This decade, business has been gripped by an expansion fever, combining more business units, organizations, and products in response to increasing competition and the market demand for new, more differentiated, and innovative products and services. Within the enterprise, business processes and functions are expanding around value and shared interests just as some business partners are along supply chain lines. One example of this corporate expansion is the Chief Procurement Officer (CPO), a role that many executives now view as they may a smart phone or Swiss army knife: a multi-functional device (or leader) that can adeptly support many key activities.
The CPO in 2016: Many Things to Many People
Business leader, sourcing expert, trusted advisor, relationship manager, supply manager, cash manager, risk manager, and many other roles are expanding under the leadership of the CPO. Among procurement leaders, there is no fear of expansion. Some are born with a natural urge to expand, some are rewarded with expansion, and some have expansion thrust upon them; what they each do with it will define their place as a market leader or laggard in the years ahead.
When it comes to the disciplines have expanded under the CPO in the past five years. It should come as no surprise that supplier and spend areas rank highest on the list. Supply risk, after all, is frequently, if not generally, viewed as a traditional ‘procurement process;” nonetheless, it is a newer responsibility for a majority (59%) of procurement teams. This is evidenced by the relative lack of sophistication in assessing and managing supply risk within the typical procurement department. The process remains fairly rudimentary with most groups still focused on defining basic risk metrics and parameters and centralizing their information.
In the case of both travel management (52%) and contingent workforce management (32%), these categories of spend are being actively managed by procurement, which is not only performing the sourcing work and managing the categories, but also setting policies and administering the overall programs. The growing use of business process outsourcing (BPO) by enterprises is mirrored by procurement’s growing involvement with outsourcing (27%); establishing and managing outsourcing governance programs, establishing SLAs, and selecting and managing providers will continue to be a huge opportunity for procurement to centralize the management of this complex business area.
For some procurement groups, expansion has taken over wholesale business functions, such as accounts payable and facilities management. Many see expansion in those areas often closely associated with sourcing and suppliers – such as new product development and cash management, in addition to supply risk. Anecdotally, more procurement departments are also getting involved with the ‘front-end’ of the house, specifically sales and customer relationships. In fact, one recent survey respondent shared that they see “closer alignment with Sales on some products and services.” Another sees “more involvement in supporting the sales process including trying to get large suppliers to also buy from us and providing training to sales teams in how to deal with procurement.” Another respondent finds that they are becoming “a core factor to a lot of business processes such as committing to a big contract/sales order, lead-time improvement per customer request, and inventory reduction programs with key customers.”
Whether by design or necessity, the responsibilities of the procurement department in 2016 continue to grow and sometimes shift; and with it comes the opportunity to make a larger impact.
And a reminder: Join us on March 29 & 30, 2016 at the Harvard Club of Boston for the CPO Rising 2016 Summit. This executive summit will bring together business executives and supply management leaders for a day and a half of keynote presentations and panel discussions on the issues that they face today. CPOs and procurement practitioners will not want to miss it! Click here to register.