This edition of Chief Procurement Officer Shop Talk comes directly from the Q&A portion of the webinar that I delivered on July 7th for Zycus. I describe the webinar here and an archive of the webinar will be available at this site (free, registration).
Q1: Do you see a trend and benefit to the use of contract automation tools such as Contract Lifecycle Management solutions with compliance or commitment management and in overall spend management initiatives?
Answer: I believe that one of the big trends in the 2010s will be technology adoption across the entire source-to-settle process. Surprisingly, despite the generally strong ROIs and improved functionality and integration that we see with spend management technology, the vast majority of enterprises have not gotten there yet. Deployed correctly, contract management solutions including contract creation, contract repositories, and contract compliance tools can add great value to procurement operations, by helping identify opportunities for sourcing (visibility into a contract repository), capturing savings (via contract creation) and ensuring that identified savings are realized (contract compliance capabilities). The tools can also improve efficiencies around the management of the entire contract lifecycle.
Q2: Do you expect to see a change in the way procurement departments organize themselves, perhaps with a trend towards center-led structures with regional support functions to have better spend management?
Answer: This is a great question and a great topic of discussion and one that is worthy of reflection by Chief Procurement Officers on some regular (3-to-5 year) basis (by which I mean, evaluate your organizational design). I think that we have already experienced a strong push toward the centralization of procurement operations – either centralized procurement or center-led procurement departments. The optimal department design is based upon a host of factors including industry and business structure as well as the location, capabilities and amount size of staff. In the last decade, centralizing (i.e. center-led and centralized departments) was viewed as the fastest path to operational excellence and this structure would be my default recommendation to any organization just getting started on a transformation project. That said, newer trends for next-generation management structures are starting to emerge as more procurement operations mature and advance beyond the “beginner” status. [We have had commenters on CPO Rising suggest taking a more category-led approach to the design and operations of a procurement department as one example.]
Q3: With CPOs facing more pressure to deliver, do you expect to see any change in the level of procurement outsourcing in the market?
Answer: I believe that the concept of a “new normal” business cycle creates an operating environment that plays to the skills and capabilities of a procurement organization. I also believe that it creates an environment with much smaller margins of error and an environment that, for many enterprises, will mean a near-constant evaluation of business processes and cost structures. In these organizations, an “own or outsource” analysis will be applied to many process or functional areas over the next few years, procurement included. As I have said previously, procurement outsourcing, in and of itself, is not problematic. In certain circumstances it can drive huge value; but, in others, it can undercut critical business operations. As technology continues to shrink the world, it will gain more traction. In the years ahead, procurement outsourcing will be on the table. CPOs need to get ahead of the curve on these discussions and evaluations to either lead the charge for or against it with data and clear, objective analysis.
Tagged in: Contract Lifecycle Management, CPO Shop Talk, Outsourcing, Strategy
