This dialogue occurred on Thursday, January 15, at 2:00 p.m. EST.

Increasingly chief procurement officers (CPOs) are re-shaping their organizational role to focus on creating results far beyond cost controls. A new IBM survey explores how. EBN will welcome Steve Peterson, research lead for IBM's Institute for Business Value to discuss the survey results and leadership practices in the purchasing C-suite.
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we will have to wait and see how these exchange of roles will have impact on their business

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Among the most successful ones we see an active and hearty embrace of bog data.  

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we will have to wait and see how these exchange of roles will have impact on their business

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And thanks to all of you for the great questions.

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That would be great, Steve.

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No communication. The two units don't typically share data. Marketers need to take a close look at what's inside the electronic product to better market it.

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No communication. The two units don't typically share data.

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No communication. The two units don't typically share data.

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Havea  great weekend!

 

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I have to power to do that: IBM Institute of Business Value (IBV), the Chief Procurement Officer Study (registration required)

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That would be great, Steve.

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Perhps we can post a link to the study for anyone who iss interested in a little light reading.

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thanks Hailey. And thanks to all of you for the great questions.

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Thank you so much, Steve for sharing your expertise with us... It was really fascinating. I hope you will join us again sometime!

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@Steve, i suspect when they see how powerful some fo these tools can be it would make going back to spreadsheet world a little harder! :)

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Thanks, Steve.

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@Mary - the role of big data is one of those that depends heavily on what sort of procurement departmetn we are talking about. Among the most successful ones we see an active and hearty embrace of bog data.  But at the other end of the spectrum we see underperforming procurement shops using .xls as their primary tool. In my view, a 1B company is simply too complex for prcurement to be using such simple tools. When the complexity of the decisions exceeds the ability of people to individually model and understand the impacts of the decisions they are making it is time to call in more support. In most cases, that start with automation, which provides the needed fuel for all analytic activity.

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@Mary, interesting question about data analytics.. i know we talk a lot about it, but i'm not sure howmuch we do it.

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@Steve, it may be a topic fofr antoher session...your survey really could have been a dozen conversations!

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Thank you, Hailey.

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@Steve

 

Steve, what role is big data/analytics tech playing with CPOs  (if any)?

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RE contract designers/manufactures etc - I think this is a strategic choice each company has to make based on its circumstances and position in the marekt. There may be a trend one way or the other at the moment, but it would probably just be a reflection of broader strategic shifts within industris. I expect this one is a topic for another session :)

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@Jim, ouch. And, rim shot.

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We are at the 11:45 mark...in deference to time, i'll invite last questions!

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@laurie, this isn't a procurement problem per se but i have experienced engineers writing me off as "not able to understand" so that actualy having that conversation provides almost impossible.

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No communication. The two units don't typically share data. Marketers need to take a close look at what's inside the electronic product to better market it. 

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@Steve/Hailey

 

One area I have seen extensive collaboration in between CPOs and suppliers is sustainability.

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@Laurie, what do you see as the primary result of that disconnect?

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@Steve, do you see contract designers, contract manufacturers and electronics distributors becoming more or less valuable in the leverage supplier picture?

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I think there's a disconnect between the two departments that need fixing

 

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Rodney, Next to R2D2!

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Hi Laurie, good to see you! What an interesting question.

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@Hailey - Examples are important - Our study showed that more than half of the highest performing CPOs have leveraged suppliers to actually help co-develop new technologies for their business. I think this really demonstrates a deep understanding of the business needs and the unique relationship that procurement has with their partners. Overall, the study showed that 92 percent of highest performing procurement officers feel they can add value to external stakeholder relationships as opposed to 68 percent of underperformers, so this is a critical shift that procurement organizations must take in order to help their businesses stay competitive and bring more innovation to the table. I hope that helps.

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Great question, David. Where in the C-suite stack does a CPO sit?

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@Dave - we have not observed a pattern of performance based on who the CPO reports to. That said, I expect many CPOs have a strong preference :)

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Steve, One problem I see with software-driven procurement is that the software is so complex it paces the buyer. The typical answer from most SaaS companies is to add even more bells and whistles! Doing simple things takes forever, and complex things need a manual to help figure out how to get it into the system...and woe betide you if you make an error!

Software vendors need to look at the real world they are creating and be a bit more humble!

