I’ve spent a good amount of time reading and rereading the KPMG paper, FUTUREBUY: The Future of Procurement – 25 in 25, an analysis of where the procurement marketplace is headed. Based on interviews with 25 procurement executives, the paper offers a look at the future of the function and the type of individuals that will thrive in it. One prediction in the paper is the rising role of procurement as “financial analyst” in the future. This is an observation with which I could not agree more—and which echoes the research and analysis on Spend Matters.
Here’s some of what KPMG has to say on the subject:
“An important future role is the ability to effectively perform financial analysis and demonstrate financial expertise that enables effective communication … At the root of this capability is the need for a reliable procure to pay system that captures data in a robust manner for analysis and construction of a basis for analytics is a critical stepping stone … procurement must [also] possess a working knowledge of currency trends, capital market events, discount rates, total cost of ownership (TCO) modeling capabilities, and global economic indicators. In addition, procurement must be able to relate the movement of these macroeconomic triggers to the impact of a third-party’s input on expenditures and the Profit and Loss (P&L) and Balance Sheet.”
“This will change the nature of dialogue of procurement with other financial executives. Finance modeling capabilities will include the ability to develop logistics cost-to-serve models, understand the contribution of supply management to capitalization, rates of return, and other key metrics. Procurement will be able to develop creditable financial business cases and establish a baseline framework for what-if decision-making using capital asset valuation, compound annual growth rate (CAGR), and shareholder value metrics.”
Spend Matters doesn’t think companies should necessarily wait for a golden P2P implementation to get these other aspects right. After all, direct spend and services spend are, in our view, more strategic than indirect, and these areas rarely go through an indirect procurement system anyway. Rather, companies should jump to hiring the right resources and implementing the right tools (Sievo is one of our favorites) to truly align the budgeting, planning, and savings tracking in line with business goals rather than the nebulous and useless PPV metric.
P2P? Yeah, you need that. But you need financial analyst-type talent even more. First. And the right tools to make them successful.
You can download the full KPMG paper if you’re interested in more on the topic. It’s worth the time to read it. I promise!