@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.
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 :)
@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.
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!
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?
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.
@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?
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.
@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.
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.
@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?
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.
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.
@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.
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?
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.
@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?
@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.
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.
@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.
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?
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.
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.
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.
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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