A future-proof approach
A few global businesses are set up with a future-proof approach. One of the most successful businesses in the world that consistently achieves double-digit top-line growth, a double-digit net profit margin, and sustained cost reduction has all these elements in place, along with a highly capable CPO who is part of the top executive team.
Procurement is led from the center and has ownership of the processes that add value, along with being a hub for innovation. The benefits that procurement creates are comprehensive and go far beyond pure deal-making to embrace new approaches to the supply market, support for the company’s sustainability agenda, and radical process automation. An end-to-end external spend governance approach brings procurement benefits into budgets and avoids leakage.
The CPO recruits the best talent from business schools, and working in procurement is seen as a career training ground for other roles in the organization. The CEO, CPO, and wider executive team have collaborated to create a culture that results in great procurement and delivers consistent value year after year.
At this organization, procurement is not a defensive mind-set but rather an offensive weapon that has created exclusive arrangements with partners to take advantage of new technology. This then improves the bottom line and makes the supply chain truly sustainable. It has also created new economic and sustainable uses of by-products rather than simply negotiating a cheap price for disposal. Procurement has been in the foreground—making things happen and taking value creation to a whole new level.
This should be the norm. After all, in most organizations, procurement is the corporate-wide function with the strongest lean toward creating value. Its reach is both broad and deep while still being tangible, practical, and operational—a much different model than, for example, finance, which is focused on the numbers in the accounts. Procurement done well creates value that no other function can surpass. This is the model to copy.
The authors would like to thank John Blascovich, Ana Conde, Simon Horner-Long, Renata Kuchembuck, Shakil Nathoo, and Prasad Poruri for their valuable contributions to this article.