Over the past few Thursdays, I have been highlighting the 15 annual CPO/State of Procurement reports that I have written. In June 2011, the report series was given the formal “CPO Rising” name as in CPO Rising 2011: Innovative Ideas for the Decade Ahead. The theme of this report is procurement-led innovation, the report is about much more than innovation. This report seeks to present a comprehensive, industry-wide view into what is happening in the world of procurement today by drawing on the experience, performance, and perspective of nearly 250 Chief Procurement Officers and other procurement executives.
Here are a few choice excerpts:
CEOs and CFOs are not the only executives focusing on procurement. Earlier this year the Prime Minister and Cabinet of the United Kingdom appointed its first Chief Procurement Officer – a CPO for an entire country – where a radical transformation of how the government manages the procurement of common goods and services is expected to push 25% of certain costs out. This new CPO and strategy have become key pillars of the nationally adopted “Austerity Measures” designed to lower the UK deficit. Correction – the “State of the CPO” is very strong!
The recent Japanese earthquake/tsunami/nuclear meltdown and the ensuing business disruption had a very obvious supply chain impact that has been and will be felt in many parts of the world. One professional feeling the impact in the United States is the Director of Sourcing for a diverse industrial conglomerate who has several Japanese suppliers for printed circuit boards and other electronics. This leader said “it’s time to seek a savings dispensation from the powers that be [the CFO]. Sourcing savings will not be possible for many of my team’s categories this year. The huge victory will be in finding the supply. We need to reframe the discussion with our superiors now.” With a concentration of suppliers in Japan for certain categories, this sourcing pro and her team have their work cut out for them.
At first blush, how CPOs are responding to their organization’s pressing demands is surprising since “sourcing more,” a primary lever to achieve savings is not the top CPO strategy. While CPOs do plan to source more (32%) categories over the next twelve months, many CPOs believe that internal collaboration (49%) and supplier collaboration (26%) are the central strategies to delivering more savings. This makes sense, since it is much easier to source successfully when budget-holders are aligned and pushing opportunities towards procurement – internal collaboration and communication increases that likelihood.
Doing the most with what you have and getting the best return on your available resources is certainly important in tough times, but it is also just smart business. Almost two-thirds of CPOs (63%) believe that their staffs are too small and, as a result, they are forced to do more with less. Compounding the issue is the tough, but realistic, assessment of staff capabilities in which, roughly three-quarters of all CPOs (76%) feel that the skills of their staffs either “need improvement” (65%) or have a “significant skill gap” (11%).
Companies in all regions and of all sizes are increasingly global and the need to support business relationships with global trading partners has become a priority of the first order. And, while globalization, innovation, and the resulting increase in competition have helped to streamline and improve business performance, they have also served to increase business volatility and supply management complexity.
For many, competitive advantage is built upon a foundation of enterprise partnerships with customers and suppliers that are innovative and difficult to copy. This advantage is more likely to become sustainable if its costs remain competitive with the market. Procurement is in a unique position to serve as a collaboration/innovation hub for both internal and external stakeholders in support of any enterprise-level “innovation” initiative.
RELATED RESEARCH
Ardent’s Procurement Metrics that Matter eBook is coming soon – Our June webinar will highlight the key findings in the report
