CPOs must align business strategy with CEO

30 January 2013

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30 January 2013 | Anna Reynolds

CPOs are failing to manage the true value delivered by procurement, according to a report by Ardent Partners.

The report, CPO Rising: Keeping Score, was based on feedback from 270 global CPOs and procurement executives.

In the report, CPOs expressed overall concern about the 2013 business environment, citing the current slowdown in China and the economic uncertainty across Europe as two potential catalysts to another global recession.

Andrew Bartolini, chief research officer at Ardent Partners and author of the report, told SM: “CPOs along with their companies are showing concern and preparing for a slow-down across Europe. Meanwhile, companies are still not at a level of sophistication to manage the true value that procurement delivers. At the moment the organisations are only reporting metric value, but the beauty of procurement is it touches so many different aspects of a business.”

Most respondents rated procurement’s positive impact on areas including supply risk (93 per cent) and profit margins (86 per cent). However, the survey also showed that procurement helps to maintain regulatory compliance (89 per cent) and improves working capital (77 per cent).

Bartolini added that this indicates a broader level of value that is being delivered or supported by the typical procurement team. Helping the enterprise stay competitive (cited by 81 per cent) was also driven by procurement. The report recommended this should underlie the CPO’s strategic plan.

The research found that just slightly more than one in five CPOs is currently working on a plan that is well aligned with the enterprise’s top goals and objectives. While Bartolini said this has improved in recent years, the CPO’s co-ordination and alignment with the CEO continues to be a work in progress. The report highlighted that on average, procurement departments manage just over 60 per cent of total enterprise spend. This suggests it will take a few more years before departments can gain a full understanding of total spend opportunity and begin to optimise it.

Another finding from the report was that more undergraduates are entering the procurement profession with some direct exposure to procurement and supply chain in classrooms.

Further, many CPOs are aware of their lack of supplier performance management and the supply risk gaps that exist within their operations. Over 60 per cent said their top strategy was more supplier collaboration to reduce risk and 54 per cent said they would improve supplier communication.

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