In February 2008, I wrote our third annual CPO-themed State of Procurement report and created a subtitle that has since become a Ardent Partners’ brand – “CPO Rising” – that now includes this site, our annual report, and our in-person and virtual conferences.
I’ve always been particularly proud of the 2008 report as it was my first solo effort and because I hit upon many themes that I would come back time over the years. The report presents a clear view as to what is happening in procurement in 2008, but it also references procurement’s history as discussed and covered in the past including (1) Marshall M. Kirkman, The Handling of Railway Supplies: Their Purchase and Disposition; 1887 (2) Helen Hysell, The Science of Purchasing; 1922 (3) Norman F. Harriman, Principles of Scientific Purchasing; 1928 as well as more modern research. I was very inspired while writing this report and it was with this report that I began to view each CPO report as a labor of love.
When writing these CPO reports, I always aspire to write a report that will stand the test of time. I don’t know how I have fared in achieving that goal over the years, but this report is in my personal pantheon. I’d love to hear what you think; so, if you’re interested in getting a copy, contact us here.
Here is the beginning of Chapter 1:
Though it was not until the second half of the 20th Century that the procurement function began to shed its largely clerical identity, the view that procurement (or purchasing) can deliver strategic value to an enterprise dates back decades before World War I. Certain events through the course of the 20th Century have, at times, placed procurement at the hub of business process and at the core of business profits. From the birth of the assembly line to Six Sigma and lean manufacturing, the critical importance of having the right materials at the right place at the right time has supported production efficiencies and spurred product quality and sourcing from the right supplier at the right price has driven cost savings and product innovation through periods of high growth, high inflation, and rapid change. In the new (21st) century, procurement’s strategic gains have accelerated, enabled by advancements in automation and refinements in process; the new century also brought new challenges. And like a Roman Centurion, the Chief Procurement Officer (CPO) leads his / her team from the front lines, exposed on the flanks by an increasingly volatile and increasingly global marketplace and marked by an increasing prominence that demands greater performance. The CPO is rising!
A few other excerpts:
It is clear that the gains made by procurement over the past decade are significant and have helped elevate the function within the enterprise. We believe that 2008 will be a year of significance for the Chief Procurement Officer (CPO), a year of the “CPO Rising” – rising to meet new challenges, rising to new operational heights, and rising in prominence within the enterprise. Yet, with increased visibility comes an expectation of consistent execution and delivery; the leaders in procurement will utilize several key strategies focused on their people, processes, and technology to propel their departments forward in 2008.
Common themes emerged this year from procurement executives as they described their respective organizations. One very common situation is that of a procurement organization in the midst of a transformation, with much work ahead of it. As one director of procurement at a mid-market pharmaceutical company described it, “We are going through a significant transition from a traditional transaction-based to a strategic function. My staff is well-versed in transaction-based procurement but is early in the learning curve related to strategic requirements…We are developing scalable processes and have put in place a multi-year plan…The one thing we need to do in 2008 is hire a CPO and gain more visibility with senior management.”
The proper blend of talented people, efficient processes, and enabling technology is needed to achieve a broad procurement transformation. But, achieving the desired mix is as much an iterative process as it is an incremental one.
Operational excellence in procurement cannot be achieved in a vacuum. There are change issues that are much larger than any team or single department, making a receptive and fertile enterprise an organizational necessity. The enterprise must be open to the “radical” concept that procurement can do more than manage the order and delivery of certain goods and services; that it can deliver strategic value the its internal customers and to the enterprise at large.
To manage projects on a global stage, sourcing professionals must develop and utilize advanced sourcing strategies (see side panel for definition) to help their groups evaluate more complex sourcing decisions and identify the highest value suppliers.
In our view, spend under management represents the opportunity that procurement has to impact an enterprise. Simply put, if it is not being managed, it cannot be improved. In most cases, a higher percentage of spend under management presents a greater opportunity to identify savings from strategic sourcing, a greater opportunity to drive reductions in maverick spend and improvements in contract compliance, and a greater opportunity to drive transactional efficiencies, just to name a few benefits. It may also provide a stronger justification for investment in the people and solutions that drive departmental performance.
RELATED CPO RESEARCH
Throwback Thursday: The CPO’s Strategic Agenda 2006 – Managing People, Managing Spend
Throwback Thursday: The CPO’s Strategic Agenda 2007 – Managing Performance, Reporting to the CFO
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)
