Happy New Year DECADE Everybody!!!!
That’s right, it’s 2020, the beginning of a new decade for procurement professionals everywhere (also, the beginning of Ardent Partners’ second decade of operations… and, I’ll be honest with you, in many ways, we are still just getting started :-)).
In ten years’ time, the procurement profession and the role of the Chief Procurement Officer has changed in many unique and profound ways. Yet, just like 2010, CPOs and other procurement leaders are entering the new decade grappling with intense challenges (some old, some new) and driving forward to achieve aggressive goals and objectives.
On that front, I’m pleased to introduce an exciting, new series on CPO Rising – “20 for 2020” which will examine a broad range of CPO-driven topics. Today we start with 20 for 2020: Key Themes for the Modern CPO’s Agenda (#1 – Visibility), which is designed to help procurement executives set their organizations’ course for the critical months and years ahead. Enjoy!
20-for-2020: Theme #1 for the Modern CPO’s Agenda: Visibility
One of the many benefits of any “Big Data” strategy is the fact that, based on current data or figures, the executive team can paint a vivid picture of the future of the greater organization from financial, risk, and planning perspectives. For CPOs that rely on data-driven strategies to fuel their programs and initiatives, the very notion of “visibility” doesn’t just revolve around what is happening now…it’s also about what can happen in the future.
The modern procurement executive and Chief Procurement Officer often lists “improve visibility” on their corporate to-do list nearly every day. For some organizations, this goal is often a pipe dream or something they “feel” they should be doing in the greater scheme of supply management. However, top-tier CPOs realize that improving visibility isn’t a simple goal on a list crowded with other objectives: it’s a formidable, real target that must be achieved in order for procurement to drive true value across the greater enterprise. Here are the major areas of visibility (high-level categories) that plague the average procurement executive:
- Financial visibility. The crux of procurement typically lies in its ability to drive cost savings – often cited as the number-one challenge in the vast majority of procurement functions. Thus, visibility into the financial aspects of the group is key to its overall success. What is the procurement group’s current savings target? Is there a satisfactory level of identified cost savings in the current supplier base? How effective are we in appropriately implementing and realizing those cost savings? And, most importantly: is there a real-time means for analyzing current vs. projected cost savings?
- Visibility into current cash flow. The convergence of procurement and finance continues to evolve at a rapid pace as both stakeholders rely on the other to support greater corporate endeavors. Visibility into cash isn’t just an issue for finance; the better the visibility into this aspect, the better procurement can prepare for future supply-based resources and the reality of how those suppliers will affect the financial performance of the greater enterprise.
- Category-specific visibility. While we’ll dive into category-specific visibility in more detail later in this article series, it goes without saying that rise in utilization of complex spend categories, such as contingent labor and business travel, is actively forcing procurement executives to balance management of direct and indirect spending in such a way that enables visibility on a deep, category-level. Aspects such as talent quality, ROI of business travel, and branding consistency are just a few of the areas that comprise the concept of category-specific visibility.
- Compliance visibility. Some procurement professionals may argue that compliance, not cost, is the true crux of the function…and their argument would be difficult to ignore. Compliance, in the form of procurement contract compliance, is certainly an avenue that is top-of-mind for the modern Chief Procurement Officer. Visibility into the status of supplier contracts and current purchasing efforts against those agreements has and will always be a prime concern for the procurement function.
- Visibility into talent-based resources across the entire enterprise. Beyond staffing suppliers, the makeup of contingent labor includes professional services and contractors, all of which can fall through the cracks without robust capabilities in place. Procurement must utilize its supplier management prowess to accurately portray current, available talent resources and how they align with critical corporate projects and objectives.
- Understanding the true ROI of business travel and corporate meetings. Business travel and corporate event budgets are on the rise, encompassing nearly 25% of an enterprise’s overall budget according to industry estimates. It is critical that the modern procurement department understand the true returns and value of these two complex spend categories to help better plan for the future. Which conferences are generating a satisfactory level of revenue? Which business trips have resulted in new deals or agreements with key suppliers? Can specific, underperforming events be pulled or canceled for next year’s slate? These are important, forecast-type questions that can easily be answered based on current and real-time visibility.
Final Thoughts
The term visibility is thrown around quite frequently in the procurement and spend management worlds. As we kick off 2020, it’s incumbent of today’s CPOs to do all they can to ensure that they enable visibility into corporate spending and provide other key stakeholders with the necessary insights into financials to help effectively forecast, plan, and budget for the future.
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