CPOs are focusing on getting the right mix of talent and greater efficiency as they seek to respond to the unparalleled demands of the recession
A positive from the business downturn is that supply risk is no longer the “elephant in the room” and is finally garnering the attention of senior buyers who realise their push for improved pricing amid a reduction in demand can have a doubly adverse effect on their suppliers.
With 71 per cent of CPOs reporting an increase in the level of risk in their supply base, but only 30 per cent of enterprises having a formal supply risk programme, many CPOs are taking action to close this gap and starting to define supply risk metrics, develop contingency plans and leverage external sources for support in programme development and management.
Response strategies
The recession has impacted the plans of many CPOs in 2009: 48 per cent of CPOs are working with decreased operating budgets compared to last year; 55 per centhave delayed major initiatives and 32 per cent are expecting headcount reductions. In the face of intense pressure, operational challenges and pervasive uncertainty, a steady hand is required to ensure that long-term goals are not undercut by the response to near-term pressures.
The modern CPO understands that the proper blend of talented people, efficient processes and enabling technology is needed to achieve a broad procurement transformation and that achieving the desired mix is as much an iterative process as it is an incremental one.
To that end, CPOs in 2009 are putting their people first, above all other strategic initiatives (see Figure 2). The scope and success of the procurement department can only scale to a level that its people can support so, if the management of spend is truly a value-added activity, investing in “spend managers” and actively trying to manage more spend both make good sense.
When the economy recovers, as it inevitably will, CPO priorities may expand from a narrower focus on cost and cash to a broader set of supply management initiatives including innovation, quality and supplier performance, while top enterprise priorities may also shift away from procurement.
For now, CPOs with a firm command of the goals of the larger enterprise, a clear vision and plan focused on supporting or achieving these goals, and an organisation that is well equipped to execute said plan stand poised and ready to lead their enterprises out of this economic cycle and into the next decade. This is not a time for the meek-hearted.
Andrew Bartolini (andrew.bartolini@aberdeen.com) is vice president and group director of Aberdeen Group’s global supply management practice in Boston, Massachusetts
