51% of C-Suite Executives are Dissatisfied with Their Procurement Operating Model

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There is a lot of hype in the procurement world around digital technology and talent, but a report from consultancy Ayming put the focus on something more elemental: the procurement operating model.

Ayming’s survey of C-suite executives from across the globe revealed a mixed picture. More than half of respondents said that they do not consider their procurement operating model to be effective.

The 200 CEOs, CPOs, CFOs and COOs who took part in the survey represent industries ranging from retail to manufacturing to technology, and the companies in this survey sample are equally split among public, privately owned and private equity owned.

Varying Degrees of Confidence

The level of confidence respondents had in their own procurement operating models varied according to company size, industry and their own job roles. Respondents from larger companies were more likely to say they derived high value from procurement, which is to be expected, as value creation through procurement is more likely to be an important part of larger companies’ strategies.

Among the different industries, confidence levels varied considerably. Respondents from the retail sector were most likely to say that their company had a somewhat or very effective procurement operating model (61%), while technology and financial services had the lowest levels of confidence, with a respective 37% and 26% saying that their procurement operating model is ineffective.

Interestingly, compared with CEOs, CPOs were both more likely to view their procurement operating model as very effective and ineffective. CPOs and COOs, who are directly responsible for procurement, are also more likely to say that value creation through procurement will be an essential element of company strategy, compared with CEOs or CFOs.

CPO vs. CEO

These survey findings suggest that CPOs and CEOs don’t see eye to eye in a number of important areas.

CEOs are more than twice more likely than CPOs to believe that reorganization will increase value derived from procurement, at 58% and 26%. In contrast, CPOs tend to see bigger budgets and better tools and systems as keys to more value creation. Ninety percent of the CPOs surveyed said that procurement needs better technology, compared with 76% of CEOs. As for an increased budget, 66% of CPOs agreed, versus 46% of CEOs.

Ayming emphasizes that CPOs need to look beyond cost savings to make sure procurement is aligned with broader business objectives. To this end, procurement needs to improve its communication with the rest of the business and the C-suite.

How Can Procurement Be More Effective?

Respondents are generally in agreement that training programs for current employees would make procurement more effective, though this opinion is most prevalent among chief executives. CEOs and CFOs are also more likely than CPOs or COOs to support increased centralization and more direct access to the management team. The chart below provides interesting data on who prioritizes what:

Source: Ayming

Regardless of job title, the respondents overwhelmingly cited people and skills development as one of the top three areas procurement should focus on to deliver more value. Increasing professionalism also came up as an important area for respondents from all industries. In contrast, only the manufacturing and the transport and logistics industries saw a need for procurement to reorganize itself.

Check out the full report here.

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