Like everything else in high-tech, the role of procurement continues to change. Until recently, according to IBM research, companies looked to procurement to help facilitate aggressive cost-cutting targets necessitated by a global economic downturn. As economic realities continue to shift, the procurement function must again adjust.
To understand what actions and decisions have led to success in the past, and to derive insights on what responses might work best in the future, IBM’s Institute for Business Value surveyed 1,128 chief procurement officers (CPOs) from organizations with annual revenue in excess of $1 billion. The study found three key points of differentiation separated high-performing procurement organizations from the pack:
- Effective delivery of traditional procurement capabilities
- Influence within the enterprise over purchasing and strategic decisions
- Delivery of innovative ideas from a diverse range of inputs
Only about 15 percent of the organizations surveyed consistently delivered on all three targets. According to the study, CPOs from these leading organizations focus on procurement fundamentals, extend procurement’s value through collaboration and develop new capabilities to address emerging procurement challenges. Breaking it down further, effective CPOs:
- Focus on the fundamentals: Procurement organizations are expected to consistently deliver value to the companies they serve. To do so, CPOs must master the fundamentals. Top performers consistently apply the right performance metrics, effect upward communication about performance success and standardize the processes and procedures that define the function.
- Influence their organizations: The hope of most CPOs is to influence and improve the way the business operates. Top-performing procurement organizations recognize the value of collaboration. Compared to their lower-performing peers, these top performers excel at both internal collaboration – collaboration between employees – and external collaboration – collaboration with customers, partners and suppliers.
- Bring innovative ideas into the organization: While about one half of procurement organizations are effective and a third are influential, even fewer are innovative, the study found. Those that are indicated they look for innovation across a wide range of sources. For example, leading procurement organizations embraced fundamentals like automation and collaboration before they were common. Similarly, top performers are currently at the leading edge of risk management, procurement analytics, and talent management.
Of course, IBM provides a host of solutions to enable these goals. Nevertheless, the report notes that to the uninitiated, procurement might seem like a “back-room” function within an organization. In reality, effective CPOs have a seat at the corporate management table – particularly if they excel.
The full report is available at: http://www-935.ibm.com/services/us/gbs/thoughtleadership/chief-procurement-officer/