This post is based on material from the Spend Matters research brief, Changing Roles of Procurement Leaders - The Analytical CPO. Registration is required to access this document – but free access to the content has been underwritten by BravoSolution until December 2013.
When it comes to building analytical skills, chief procurement officers have many places to turn. As a start, we think that all procurement professionals should ideally be comfortable with basic numerical analysis and understand simple concepts such as percentages, basic statistical ideas, and discount factors.
When the supplier says, "I want to increase my price from $200 to $210,” if my buyer cannot work out (without help) what percentage increase is being proposed, then can I really trust them to handle a live negotiation?
There is an overlap with finance capability here. A good procurement professional also needs to understand the basics of financial management, which in turn requires much of that facility with numbers and some of these concepts. The basics of profit and loss, balance sheet, working capital, and so on also seem to be essential knowledge.
Having an understanding of probability and basic statistics in particular is critical. Concepts such as assessing probability, expected values, deviation and regression to the mean are central to risk and quality management, and therefore to anything to do with contract and supplier management. Such tools are also central to understanding commodity markets, hedging, or currency issues.
We would also suggest that a reasonable level of Excel knowledge is pretty much essential for today’s procurement professional, a point we’ll pick up on as we continue our analysis.
Read the full Spend Matters Research brief: Changing Roles of Procurement Leaders - The Analytical CPO (free, registration required). Temporary access to this material is underwritten by BravoSolution until December 2013.