Commerciality and the outlook of CPOs in uncertain times

“In these tough times, procurement and supply chain functions need to be agile to take care of the opportunities that present themselves, said Clive Govender, former head of Supply Chain for Anglo American Platinum at the Smart Procurement World Western Cape Conference.

There is considerable uncertainty in South Africa’s immediate future: economically, commodity prices have fallen to low levels and, at a societal level, the country has seen a great deal of unrest. There has been a high level of staff retrenchment, beginning in the mining sector and spreading across to other sectors, noted Govender.

Among all of this uncertainty, traditional supply chain models are rapidly changing, businesses are becoming more complex and sophisticated, and, therefore, procurement individuals need to up-skill and change the method of how they are doing things.

This must happen if procurement is to be successful in the commercial role it must play in business.

“Procurement plays a huge role in commercialisation,” explained Govender. Chief Procurement Officers (CPOs) should be addressingfunctional gaps in their organisations, start building strong cross-functional teamsand lead and facilitate discussions that need to take place.

CPOs need to drive procurement at the bottom line, while speaking the language of CEO and CFO.

CPOs need to look for ways to increase revenue for business, maintain supply network resilience, manage supply risk, develop mitigation plans and, most importantly,CPOs have to know how cash is managed.

“Commercialisation and procurement work hand in hand,” said Govender.

What does commerciality mean in the context of large procuring organisations and the short- to medium-term outlook of CPOs

“Procurement processes need to change from time to time to allow innovation to happen. If companies do things differently then there will be a way forward. One tip to a CPO is that they need to challenge the status quo, while maintaining procurement policies that are transparent and fair” said Kate Vitasek, author, University of Tennessee Supply Chain Management Professor and architect of the Vested Business Model.

“CPOs must ensure that suppliers deliver on time and deliver high quality. CPOs must stick to their decisions, manage their suppliers and re-evaluate contractsif there need be. CPOs need to adapt quickly and change their ways of doing things,” said Hugo Du Rand, Head of Group Supply Chain, Scaw Metals.

“Competitive advantage does not only involve price, but working together and finding solutions for the business and for the supplier. Collaboration helps when you are managing costs;partnership means that if the company grows so does the supplier. As both parties grow, the cost goes down significantly, said Sanet Shepperson, Executive: Procurement, Cell C.

One tip to CPOs: understand which ebitda targets are for your company and understandhow you affect that, said Shepperson.