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 Can you give an example of how procurement can work with partners and suppliers in new ways? Given the pace of business in the high-tech industry, this may be particulary important. Do you see this sector doing more or less well than other manufacturing sectors?

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@Steve- Thanks. in many organizations I'm aware of the top procurement officer often reports to the COO or sometimes is the COO. Occasionally I see it is the CFO. Do you think it matters? Do you have a preference?

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Steve, quick question when you get a chance. How closely do CPOs work with their marketing departments for external communications to consumers or B2B partners? 

 

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The fact is, procurement has always been in this position by nature of how they negotiate contract terms with partners and suppliers, but they are recognizing the value that they can bring to these relationships and bring them several steps further to the benefit of the business. They are no longer just the gatekeeper to external parties, they are the conduit to leveraging them to drive business results. 

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@Mary, LOL..that's a sad statement. We better not let it get out that many CEOs don't have good knowledge about what's going on operationaly. :)

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@Rodney

 

Well, I'd better find some dessert, then!

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@Steve, back to the value question: Do you think that it's the CPO's job to define what the value is (and how it's being delivered) or in most organizations is the value something that's defined by others in the executive team -- the CFO or COO, for example?

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@Rodney, never eat lunch before you show up here...we are a VERY hospital group. When two are three are gathered, there will be gaucamole.

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Great question Hailey - Procurement professionals are actually in a very unique position in every company right now. Not only are they working closely with all the key internal business decision makers, but they also act as a key interface to all the outside suppliers and partners that are so critical to doing business. This gives procurement pros a unique vantage point to really understand the needs of the company from the inside and then find the right strategic partners from the outside that will help achieve these goals.

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@ Hailey

 

This is  probably a bad thing, Hailey--but often I see the confusion starting with the CEO, who doesn't consistently have a good operational grasp of what's going on. 

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Wait, taquitos?! And I just had lunch. :(

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@Dave - I don't think strategic leadership is a zero sum game. I think procurement brings a unique point of view to strategy formation and implementation that many other parts of the enterprise may fail to see. The more cooks in that kitchen the better... as long as decisions and actions are clear.

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What are some of the key factors and conditions that are helping to drive this shift in procurement?

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@Steve, i can't imagine that getting action in large organizations is an easy thing to do--so that's a notable result.

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@ Steve


That's really interesting data, Steve.

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Mary,

I've got some salsa to put on the taquitos!

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@Mary, thanks! It's turning into a fiesta here!

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@Mary, what problems do you see the confusion causing? Do you think there's a way to clear up those lines or is it too tough to do?

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In other words, procurement role models not only advocate for strategic change in the companies they serve, but they actually get the company to act on those suggestions.

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@Hailey

Great to be here, Hailey.

 

I brought taquitos to be different!

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David, That brochure was 42 pages long...you aren't busy enough!

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@Jim and you gotta love it when that happens! Total score. :)

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To your question about CPOs role in strategy - in past years, CPOs have talked a lot about this shift in influence and focus, but we're now seeing this talk turn into more action. According to our study, top procurement organization are nearly twice as likely to introduce new innovations into the company and 1.5 times more likely to have influenced senior leadership to enter a new market than their lower performing counterparts. These are the kinds of higher level strategies and initiatives that you don't traditionally associate with procurement, but this is clearly changing.

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@Steve

 

That's what I see, Steve.

 Sometimes this creates  confusion.

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Hailey, The most interesting result was that all the team members could see a real contribution. After that ad-hoc teams formed up regularly without C-Level intervention.

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@Mary, i didn't see you hiding there in the back! Welcome... thanks for stopping by. :)

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@Jim--There's also the problem of different divisions within a company working with disparate procurement systems that don't tie out.

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@Steve how do you see CPOs trying to exert their influence on the broader business strategy of the organizations they serve?

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@Jim- No way! I read the brochure. That ERP is going to let me do backflips around the competition even though they are also using it.

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@Mary - in larger organizations we tend to see both CPO and Chief Supply Chain Officer. In smaller organizations those duties are hendled by one team. In both cases, the lines are fuzzy.

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I am consistenly shocked that Excel spreadsheets remain alive and well as the top favorite tool of many procurement organizations.

