Many CEOs don’t realise procurement teams can manage business risk and minimise the impact a disaster could have on the bottom line ©Press Association Images
Many CEOs don’t realise procurement teams can manage business risk and minimise the impact a disaster could have on the bottom line ©Press Association Images

Half of bosses ‘don’t get procurement’

14 December 2016

Half of procurement professionals say their CEO or managing director does not understand what their team does, a survey found.

In a poll of 521 CPOs, managers and procurement personnel, 48% said their boss “still doesn’t get what the procurement team does or can do”. 

More than half (55%) said procurement was treated as a support function that existed to cut costs rather than add strategic value.

Procurement departments need to highlight to their businesses what services they can provide beyond cost cutting, said Mark Ellis, partner at consultancy firm 4C Associates, who conducted the survey.

“If all the [procurement] function does is speak in terms of savings then that’s how it will be perceived: as a cost cutter,” he said.

Although a stagnant economic situation “provides a fertile breeding ground for successful cost reduction strategies”, Ellis said procurement needs to adapt and demonstrate versatility if it wants to gain or keep a seat in the boardroom. 

Ellis gave the example of Ryanair, which abandoned a plan to introduce a £1 charge to use plane toilets. The thought was demand for toilets would reduce, allowing cubicles to be removed to add extra seats. But instead the company has adopted added-value measures.

“Whereas previously [Ryanair CEO] Michael O’Leary openly pondered the idea of charging passengers to use airplane toilets, he has now implemented several measures to win back customers, such as more generous hand baggage restrictions, more attentive staff and a more customer-friendly website. As a result, the airline last year reported a rise of 66% in its net profit,” he said. 

Likewise, procurement needs to show where it can add value beyond cost savings.

“For example, highlight how the department’s risk management programmes minimise the potential impact that a disaster could have on the business bottom line, or the added value it can bring to the company’s corporate social responsibility programme,” he said.

“Show how procurement is driving innovation within the supply chain, giving the company that competitive edge.”

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