Today, we feature our ongoing coverage of this year’s 18th-annual CPO-themed report, where my team and I continue our nearly two-decade-long dialogue with chief procurement officers (CPOs) and other procurement leaders.
The report is based on research by Ardent Partners and represents a comprehensive, industry-wide view of what is happening in the world of procurement and captures the experience, performance, perspective, and intentions of 341 CPOs and other procurement executives.
Our post today looks at standard procurement capabilities that are essential for CPOs and their teams to master in order to collaborate effectively cross-functionally and with suppliers.
Procurement’s Capabilities in 2023
Despite the importance of developing standard procurement capabilities, many departments still lack them. While a majority of teams report collaborating with finance, HR, and other functions (62%) and using spend data to identify sourcing opportunities (62%), it is troubling to note that 40% of teams still lack these essential capabilities. Additionally, while half of procurement teams (56%) operate with an active sourcing program and pipeline, the other “half” is exposed to market volatility and huge price spikes, among many other risks.
However, 61% of teams report the capability to collaborate with suppliers, offering an opportunity to drive innovation, enhance competitiveness, and ensure supply assurance. CPOs understand the critical importance of supplier relationships as it pertains to innovation and competitiveness. Access to new innovations is only possible through a procurement and supplier partnership where trust and communication exist. The capability to collaborate is the entry point to such a relationship.
An important statistic to highlight is collaboration with the line-of-business budget holders (52%). While half of procurement teams are executing in this area, the other half lacks this essential capability. Why is this alarming? Despite the higher percentage of collaboration with multiple business units, procurement teams are not communicating and planning yearly budgets with the individuals who rely on the resources the most. Without budget knowledge, CPOs and their teams are sourcing in the dark, not knowing the accurate spend they’re sourcing against. Procurement should be viewed as a budget partner to ensure actual budget requirements are realistic. Ultimately, the more value CPOs and their procurement teams can generate cross-functionally, the more opportunity to increase their spend under management.
Two other important statistics focus on standardization capabilities: standardized sourcing process (53%) and standardized contracting process (51%). Without a standard sourcing process, CPOs lack appropriate insight into quality and spend. Sourcing is a primary component of supply chain strategy and inventory efficiency. Similarly, a non-standardized contracting process opens procurement and the enterprise to unnecessary costs and risks associated with supplier performance and compliance.
Next week, we’ll be covering procurement technology adoption and investment trends. The prioritization of digital transformation is expected to translate into a high level of technology investment in 2023.
RELATED RESEARCH
CPO Rising 2023: CPO at the Crossroads
CPO Rising 2023: The Top Risks Facing Procurement in 2023
CPO Rising 2023: The CPO’s Agenda for 2023
CPO Rising 2023: Priority Deep Dive — Once Again, Savings Is Job One
CPO Rising 2023: Procurement’s Top Achievements in Last 25 Years (Part 1)
CPO Rising 2023: Procurement’s Top Achievements in Last 25 Years (Part 2)