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@Steve- I totally believe you when you say CPOs are getting a bigger seat at the strategy table and how. But when I'm in these chats, it seems like every CxO is being more strategic and getting a bigger seat. Is the strategy table growing? Is the room for all of these people, or do you think where the CPO is successful, someone else is getting pushed aside? And if they are, who is it generally? the COO? The CIO?

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@Jim, great example of how big picutre thinking, looking at design, etc can really make things better!

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David, I've seen procurement hide behind the ERP system and not be very innovative. They just put in the minimum...partly I suspect because the system gave them data overloads.

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So basically they are having to speak a new language: Business value. Are they being welcomed at the table? Or do they have to really prove themselves to get a seat?

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To your first question Hailey - Traditionally procurement has been seen more as the guardians of corporate spending. They are the watchdogs of sorts that ensure costs are under control. But increasingly CPOs are expanding their remit to bring more strategic value to the business and into the c-suite. Top procurement leaders are now more in tune with the bigger picture to help drive innovation, grow revenues and expand competitive advantage. They aren't just concerned with the success of their procurement function - they are more focused on the success of the business as a whole. It's a major change in mindset that's giving CPOs a bigger seat at the executive table.

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@Curt- Watch out. I spilled some on that chair over there. :)

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One solution is to form teams with the technical experts and product managers to better be able to look holistically at a given class of product.

One time, I set up a team for cable assemblies and they reduced parts count by 75% and costs by 50%, never mind inventory and wastage.

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I am just joining--so perhaps this question has been asked--but where do the roles of a CPO and a chief  supply chain officer intersect--and should these be peer positions in most organizations?

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@Hailey, I'll be sitting down as soon as I scrape a bit of the guacamole onto my plate...

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@Curt - great question. I think both are the case in procurement departments. There is a general expectation at the senior level that procurement will deliver savings, but true value add often comes from procurement's interactions with business unit stakeholders. Companies struggle when they focus too much attention on either of those objectives.

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Thanks. My first question is that I thought procurment was a "solved" problem in IT. The marketing sure makes me think so. I'm supposed to have all sorts of great cloud and SaaS options to make procurement easy and give me great ROI. Where does the marketng hype fall short from reality?

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Hey Curt... welcome and please pull up a chair and join the conversational fray!

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What did the CPO study reveal about how the role of the CPO is changing within organizations?

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Yes, I think all of the finding and suggestions in our study would apply to smaller companies too. Our respondents were both large and global in nature, but the observations about how the function can operate do not require a minimum scale, or even an official CPO.

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@Steve, is there anything within procurement that is like agile development in software? Cross-departmental, constant feedback, etc.?

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@Steve, we've seen a lot of different business units talking about the importance of "adding value" to the organization. Is that something that the procurement unit is wrestling with or is the value add just a given of the function?

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@David, glad you could make it...and the virtual guacamole isn't all gone...so you are still in time. :)

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Steve...I've seen that too in companies. Purchasing is often to loaded up to spend time being strategic of even efficient!

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Hi folks. Sorry I'm late.

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@Jim - great point. Procurement in a vacuum is never a good idea, but we were taken aback by the number of respondents who seemed to accept this as their standard course of business.

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Are there things that smaller organizations can take a way from what you learned in the study? Many don't have a dedicated CPO but they do have a lot of the same activities and challenges.

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@Scott - I suspect everyone in procurement who is serving an underperofming organization could benefit form the shift in mindset that we advocate in our study. That said, the procurement respondents to our suvey were all VP level and above, and all of them were from companies with revenue in excess of 1B USD.

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@Steve, I might be misreading that, but it sounds like you are saying porrly implemented automation will need more human capital than no automation at all in some cases.

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Steve, Your comment about the procurement "silo" is a reality. One problem with most companies over 1000 employees is that they build walls around their own jobs.

Buying in a vacuum is a very expensive error. It prevents the interactions that allow what if discssions to lead to lower cost solutions and better risk taking in buying.

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@Rodney - great questions. I don't want o be too generic in my response, but almost any area of procuremetn that can be automated (and that includdes most, as I am sure you know) can suck in human capital and make it hard for procurement to perform more advanced forms of analysis.

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@Jim, glad to have you with us! Pull up  a chair--and help yourelf to some virtual guacaomole and chips.

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Also, are academic programs keeping up in terms of offering new courses and skills training? If not, is there an alternative?

