CPOs on the Rise in 2011 continues – In our last article we introduced you to an EMEA-based Chief Procurement Officer who works for a company that operates in 38 different consumer markets (which tend to be smaller and developing – countries like those in Latin America). This CPO oversees a decentralized procurement organization which operates with 4 different procurement hubs that are each attached to a regional business that manages its own P&L
Today we will continue the use of a “quote-driven” article as we look at this Chief Procurement Officer’s main areas of focus and top goals while also discussing the shifts that are occurring in the industry and the impact on supply management as well as this group’s deliberate efforts to drive supplier innovation.
Areas of Focus
“This industry has its challenges – our customers expect more and better service; at the same time, they expect to pay about the same or less. This requires huge CapEx expenses. It is fair to say that our industry is highly competitive and constantly changing; the business or revenue model, I should say, is still developing. The changes and overall challenges in this sector create huge dilemmas for both the large and small players.
“We are looking at different models of engagement with our main suppliers – we are very focused on new technologies which will continue to drive industry growth but also huge changes.”
“The new technologies which will be launched over the next 12 months may change our revenue model again – we have to be very conscious to try to keep our expenses in line with our changing model.”
“Cost is very much the top priority. Time to market and delivery are very important as well. We do measure projects from the time of budget approval to project delivery – measuring how long it takes to bring a new product or service to market.”
“We try to measure the value that our SRM program delivers, but it has been a challenge. We share our experiences and results with my boss, the COO who supports us….. when we do believe we have made a difference, it is nonetheless, hard to measure – for example: a successful supplier program’s revenue impact.”
“We must become much more active in China and Southeast Asia.” [Note: By “more active,” this CPO means more engagement with suppliers, not necessarily placing more spend in the region.]
“We plan to roll out a Cost/Spend dashboard to the regions this year.”
“We are a smaller player in a huge global industry so, when one supplier comes up with a killer device, it can be difficult for us to gain exclusive access. How we are able to punch above our weight is by becoming very, very close with our suppliers. There are of course many challenges in getting close.”
“Our engagement with strategic suppliers? That strategy changes the skill-sets that you need in your category managers. You have to move beyond a traditional category approach and become much more entrepreneurial in the way you think about relationship management.”
“We develop a strong SRM program plan across our different categories each year.”
Opportunities to Lead Supplier Innovation Initiatives
“One of the challenges, always, in procurement is how do you get your team closer to the front lines? How do you get the team involved with those areas that really interact with customers and drive the business? How do we understand the needs of those groups and what does that mean for innovation in the supply base?”
“We have started to develop much closer relationships with the marketing and product teams in each of the four regions to try to understand what their needs are; then, we approach suppliers to get their ideas on how they can support those needs.”
“One of our main challenges is our size since you need scale to get suppliers to want to invest in working with you.”
“The Asian suppliers are driving cost in our industry. We need to start working more closely with them on other aspects of their business.”
“Innovation is moving east to China and that region of the world. In the past, the relationship with Chinese suppliers was ‘supply on-demand.’ They had a traditional, low-cost delivery model – they were fast, could deliver well, and respond quickly but things are changing in that region. We need to start working more closely with those suppliers and bring them closer to our customers. They are the future of innovation.”
We would like to thank this Chief Procurement Officer for his time and support.