Today’s article is the second of two articles from a report that we recently published, entitled, Five Transformative Strategies to Unlock More Procurement Value, sponsored by BravoSolution and available for free download by clicking here.
The current generation of procurement professionals has witnessed first-hand a period of unrivaled advances for their profession as market forces and new technologies combined to pull procurement to the center of business operations and business results. But in 2015, many Chief Procurement Officers (CPOs) and their departments find themselves at a crossroads, struggling to maintain their momentum while the speed and complexity of their businesses continue to accelerate. And, while the foundation of procurement’s future will be built upon the past, the strategies and approaches that driver new successes will be markedly different. This report looks at the transformative strategies that will unlock procurement’s next wave of value.
1: Earlier Engagement
In a recent survey of 318 CPOs and other procurement leaders, 66% of respondents indicated that earlier engagement in the sourcing process was their top strategy for elevating procurement’s performance to the next level. For CPOs and their staff, earlier engagement means co-locating or embedding staff within constituent departments, holding regular meetings with partners, having a seat at the table, and getting involved in projects at the outset rather than the tail end. Getting engaged sooner allows CPOs and their staff to become valued business partners rather than order takers, and allows procurement to deliver more value and mitigate more risk for the enterprise.
2: Talent (and Knowledge) Management
Procurement departments have experienced quite a bit of transition over the past decades, with the number of procurement-related positions swelling to record highs in 2007 before dropping after the Great Recession. Millions of procurement-related positions have yet to be recouped, forcing many procurement departments to continue to do “more or better with same”. These vacancies, coupled with an increasingly transitory procurement staff, make talent and knowledge management even more important for the long-term viability of an organization. As a result, CPOs should continuously evaluate whether they have the right mix of talent on hand; and they should consider leveraging non-traditional sources of talent, such as contingent labor, to fill critical skills or knowledge gaps.
3: Collaborative Innovation
The speed, intensity, and complexity of business will continue to increase, leading to shorter lead times, higher demands, and continuously changing expectations for success in the marketplace. With so much innovation occurring in the market, procurement teams cannot afford to go it alone, and neither can their trading partners. As a result, enterprise procurement teams ought to become a hub of innovation for both internal and external partners. Some of the strategies to do this include defining or redefining supplier innovation for the procurement team and their suppliers; providing clear incentives and rewards to suppliers for their innovations; and developing a set of supplier innovation metrics to help track program performance.
4: Role Expansion
As procurement engages sooner in sourcing processes, manages non-traditional sources of talent, and collaborates with internal and external stakeholders to innovate, it is only natural that the CPO’s role expands across the enterprise. Its central location within the enterprise makes it optimally suited to land and expand across the enterprise. As a result, the average CPO has seen his role expand over the past five years to cover areas like supply risk management, travel management, contingent workforce management, and a half dozen other parts of the business. By expanding across the enterprise, CPOs can lend their expertise and resources to these areas, sooner and more collaboratively, and extend procurement’s value even further.
5: Balanced CPO Scorecard
CPOs and procurement departments can drive greater value than just savings; they can place more spend under management, increase process efficiencies, innovation, staff retention, and supplier performance, and mitigate a host of risks. For these reasons, developing a balanced CPO scorecard is the fairest way to assess the success of a CPO and their staff. A CPO scorecard ought to include hard financial metrics, like savings and spend under management, plus stakeholder metrics, like internal customer feedback and supplier performance and risk. It also ought to include process and technology metrics, like procurement efficiency and activity metrics, plus people and knowledge metrics, like staff competencies, training, and retention.
Final Thoughts
For procurement organizations, the ability to perform the basic “blocking and tackling” duties across the source-to-settle process have become table stakes while the ability to sense and adapt to the dynamic changes and growing complexity within their departments, enterprises, and supply chains are becoming competitive differentiators. The procurement profession needs new, more proactive strategies and approaches to propel it to the next level of performance. The winners in procurement will be the agile organizations that can inject their systems, culture, and operations with transformational strategies designed to unlock more procurement value.
RELATED ARTICLES
Research Preview: Five Transformative Strategies to Unlock More Procurement Value – Part I
Sourcing: Why Enterprises Should Stop Worrying and Love the Procurement Team
Sailing Downstream: Why “Source-to-Settle” Defines Procurement Transformation in 2015
