Is a Chief Sourcing Officer Right for You?

Over on Supply and Demand Chain Executive, there's is a though provoking -- though potentially misleading -- op/ed by a SIG executive and one of their members about the need to create a "Chief Sourcing Officer" role. In it, the authors argue that a CSO should be "capable of transforming the relationships between your business leaders and your key service providers and suppliers into a competitive advantage. Your Chief Sourcing Officer acts as a liaison between your business leaders and your most important third-party relationships, gaining access to their best and brightest to enable innovation, tight cost management and superior performance."

A fascinating perspective, perhaps, but a "CSO" is a role that I'm afraid is only appropriate for services companies. Why? The authors frame their argument way too narrowly around managing performance and stakeholders. And I'm sure we'll all agree that while this is valuable, there's only room for one C-level Spend Management executive. Sure, a CSO could make significant sense for managing IT, non-manufacturing outsourcing and other service provider contracts. But the nuances of direct materials management and manufacturing outsourcing go far beyond what the authors suggest a CSO should focus on. Indeed, the authors tip their cards about their services and outsourcing bias around Spend Management by suggesting that "negotiating highly complex service agreements" should be a top level goal of sourcing executives.

In my opinion, the article raises the question as to whether or not sourcing should be the number one focus of the top Spend Management -- or supply management, if you're of a different persuasion -- executive in a company. I believe that sourcing is a critical element of Spend Management. But it's only one element (and this is coming from someone with a sourcing background and a sourcing bias). In the case of manufacturing organizations, a Spend Management leader must also tackle complex operational and supply chain issues that extend far beyond the four walls and internal "stakeholder" management mentality the authors suggest is a critical focus of a CSO. And risk management becomes a huge issue as well (something the authors gloss over entirely, except for noting the basic "risks" of working with service providers).

And even for services firms without any direct materials concerns, creating a CSO role could cause the procurement function to overlook other areas that matter besides managing large outsourcing and services contracts. Consider how there's no mention about talent management being the responsibility of the CSO. Rather they suggest the role of the CSO is all about better external partner management and managing internal objectives and expectations -- not about building a world class team as a primary objective before focusing on sourcing. I believe this a flawed approach to running procurement and sourcing. The authors also gloss over the need to manage technology and select the best solutions that create leverage, savings and scale.

All in all, it's clear to me that most organizations would do well to create a C-level procurement and supply chain position. But creating one with a singular focus on better "sourcing" is not the right strategy. I'd suggest that creating a CPO role in more than name only is still the right ticket. And then hire that VP of Sourcing -- you know, that weathered AT Kearney or Big 5 senior manager who is fed up with four or five nights a week on the road -- to work for her.

Jason Busch

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