As I noted last time, my Ardent Partners’ annual CPO Rising report is now available at the following sponsor links here, here, here, or here (registration required). CPOs and those that aspire to the role will enjoy the report but so too will those that have to work with procurement on a regular or even sometime basis – finance, supply chain, accounts payable, and suppliers are part of that list.
This is Ardent’s banner report and its one annual market research effort that is focused on procurement and the Chief Procurement Officer – I think it turned out well and I believe you will agree (and I welcome your feedback). The report is entitled CPO Rising: Keeping Score and covers a wide range of topics – one major theme is the daunting task/challenge of properly measuring procurement performance which we’ll come back to soon. The report also presents a snapshot of the typical Chief Procurement Officer in the market today or “The State of the CPO” which I will begin to present below.
The evolution of the role of the CPO continues apace, so much so, that the good news for many Chief Procurement Officers (“CPOs”) and their staffs is that they have a secure place on their enterprise’s “varsity” team. And, it should be pointed out that for most, it is a position that was duly earned. The deep and sudden shock that the 2008-2009 financial crisis had on business performance served as a wake-up call to all enterprises, but, particularly to those that were caught flat-footed and without flexibility in their cost structures and supply chains. The CPOs, who were able to respond to the market shift and execute amidst global turmoil and general uncertainty, gave their executives (and ultimately, themselves) a big lift. And, while much has been made of the significant role that procurement played during the tough times, the CPOs who were able to quickly pivot their operations and manage growth when the market rebounded strongly were no less important. As the CPO of a US-based Tier One Automotive Supplier told me, “We weathered the downturn in strong fashion in 2009 and started to see things come back quickly in 2010 and 2011. What a difference a year or two makes! We were struggling to manage down capacity in 2009, then struggling to find it in 2011…. Now, we’re bracing for Europe in 2013.” [Sidebar: It was my interview with this CPO, in particular, that heightened my concern for Europe in 2013 and the potentially severe impact that a sharp downturn there could have on the rest of the world – see Supply Management: Big Trends & Predictions for 2013 (Globalization) for a more in-depth discussion]
So often we reference the CPO’s “Smart Strategies for Tough Times” (as I called them in a report I published 4 years ago at the depths of the market despair – click the link if you’d like a reminder of how much things have improved). Procurement groups that were able to deliver at crunch time performed a great service. In 2008 and 2009, what was needed most was for procurement to do what it does best – “get money for value” or “identify savings” (and we’ll talk about a few of the CPOs who delivered and were duly rewarded in a future article or two) but as markets recovered, needs shifted and procurement teams had to be responsive to those changes.
Increased volatility may be very visible in the stock market, but this greater volatility in stocks is, in many cases, the result of increased volatility in the underlying supply or commodity markets. Best-in-Class procurement departments are busy preparing for the next market shift (the one they are anticipating), but they are also getting themselves more generally ready to adapt to any type of shift (the ones they can’t anticipate). For some CPOs, change, no matter the cause, presents a serious challenge; while others, like Rick Hughes, CPO at Procter & Gamble (“P&G”) who said, “Every one of my thirty years at P&G has offered up some type of uncertainty or wild card for procurement. Our job is to be ready to react,” have been successfully managing market shifts and change for years.
More on The State of the CPO next time.
Again, to get the full report, click here, here, here, or here (registration required).
