Editor’s Note: This week on CPO Rising, we’re publishing five “best of” articles from 2014 as we reflect on the year and prepare for the new year ahead. Enjoy!
Ardent Partners recently published our annual CPO Rising report (entitled CPO Rising 2014: Convergence) and the focus of this report is exactly geared towards the readers of CPO Rising (CPOs and those who aspire to the role). The report presents a comprehensive, industry-wide view into what is happening in the world of procurement and captures the experience, performance, perspective, and intentions of 273 Chief Procurement Officers and other procurement executives. As we do every year, we interview many Chief Procurement Officers (24 procurement leaders in total) to add context to this research effort. The report is available (with registration) from several sponsor sites including here, here, here, here, here, or here.
Chief Procurement Officers in 2014: Doing Better with Same
“One top priority for us this year [2014] is to get better utilization of our technology. There’s a lot of execution expertise and productivity that we can pull out of what we have today.” ~ Vice President, Global Purchasing (CPO) for a multi-billion dollar manufacturer
Even before the worldwide economic downturn of 2008 and 2009, procurement departments around the world had been trying to boost efficiencies by either cutting headcount or remaining flat. After all, why not do more with less, or the same? It’s not just common sense; it’s good business sense. But when the Great Recession hit and many companies and industries were forced to reduce staff, their procurement teams, like many other business functions, were forced to do even more with even less. This became the “new normal”, where workers felt lucky to have a job, even if that meant doing the job of two others.
In early 2010, when the global economic gears started turning again and businesses became secure that the worst was over, this “new normal” became standard operating procedure in many enterprises around the globe. Businesses were no longer shedding jobs by the tens, hundreds, or thousands, but they weren’t hiring back either, having just endured the worst recession in eighty years and with the threat of a “double dip” recession looming. While many believed the worst was over, procurement teams weren’t out of the woods and they were forced to look within themselves to become more efficient and deliver greater value to their enterprise.
Today still, it is the rare industry or enterprise that has an abundance of staff and is not pressed to meet its goals. Outside of a few fast-growth, well-funded companies, job requisitions are hard to come by. Indeed, four years into the recovery, most CPOs are stuck with flat headcount and remain pressured to not just do more with less, but actually “do better with same.” Ardent Partners’ recent report, CPO Rising 2014: Convergence found that 56% of CPOs are pressured to find greater cost savings, while another 37% are pressured to increase overall effectiveness and influence. Giving the need to do better with same, CPOs have been looking at strategies that will enable procurement to drive greater value through the organization with minimal new investment. And, as shown in the figure below, readers will note that:
- Fifty percent (50%) of CPOs want to improve existing relationships with business stakeholders: collaboration is key in today’s business environment, especially for procurement, which has a stake in just about every aspect of a business today – from finance, to IT, to products, to senior executives. Collaborating with internal stakeholders and sharing procurement’s vision of doing better with same can lead to greater savings, smarter spending, or buy-in to automate processes, to name just a few benefits.
- Forty-three percent (43%) of CPOs want to improve existing relationships with suppliers: just as extending procurement’s influence across the enterprise is better for business (for the most part, anyway), so too is working more closely with the suppliers (the strategic ones, anyway) who can help CPOs derive more value from the relationship. Bundling goods and services and scaling up orders to maximize value; or formalizing discussions around negotiating early payment discounts are all ways that CPOs are looking to extract more value from their suppliers.
- Forty-five percent (45%) of CPOs want to get more out of the technology solutions they have: with enterprises still skittish from the recession and leery of making large investments, many CPOs are best served by maximizing the value they can generate from the systems that are currently in place. In our view, this is a wise strategy, since many procurement teams’ have poor technical skills and a huge opportunity to improve
- Thirty-two percent (32%) of CPOs want to improve upon the systems and processes already in place: as a corollary to the bullet above, roughly one-in-three CPOs want to build on the systems and processes they have, making them leaner, faster, and more efficient. In many cases, technical mastery or process improvement takes time, patience, and a great deal of trial and error before best practices can be found, implemented, and institutionalized.
While the Great Recession may be over, CPOs are still charged with driving value on tight budgets forcing them to make tough decisions about staffing, technology, and the future direction of their departments. The lessons learned during that painful period – to do better with same by driving greater value with better internal and external collaboration, fully leveraging existing technology, and improving upon the solutions and processes in place – have carried through to 2014 when economic recovery is relative and specific. While the U.S. economy officially regained all of the jobs it lost during the recession, the economy contracted in the first quarter of 2014 – the first time in five years. Although economists expect the economy to improve in 2014 and into 2015, CPOs – unable to invest in greater bench strength and in more robust technology solutions – will likely have to do better with same for a while.
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