So, where were we?
Ahh, that’s right – the CPOs on the Rise in 2011 series is back and with a big push coming up we plan to focus on the high-profile Chief Procurement Officers whose interviews and profiles are long overdue to appear on these pages.
First up is an EMEA-based CPO who works for a company 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 that exists as 4 different procurement hubs that are each attached to a regional business with their own P&L. This CPO and his immediate staff focus on the strategic areas of the business that pervade each region which means that while indirect spend is important, they are much more focused on the direct categories that have a strategic impact on the business. This CPO reports to the COO who reports to the CEO. The COO is the one who funnels business strategy across the four different regions.
[Sidebar: Over the summer, I read Those Guys Have All the Fun: Inside the World of ESPN, which used a non-stop flow of direct interview quotes to drive the entire narrative. I am going to borrow that style for this CPO profile]
Reflections on Recent Changes
“Before the fiscal collapse, we started to directly engage with our strategic suppliers to develop ideas that will improve our revenue. These discussions were happening at the CEO and Board level so my team started to focus on developing different relationships with our key suppliers.“
“One of the big changes seen over the last few years and since the downturn is that the typical cost reduction efforts have intensified. The downturn also put things into perspective for us as we had to reformulate how we go about finding cost reductions. This led to a ‘back to basics’ approach in how we identified a number of cost-down projects; we had to put the strategic supplier initiative on hold until 2011 when it has really started to pick up.”
Procurement Structure: Decentralized
“Like many other groups, we have struggled with trying to determine if the centralized or decentralized model can work at our company. We need a hybrid model and have been looking for that sweet spot for years. What we have learned is that we must focus on collaboration. That is the key.”
“I like your [Bartolini’s] term ‘category-led’ structure to describe what we are doing.” [Read the answer to question 2 in this article for more on ‘category-led’]
“I have a senior team that is driving the strategic sourcing for the spend that cuts across the regions. We involve the regions fully in the process.”
“Since my group is a cost center, our executive team takes the view that all of our efforts are for the greater good of the corporation. This means that we do not participate in the savings on any of the projects that my team leads.” [Passing all savings back to the regions has helped create an environment where every region is eager to work with this CPO’s team.]
“There is a myth about a clash between local demands and group benefits. We don’t see it. In our company, they are very aligned.”
The CPO-CFO Relationship
“What works? Something that we do here and, I am not sure how many other groups do this, but we are very close to finance during the financial planning process. For example, when we define our investment envelope for the year, we are very involved in helping shape and define our CapEx structure – involved very early. Finance is very interested in the support we can provide in that regard. Because of this, they respect us and support us in our efforts this year.”
“We are still working on developing a good savings measure across the company.”
“What has worked in the process of defining savings is that I try to identify the incremental value we deliver, not cost avoidance – those things that have a tangible impact.”
In our next article, we will at (1) this CPO’s Top Goals and (2) main areas of focus while (3) also discussing the shifts that are occurring in the industry and the impact on supply management and (4) efforts to drive supplier innovation.