We continue our “Throwback Thursday” series with another look at a past entry in our State of Procurement research series. And, as the co-author of this edition, it is great to see how far we’ve come as a profession (Editor’s note: Be sure to check out our 2020 CPO research – CPO Rising 2020: Continuity, Resilience, Recovery (Webinar On-Demand thru 5/31).
The overarching theme of the 2007 report focused on the CPO’s burgeoning relationship with the CFO, but also procurement’s growing strategic value as an enterprise function, proves that the procurement unit has truly broken free of many of the tired misconceptions that were historically attached to the group.
The most effective CPOs manage their performance like any other executive. They have standard metrics that help them gauge the health of their operations and benchmarks for relative comparisons. However, CPOs are challenged to demonstrate their impact in commonly understood and accepted enterprise financial terms. The convergence of procurement with finance is helpful, but CPOs need to take advantage of the CFO relationship to drive this bottom-line financial value.
Procurement has emerged as a strategic function within the organization in recent years. It is at the crossroads of so many different business processes that it can no longer be considered unnecessary. These enterprise touch points include product design, engineering, packaging, logistics, warehousing, receiving and quality sampling. With so many critical junctures at its fingertips, the question of necessity is answered, but the question of strategic value-add often remains a mystery. CPOs must continue to transform the entire spectrum of their function, not only to unsheathe themselves from the ignominious distinction of a “necessary evil” within the organization, but also to ensure that factors such as cost reductions, cost avoidance, risk mitigation and compliance are adequately communicated and correlated to bottom-line enterprise financial metrics.
It’s also enlightening to read just how far the concepts of performance measurement and data management have evolved over the past 13 years:
There is a technology void for procurement performance management. As much as technology helps the CPO with secondary goals of operational efficiency, it has yet to deliver on the primary goal of “booked” savings. Technologies for spend analysis, sourcing contract management and budgeting are all very helpful, but together or apart there is still a void. CPM (corporate performance management) technology providers under-stand finance and are perhaps closest to addressing the procurement opportunity, but most have yet to take the final step. Spend analysis solution providers are also likely candidates to assist the CPO with their performance management. ERP providers, large and small, also have a cat-bird seat at the party, but often still need an invitation.
Strategic partnerships that bring the best of procurement technology together with the best of CPM will be an important step toward the ultimate solution. Over time these relationships will serve to educate the partners and onlookers so that respective solutions become more robust. Eventually, procurement performance management features will be standard issue in procurement technology offerings. Hopefully, this won’t occur just as CPOs prepare to take the next major stride toward becoming a strategic enterprise function, and the features will have been well worth the wait.
Procurement performance measurement is standard fare in today’s spend management systems; too, the tight-knit relationship between the CPO and CFO is also taken for granted in most businesses. However, there was a time when these aspects were not well-established and considered to be emerging attributes of the procurement function.
Interested in reading this 2007 classic – send us a note here.
RELATED CPO RESEARCH
Throwback Thursday: The CPO’s Strategic Agenda 2006 – Managing People, Managing Spend
ON-DEMAND WEBINAR (60 min) Top Strategies for Leading a Resilient Procurement Organization (starring Linda Chuan & Andrew Bartolini)
ON-DEMAND WEBINAR (60 min) CPO Rising 2020 Study: Continuity, Resilience, Recovery (starring Andrew Bartolini)
ON-DEMAND WEBINAR (60 min) – CPO Strategies: Paving the Road to Recovery (starring Anders Lillevik)
ON-DEMAND WEBINAR (30 min) – CPO Playbook: Leveraging Your Network To Ensure Supply in the Age of Corona (starring Greg Tennyson)
ON-DEMAND WEBINAR (60 min) – CPO Leadership in Times of Crisis (starring Uldis Sipols)
