In April 2009, I wrote our fourth annual CPO-themed State of Procurement report in the throes of the great recession. Things looked pretty bleak and there was a high degree of uncertainty. But, spoiler alert: most companies survived with many greatly aided by the strong performance of their Chief Procurement Officer and procurement team. The economy bounced back and roared for the next decade.
In this study, I published an “eSourcing Manifesto” which was a clear precursor to our early eSourcing 2.0 writing. In each of these CPO studies, I look to interview a couple dozen participants and 2009 was no different. But, I was also able to hear several the CEOs of several companies discussing their “new plans for 2009.” If you’re interested in getting a copy, contact us here.
A few excerpts and quotes from the 2009 report:
It is certainly not the best of times for business. For many of the more than 220 Chief Procurement Officers (“CPOs”) and other global procurement executives who participated in this research effort, it is the worst of times for their employers. But the challenges of each day present opportunities within them. In this business cycle, many of an enterprise’s best opportunities and top priorities will play to the strengths and expertise of its procurement department. For example, as top-line revenues stagnate or fall, cost containment, a major focus for any procurement department, gains in significance as a business lever for profitability. Also, unprecedented commodity pricing volatility can enable a procurement department that possesses deep supply market and category expertise to gain advantage over its competitors. For many CPOs and their enterprises, basic survival is the order of the day; for others, like Nat Leonard, CPO at Veyance, “resiliency” is this year’s theme. One thing is certain: the leaders who utilize smart strategies to address short-term enterprise needs while pressing forward on longer-term initiatives position themselves and their organizations to play an increasingly strategic role when the recovery inevitably begins.
Despite the bleak overall economic outlook, in 2009, the “state” of procurement is generally strong; very strong on a relative basis to other functions within the enterprise. In 2009, the CPO’s Agenda is more closely linked to the CEO’s Agenda than in any other year in recent memory. Reduce or contain costs? Check. Improve cash positions? Check. Drive efficiencies? Check. Strengthen key internal and external relationships? Check. Improve execution to position for long-term success? Check.
“We intend to operate with strict financial discipline, maintaining a maniacal focus on cash. We’re also closely managing all of our costs, renegotiating contracts around the world, localizing our sourcing, and variablizing [sic] our costs.”~ Indra Nooyi, CEO, PepsiCo 4 / 20 / 09
“Companies that deliver improved execution during the tough times will be the ones best positioned to capitalize on the economic turnaround which will most certainly occur. To be successful in 2009 we need to deliver on improving execution across the supply chain.” ~ Bob Eckert, Chairman and Chief Executive Officer, Mattel Inc. 4 / 17 / 09
“…the sequential decline in margins is almost entirely due to volumes. In order to offset this impact, we are very focused upon controlling the controllables [sic] and have made great progress on cost savings initiatives…We are reducing costs, we are investing in innovative products and services…I believe we are doing what we need to do for this environment.” ~ Joseph M. Tucci, Chairman of the Board, President & Chief Executive Officer, EMC 4 / 23 / 09
“We have worked closely with our strategic suppliers to achieve sustainable cost improvements, the bulk of which is expected to impact our results beginning in Q2. With our Japanese yen-based suppliers, we have negotiated lower prices and where appropriate, we have negotiated to do business with them in currencies other than the yen.” ~ Olli-Pekka Kallasvuo, President and Chief Executive Officer, Nokia 4 / 17 / 09
“Our leaders abandoned business as usual early on and focused on what needed to be done in the short-term without ever losing sight of what was important, our customers and our brands. And while we were committed to driving revenue across all channels, an equal focus was placed on improving operational efficiency, driving down costs and lowering inventories.” ~ Howard Lester, Chairman and CEO, Williams-Sonoma 3 / 24 / 09
The global recession is taking no prisoners. Neither industry, nor region, nor company-size has provided shelter from its impact. Within the enterprise, few business functions have been unaffected. Yet, as this business downturn continues, the Chief Procurement Officer’s (“CPO”) agenda and the CEO’s agenda have started to converge. In fact, two-thirds of this study’s participants believe that the economic downturn has positively impacted the role of the CPO within the enterprise. One thing is certain: the CPOs who successfully devise and execute smart strategies in these tough times will continue to rise.
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