In conversations with the CPO’s: Key Procurement Takeaways Part III
In the previous blog, I shared three key takeaways from the conversations with the CPO’s in Europe
- DON’T shy away from standardization & change
Nearly across-the-board (no matter how study data are sliced), the number-one strategic entry point for enterprise procurement groups is using spend analysis to identify opportunities for competitive sourcing or re-sourcing of spend categories. The big exception is companies reporting either high (21%+) or very high (30%+) cost savings rates attributable to strategic procurement. High savers are 2X more likely to put early focus and energy into standardization — identifying approved items for purchase, implementing preferred suppliers and so forth. Very high savers are 6X more likely to emphasize standardization before focusing on competitive sourcing/re-sourcing, re-negotiation, supply base rationalization or other procurement strategies.
- PAY MORE attention to supplier performance
Few enterprise procurement groups have the luxury of being handed investment money for all the technology tools and systems they might need to deliver major performance improvements to a business enterprise. More often than not, CPOs must choose one technology entry point and procure-to-pay (P2P), according to the study, is the number-one choice (34%) with spend analytics earning second place (26%). The relative popularity of P2P suggests a majority of procurement groups may still be grappling with spend data that is insufficient for actionable spend analytics and need to lock down spend work flows to generate better information moving forward.
Interestingly, while the total survey pool suggests a high unlikelihood of supplier performance management (SPM) being chosen first for procurement tech investment (only 5%), some 20% of high savers report investing first in supplier performance management.
- COURT the boardroom
Of all major corporate process flows, strategic procurement and spend management requires participation and cooperation from virtually every corporate function. CPOs, if they wish to succeed in driving true business performance improvement, are tasked with cultivating close working relationships with corporate leaders across-the-board. But is there a subset of corporate leadership that matters more, deserves more attention than the rest? According to the study, Strategic Business Unit (SBU) leaders are the collaborators most commonly cultivated by CPOs with 38% citing this group when asked who they court most assiduously. Executive leadership/boardroom, however takes a close second place, earning 34% of the votes. Finance leadership takes third place (20%) followed distantly by IT and legal (4% each) while virtually no one sees HR execs as their most important internal allies.
Slicing by major procurement KPIs, an intriguing split emerges with high SUM and high compliance procurement groups being notably more focused on cultivating SBU leadership versus high savers who are2X more likely to be cultivating executive/ boardroom support and equally likely to be cultivating finance compared to courting SBU leadership.
- LOSE the arms’ length supplier relationships
A final question addressed in the study focused on potential for performance impacts in how enterprise performance groups choose to approach relationships with suppliers. Only 14% of the overall study pool continues to pursue primarily arm’s length relationships with their suppliers, characterized by minimal information and systems integration and little to no co-development or risk sharing. Still, nearly as few (only 16%) have gone to the opposite extreme, building supplier relationships with very high degrees of information and systems integration, co-R+D and equal risk sharing. The vast majority cite typical supplier relationships falling somewhere in between the two extremes, classifying as collaborative, yet moderate in terms of information, intellectual property or risk sharing.
Looking by major procurement KPIs, the most notable differences show up in the arm’s length supplier relationships category: zero percent of high savers cite this as their major approach to supplier relationships while only 5% of procurement groups achieving high process and contract compliance claim the same.
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