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Specifically, what kinds of skills do procurement professionals need to make the shift to respond to the organizational shift of procurement being strategic?

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Hi Hailey, Steve

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I have a couple of really quick questions about skills sets and what people need to know.

 

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Steve, what sort of automation tools or processes are available that the underperformers might not be using?

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Welcome, Scott. Good to have you with us.

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@Rodney, welcome. Pull up a chair and help yourself to some virtual quacamole.

 

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Hi Hailey and everyone else.

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To put a finer point to my response about what finding surprised us the most, about 10% of the underperforming procurement organization shad that they did not value interactions with stakeholders (both external to the company as well as those from inside the company). In other words, lots of underperformers like to do procurement in a silo. Scary isn't it?

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Well there's always next year!

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Howdy folks.

 

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It is hard to say for certain, but yes, I think resoruces are a big part of the problem among underperformers. The other contributing factors, I expect, include under-automated transaction support systems, leadership that tends to focus on procurement performance instead of corproate performance, and culture. Unfortunately, we did not collect data that would help me explain this particular finding. Perhaps that is a fruitful area to focus on for our next procurement study.

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FYI to those arriving, there is a slight delay this morning between hitting 'Post" and seeing the comment. Fear not! They do show up.

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What's behind them ignorning it? Lack of resources?

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The most surpising findings actually came from the groups of procurement organizations that are underperformers. We were a but shocked to see how many of them seem to willingly ignore important stakeholders from both inside and outside the companies they serve.

Many of the findings relative to the procuremetn leaders were far more intuitive. I am sure we will get into these detaisl when this gets rolling.

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Actually, we decided to conduct this study as a follow-up to the study we completed in 2013. In that study we concluded that well run procurement shops can and do add value to the organizations they serve. Our mission on this study ws to learn a bit more about HOW this happens.

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As a starting place, and before we get teh ball rolling officially, tell us a little about what prompted you to want to look at this topic? Did you find what you expected or were there surprises?

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Hi Steve, welcome

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I am the author of the IBM 2014 Chief Procurement Officer study and I am excited to join this conversation.

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Hi Hailey - thanks for having me today!

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Whilie you are waiting--or when you have a quick second--Please take a second to weigh in on our most recent poll in the column to your right.

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For a quick review of the results, take a look at my recent blog on this study: http://www.ebnonline.com/author.asp?section_id=3219&doc_id=276259&. It has a very cool infographic that gives you a quick look at the highlights.

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As you arrive, please introduce yourself so we can offer words of welcome, and offer you a seat as well as a bit of EBN's famous virtual guacamole and chips.

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Questions, theories, ideas, real world experiences and even friendly rants are welcome here.

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Second, if you have problems posting, we suggest trying a different browser.  IE9 is a popular choice, but sometimes find Firefox, Chrome, or Safari work better.

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This will be a fun, fast, and friendly conversation, so please do not hold back with your comments or questions.  There are no dumb questions and we value everyone's point of view.

 

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First, please make a copy of your post before hitting the "post" button – just in case.  If the system "eats" one of your carefully crafted thoughts, please hit "Ctrl-Z" to recover it.

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We should be getting started at the top of the hour-- 2PM EST sharp, as soon as our guest arrives.  First, though, there are two housekeeping notes:

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Hi Tech4People, thanks so much for popping in with questions! We'll make sure to get them answered for you. :)

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Do the CPOs have all the Tools in place to enable them to do their Jobs most effectively today?? I have serious doubts about that issue.

User Rank   Supply Network Guru

So basically Procurement Officers now have to do things differently correct?

User Rank   Supply Network Guru
EBN Dialogue / LIVE CHAT
EBN Dialogue enables you to participate in live chats with notable leaders and luminaries. Open to the entire EBN community of electronics supply chain experts, these conversations see ideas shared, comments made, and questions asked and answered in real time. Listed below are upcoming and archived chats. Stay tuned and join in!
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Live Chat 01/15: CPOs Re-Shape Their Business Roles
Increasingly chief procurement officers (CPOs) are re-shaping their organizational role to focus on creating results far beyond cost controls. A new IBM survey explores how.
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The number of cyberattacks is on the rise and hackers are targeting the supply chain. Drew Smith, founder and CEO of InfoArmor, will be on hand to discuss the reality of today's threat landscape and what to do about it.
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