In our last article, we discussed this Chief Procurement Officer for a Fortune 500 Company’s achievements over his first four years in the role. During this time, he led a multi-pronged effort to build, develop, and enhance the procurement department along its people, process, and technology areas. If the past four years in sourcing/procurement at this company have been busy, we can only expect more of the same in 2011. This CPO’s top priorities for 2011 include:
- Enhancement of reporting capabilities
- Establishment of a vendor management program
- Maintain the value perception of the department
- Run the group like a sales organization
Reporting
Building upon a newly established commodity code and the development of Commodity Councils that draw from all of the company’s different divisions, its IT group is building a spend cube for the CPO and his team that will be a “combination of spend analysis and customized reporting.”
Vendor Management Program
A very common trend in certain quarters and in recent years has been the development of a vendor management program office. This company will focus its program on the top 20% of its 11,000 suppliers. As part of this plan, they plan to segment the top 20% into three segments or types: (1) Strategic (2) Preferred or (3) Approved. This executive’s goal is for his organization to become “the CIA of supplier information, gathering and collecting all key information and relevant parameters. More than just SLA management, our team will focus on the most important aspects of managing the different suppliers, innovation as one example.” The CPO intends the program to function as a hub (procurement department) and spoke (business stakeholders).
Value Perception
He thinks it is hugely important to continually market the value that his team is delivering across many areas, including sourcing from the highest value instead of lowest cost suppliers. “If you are always focused on cost, you create more rogue situations as people will be less inclined to work with the sourcing team.” While he is always selling the value and uses the company’s annual planning conferences with the different budget owners to reiterate procurements value and identify potential sourcing projects.
Operate as a Sales Group
There is no mandate to work with the procurement at this company, so the CPO and his team have to earn it every day. He takes the position that for his team to succeed, the level of service and value must be compelling enough that the business stakeholders answer “yes” to the question – “If you had to pay for the service, would you hire someone like us again?” To get the right answers to that question, he treats his department like a sales team with a focus on excellent customer service, reinforcing messages, execution, and client management.
2011 MBOs
This procurement leader’s 2011 MBOs which cascade down his department are made up of four key elements savings (60%), control (20%), stakeholder management (10%), and reporting (10%), with savings (defined as “reported” savings, not “budget impact” savings) as the most heavily weighted. As his department continues to grow and mature, he believes that there will be more opportunities to influence the strategic direction of the company and “challenge the thinking of operations, while making a back-end impact.” And, with the strong foundation built over the past four years, there’s little doubt that this will happen and that he and his team will get straight A’s in 2011 and beyond.
I’d like to thank this CPO for his time and contribution to our CPOs on the Rise in 2011 series.
Tagged in: Case Study, Chief Procurement Officer, CPO, CPOs on the Rise, People, Strategy
