Digital Transformation Disrupts the CPO Role — Adding Pressure and Opportunity
The role of the chief procurement officer as a strategic business partner has taken on a new shape in recent years as organizations aim to better focus on changing business landscapes and keeping up on tech developments.
A recent ProcureCon study, “Examining the Role of the CPO as a Catalyst for Digital Transformation in a Time of Disruption,” suggests that the role of the CPO must now assist its organization by navigating the global business environment’s opportunities and changes.
The study, which was authored by several organizations like ProcureCon, Amazon Business, Beeline, Capriza, GEP and Smart by GEP, states that variations in the state of the global economy, as well as the introduction of new technologies such as the cloud, artificial intelligence and blockchain, have caused a further need for digital transformation.
The new edition of the annual study also analyzes data collected from CPOs overseeing the management of more than $1 billion in annual spending.
“Businesses must embrace adaptable tools and a greater ability to gather and share data across the organization in the near term, as disruption is a force that is as impossible to ignore as it is industry agnostic,” the study states.
Those who fail to adapt to emerging digital capabilities could likely fall behind their peers in business.
“Pressures to transform digitally also provide opportunities to deepen the influence of procurement leadership even further,” the authors write. “New solutions will allow for the bulk of routine purchasing to be automated, while solutions that put spot-purchasing into intuitive self-service tools offer the potential to capture the last vestiges of tail spend.”
According to the study, ProcureCon and others believe the use of emerging digital technologies for business will allow for a wealth of information that the next generation of procurement leaders will be able to draw upon to deliver stronger insights and value for stakeholders.
CPO as Data Scientist?
“The future of (hiring a CPO) now has elements of a consultant, a negotiator and a data scientist,” ProcureCon states in the study.
Among the study’s key findings was the distinction that while traditional cost-cutting metrics are still the most common way of demonstrating procurement’s value to executives, return on investment and EBITDA are also making strides.
The study states that such findings indicate that procurement’s role as a value-generatiing method is becoming increasingly mainstream, noting that the CPO’s performance is becoming considered in a multidimensional sense and relying on a broader range of metrics to evaluate procurement’s performance.
“This is an important point when working to advance the progression of a digital transformation already underway,” the study said.
According to the study, 84% of respondents surveyed said they were in the midst of sourcing new solutions, integrating them or had achieved a full transformation into implementing new solutions.
“There is no longer any question whether or not digital transformations are necessary for procurement,” the authors wrote. “CPOs representing larger companies with over $1 billion in annual spend under control may be incentivized to more aggressively pursue technology changes that they view as important for competition in the long term.”
Execs Need to Help CPOs, Digital Change
The study points to the large percentage of CPOs recognizing the need to change as evidence that procurement as a discipline will be altered by the addition of new technology integrations in the next several years.
Among the toughest challenges that CPOs face are a lack of urgency among executives, budget restrictions and the difficulty of bringing new technologies into pre-existing environments, the study suggests.
CPOs will need to address such concerns and communicate the need for digital transformations to key stakeholders, and officials said using outcomes that include stronger insights, improved self-service options and a reduced amount of tactical work as examples of benefits can help them to make the case for change within their organizations.
The study also explained that the role of the CPO within organizations may shift in terms of who the individuals report to. Currently, ProcureCon said the majority of CPOs will report into the supply chain function or finance executives, or both.
“The relationship of the CPO with other key business leaders is deepening, and while they may often report into either Finance or the Supply Chain function, their lines of communication directly into the C-suite will often be strong as well,” the study explains. “The role of the procurement executive has increasingly taken on the characteristics of a master communicator understanding and even anticipating the needs of the business.”
Geoff Tonini, Hess Corp.’s senior manager of global supply chain, procurement and strategy, states in the study that CPOs now have to function as leaders who may not be traditionally managing 500 or so employees at the procurement desk, but that they may now be required to manage digital challenges such as bots and outsourcing relationships.
“That’s a different skill set than the motivator and strategist of yesteryear who was trying to incentivize an individual with a paycheck,” Tonini said.