Leading supply chain executives are still looking to transform their functions
We recently surveyed more than 400 Chief Procurement Officers (CPOs) and other functional executives to understand their strategies for next year.
Perhaps unsurprisingly, the function is still obsessed with cost cutting. Achieving enhanced savings was the single most highly sought-after metric within purchasing. To achieve this aim, many are looking to reorganize their functions.
Procurement Leaders explored the projects that had been proposed to deliver these strategic objectives and the resource commitments needed for these plans. This was measured through staff allocation and the expected time duration.
The amount of full-time employees and month duration for procurement projects planned for 2016. Many... [+]
Other change management projects are equally costly. Globalizing spend and implementing category management are one of the most expensive processes a company can undergo. Executives are also committing significant resource to these in 2016.
The second area of focus for CPOs is technology projects. Implementing a new system in a large organisation is no picnic either. Introducing e-procurement is expected to take more than a year.
Simply installing programs costs millions of dollars alone, but the roll-out expenses are the chief cost-driver. As most systems are not tailored, companies have to change their processes around the workflow of the new application. The challenge of new technology is not technical, but one of change, as well as expense. Thousands of people have to learn a new system and change the way they work, so it’s often easier to resist the new technology.
New leaders are often keen to put their stamp on a department when they take charge. The most obvious way of creating a legacy is the ‘reorg’. Given CPOs are in the top job for an average of two years, this means staff spend a lot of time studying the new organization charts.
Our research shows any given procurement function will be undergoing a structural change for one-third of its time. Next year is not a departure from this trend.
The debate within the function often relates to decentralized versus centralized structures. Should buyers be present in one global headquarters, arranging purchasing from top-down diktat? Or should procurement teams be dispersed throughout the world, sitting among local business units?
Decades of change have not produced an answer to this dilemma.
Rather, CPOs seem content to oscillate between these two models, subsuming an enormous amount of company resources in the process.
The function struggles to find its role in business. That its management are consumed by tinkering with reporting lines and imposing new technologies is indicative of this anxiety.
At some point, a deeper change will need to be addressed: one of people’s mentalities. Unless individual buyers can devise means to add value to the business themselves, beyond the cost-saving, procurement will never be at the heart of business. Drawing an infinite number of new dotted lines will not change this.
You can read more about this topic in Procurement Leaders CPO Planning Tool-Kit.
