30 March 2007 | Paul Snell
Chief procurement officers need to do more to convince finance directors of the value of purchasing, a report has found.
According to The CPO's Strategic Agenda: Managing Performance, Reporting to the CFO, published by research group Aberdeen this month: "CPOs become so steeped in their own world that they often forget the financial fundamentals." It says this is a problem because CFOs are often not "fluent in the language of procurement".
The study claims CFOs are often reluctant to acknowledge savings achieved through cost-avoidance, such as negotiating volatile commodity markets. But these savings do help to establish trust with finance departments.
It also found that when procurement departments implement cost-savings plans, savings were often 2.5 per cent less than original estimates.
This was considered a problem as "negotiated cost savings" was the main performance indicator for three-quarters of CPOs. And it was found that nearly one-third of all CPOs reported directly to the head of finance.
The report recommends CPOs begin to link their savings plans to overall business goals, such as improving revenue. It also suggests boosting the use of technology, to make it easier for finance to see delivered results.