Improve your ROI in procurement - CPO imperative

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Success_.pngBecoming that well-equipped procurement and supply management organisation means ensuring efficiency and increasing return on investment in procurement.

To get to this vision, CPOs must focus on certain imperatives.

Alignment & Collaboration

The strategic imperative for procurement is to become the hub: the function that can capture knowledge and information effectively and efficiently from many sources, transform and redistribute it where needed.

For example, supplier performance data captured from operations might be used to predict and reduce exposure to supply risk; information extracted from contracts might be used by finance to improve cash low; forecasts and other qualitative input captured from sales might be used to generate intelligence about future demand and sourcing requirements; and information about supplier innovation captured through sourcing RFIs and RFPs might be passed along to R&D and used there to inform a company’s long-term technology and product-development roadmaps.

When procurement deploys solutions that enable knowledge capture and collaborative decision making, the possibilities for achieving competitive advantage and driving business performance increase exponentially.

Compliance

Driving business performance from procurement means convincing employees to line up with and adopt preferred procurement processes, strategies, standards and decisions.

Well-engineered procurement solutions drive compliance by empowering procurement executives to codify corporate objectives, standards, workflows and strategies with, for example, a contract authoring tool with templates that incorporate preferred commercial terms and legal protections, which creates a powerful platform for managing legal and financial risk exposure.

Likewise, a decision optimisation tool for e-Sourcing might be weighted heavily in favour of suppliers who perform best on the product quality metric, preventing sourcing professionals from over-emphasising cost in a business environment that values product quality more highly.

However, relying on solutions to promote compliance assumes people can easily adopt and use the solutions.

Adoption

Procurement needs technology, but simply investing in technology is not enough: successful procurement organisations must also be capable of driving broad adoption and consistent use of procurement technologies at all levels of business enterprises and supply networks.

And, while alignment and collaboration may go a long way to supporting adoption of procurement disciplines, processes and technologies, a technology’s usability seals the deal. Usable procurement technology solutions will:
• Be aware of how people prefer to work and the ways in which ubiquitous desktop applications have already trained them to think;
• Mimic common user experiences (such as B2C e-commerce);
• Reduce time and effort required of users to perform tasks;
• Represent the easiest ways to perform tasks and obtain desirable results (such as closing deals, obtaining needed goods or services quickly and getting paid);
• Offer simple solutions to complex problems, enabling organisations to start from wherever they are without undergoing massive training or knowledge acquisition; and
• Be capable of growing with end users as they expand their abilities incrementally and seek to push past their own boundaries.

Contribution

Procurement’s core performance focus - keeping costs to a minimum - can often feel at odds with other business objectives.

A company’s financial and senior executives may become distracted from the cost line when revenues are growing fast. Meantime, the people responsible for driving innovation or building a company’s brand may feel that too much focus on costs undermines creativity and style; people responsible for operations, quality and customer satisfaction can be quick to blame procurement when problems originate in supply chains.

Even when corporate and functional leaders back procurement 100%, it can still be exceedingly difficult to transform theoretical cost savings and other procurement achievements into facts that show on a company’s financial statement.

Innovation

Business enterprises are full of smart people with great ideas and it's always the unique ideas — executed rapidly and well — that yield competitive market leadership. That is why procurement technology solutions, while incorporating proven best practices, must also be engineered for flexibility and ongoing innovation in procurement strategies and approaches.

When it's time, for example, to shift strategy from supply-base rationalisation to globalisation, it should be easy to add a spend analysis filter that redirects discovery of performance improvement opportunities in favour of the new strategy. Or, perhaps some bright sourcing professional discovers a market opportunity that involves bundling spend in an unusual way.

It should be easy to see what a revised categorisation of spend might look like without waiting days, weeks or months for a company’s core spend classification model to be rewritten permanently.

The best procurement technology solutions will deliver best processes and practices without any of the constraints — or sameness — that might stop a procurement team from surpassing their competitors with the next big idea in strategic supply management.

The contents of this article were sourced from a Zycus report 6 Imperatives for CPOs intent on driving business performance improvement.

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