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Tuesday, September 2, 2014

10 Points Every CPO Must Consider

The two-day Chief Procurement Officer Summit in Boston late last month, conducted by Aberdeen Group, let CPO attendees “network with like-minded peers,” as one speaker explained, as well as understand cutting-edge procurement and gain a holistic view of supply chain management (SCM) and other operations.

Credit: graur razvan ionut at FreeDigitalPhotos.net

Credit: graur razvan ionut at FreeDigitalPhotos.net

It succeeded in each of these areas by providing valuable insights about how best to run operations in a shifting business environment — one that is increasingly dominated by globalization, pressure on prices, international regulations, and sustainability.

Following are some of the points made at the conference. Many may seem like a keen grasp of the obvious, but based on audience reactions and company push-back to these ideas as described by speakers, they are relevant and worth reviewing, if not enacting.

1) Know and understand corporate strategy. CPOs should make sure their teams are aware of company goals and develop consistent procedures and practices to achieve them. Corporate strategies can be sloganeering, of course, but are still a good base on which to build operational procedures and results that enhance procurement.

2) Procurement is vital to bottom-line growth. Major savings are achievable with effective SCM. In many cases companies turn to CPOs to develop ways of more effectively managing suppliers and purchasing. Cost-cutting mandates are opportunities to implement innovative strategies. Visionary procurement policies can lead to significant savings, which enhance revenue and profitability.

3) Oversee all areas of spend. This includes internal as well as external spend. Often, major savings accrue if CPOs develop internal procedures that regulate purchasing within departments. No area is too small to monitor. One speaker related how his team cut IT spend on subscriptions by 70 percent by mandating the purchase of partial, rather than full, licenses for software.

4) Analytics count. It’s vital to develop benchmarks and other metrics to know how successful SCM and other policies are at meeting objectives.

5) Go long on data. CPOs need to know how much something costs and what a reasonable profit margin is for suppliers before price negotiations. A thorough knowledge of component or system costs provides the information for realistic price demands.

6) Monitor every supplier. No vendor is too small to not be checked regularly. Most CPOs have horror stories of suppliers which, because they account for so little in terms of annual spend, were unregulated and wound up in financial or other positions that could imperil a supply chain if anything happened to their operations.

7) Collaborate and innovate with key suppliers. There is nothing new to this, of course, but it’s always worth pointing out. A CPO’s best suppliers will bring expertise to the table that can be used to improve products, supply, and prices. Knowing who these suppliers are and developing close relationships that promote meaningful collaboration (i.e., of benefit to both parties) are essential.

8) Cultivate executive support. Another no-brainer, but again, worth repeating. All CPOs need the support of company leadership to implement good practices and make stakeholders across the company buy into them.

9) Be visible. Nothing succeeds like success, and no one gets support faster than a CPO who is the face of effective procurement to leadership.

10) Hire well. Talent is thin in procurement, one speaker noted, mostly because the profession flies under the radar of colleges and students. CPOs thus need to look relentlessly for capable people and be unafraid of hiring those from unconventional backgrounds — even if it takes longer than planned. One speaker said he hired bright college graduates who were bartenders and retail salespeople on the strength of their people skills. Attitude and aptitude count; any good hire can be trained, but if he or she does not have the determination to succeed, training may not count for much.

 

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