In my line of work, the acronym CPO is tossed around like ATM or DNA. I mean, everyone knows what a CPO is, right?
But for those of you that don’t eat, drink, and sleep supply chain acronyms (and even for those of you that do), here’s my take on one of my favorite industry pet names, the CPO.
A CPO is a centralised procurement organisation (or a central purchasing office or organisation), and it’s pretty much what it sounds like: a single business unit designed to handle the bulk of a company’s procurement and arguably one of the best investments a business can make to consolidate spend and regain control of its supply chain.
Taking a closer look, the following is what’s required to build and manage a CPO:
• Connecting diverse systems. A preliminary challenge to implementing a CPO is connecting geographically and architecturally diverse systems. As far as I can tell, there’s really only one option here: a common information platform. It’s critical your information platform is able to receive and translate incoming data from all of your external partners regardless of native protocol and format.
• Multi-enterprise collaboration. Key to all CPO processes is the ability to collaborate with external suppliers. Collaboration, of course, requires electronic connectivity to trading partners plus the ability to exchange data and respond to disruptions in near real time. In my experience, cloud-based software solutions offer the most comprehensive and easy-to-implement tools and systems for this.
• Location, location, location. Selecting the best location for your CPO is crucial, and should not be done hastily. Exhaustive research needs to be conducted to understand the tax policies of different countries, as well as the potential impact a new location would have on current operations. Cultural and linguistic compatibility should not be overlooked.
• Intelligent change management. Profits generally align with where key functions are performed, risks are assumed, and assets are located. As a result, the effective implementation of a CPO requires organisational change and the need to relocate executives to the CPO location. Because centralised procurement extends across a variety of organisational functions (e.g., finance, supply chain, operations), it is important to ensure your company is aligned cross-functionally.
• Partner cooperation. The success of your CPO depends on the cooperation of your suppliers. Direct communication about CPO requirements is crucial. Specifically, ensuring all partners understand the benefits of leveraging a CPO (e.g., it offers a more seamless, timely, and transparent process) and also understand how they can participate most effectively.
A well-run CPO can offer tremendous cost savings and service improvements, and can also restore internal control of the extended supply chain. That being said, implementing a CPO requires cross-functional support and often introduces a variety of new risks and complexities into your organisation, but to close with two of my favorite acronyms, the ROI on a CPO can be huge with the right foundation in place.
☛ David Maund is vice president of professional services EMEA at E2open