to develop one, and how it will transform procurement and the larger business. Automation tools that create more visibility into spending and stronger analytics capabilities will give procurement teams a major edge, as numerous companies still struggle to gain transparency into their spend data. Similarly, early cloud adoption is creating opportunities to share data (and therefore, value) across the organization.
Another investment CPOs are prioritizing this year is talent. Together, talent and tech are prized as abilities that fuel change. Developing people with the right skill sets is especially vital as procurement begins to work more closely with groups such as IT, which comes with specific requirements as well as a demand for industry knowledge.
It’s important to note that change involving people, processes, and technology is constant. Focusing on these five strategic abilities will put your procurement team on the right path to transformation, but as in any business function, maturation is never completed—it’s a journey.
To learn about how other leaders are progressing on theirs, download the full ProcureCon report.