THE BUSINESS REVIEW FOR PROCUREMENT LEADERS
by Andrew Bartolini and Vance Checketts
A report by Aberdeen Group shows a marked acceleration in the significance of
procurement’s role. Although it remains the extreme exception for procurement
to be considered the leading competency of an enterprise, 89 per cent of this
year’s survey respondents indicated that the procurement function has grown
more strategic over the past three years. Procurement’s continued stride
forward is also evidenced by the fact that nearly a fifth of all CPOs now report
to the president or CEO of their company.
We surveyed and interviewed procurement and supply chain executives at over 250 global companies for the report, The CPO’s Strategic Agenda: Managing People, Managing Spend. Respondents represented a broad range of industries and enterprise size and were based across North America, Europe and Asia Pacific.
What are the main priorities?
Globalisation, compliance pressures, supply market risk and procurement automation
have simultaneously elevated the procurement discipline within companies
and increased supply management challenges. In response, procurement executives
have established a clear agenda for 2007. These plans incorporate activities
to bring more spend under management, enhance the procurement organisation’s
skills and visibility, and increase both internal and external collaboration
(see chart).
In 2007, CPOs will prioritise their efforts in the following areas:
Spend under management. Increasing spend under
management remains the top priority across procurement organisations, and serves
as the key measure in defining its overall impact on the enterprise.
Supplier development and collaboration. With continued
growth in procurement outsourcing and low-cost country sourcing, supply risk
management is sharing the stage with savings and cost avoidance as procurement’s
primary objectives.
Procurement team and organisational structure. As
procurement’s visibility increases, performance expectations have increased
exponentially. To build and maintain a successful organisation, CPOs are intensifying
their efforts on recruiting, training and retaining staff.
Internal collaboration. CPOs will continue to drive
towards centre-led structures and the use of cross-functional teams to engage
business stakeholders earlier and more frequently in sourcing initiatives.
How are CPOs responding to the key challenges?
Most CPOs find themselves struggling to institute broad procurement policies
and procedures across the enterprise. Although the move to a centre-led organisation
or the use of commodity councils has enabled some success in developing standardised
processes in recent years, the CPO’s most common response to this challenge
continues to be the deployment of certain procurement technologies that incorporate
workflow and compliance mechanisms to mandate process. CPOs who incorporate
rigorous process methodologies, such as Six Sigma, report greater success
from their technology deployments.
Combating the gaps in both spend and supplier visibility remain central to CPOs’ plans for 2007. Specifically, they will focus on improving their supplier scorecarding capabilities and on automating the classification of a greater amount of their total spend. Significant investment in data enrichment services is also expected.
What differentiates leading CPOs from their peers?
Best-in-class CPOs who have succeeded in driving close to 80 per cent of total
spend under management now find themselves in the harsh glare of the corporate
spotlight, and they face the daunting task of managing this spend more effectively
and efficiently. Accordingly, these leading CPOs have put the development
of their procurement team above all other priorities in 2007.
Progressive leaders are also using the strategies and tactics of other parts of the organisation. Whether hiring marketing consultancies to train procurement teams to better sell their programmes internally, holding kick-off and other meetings that reflect a strong sales-like culture, or setting savings “quotas” and using them aggressively in variable compensation calculations, leading CPOs are employing proven approaches of their peers and working aggressively to earn their C-level status.
Click here to download the full report.
Andrew Bartolini (andrew.bartolini@aberdeen.com) is research director and Vance Checketts is channel director of the global supply management practice at Aberdeen Group in the US
