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Why nobody understands the CPO’s problems

06/16/2022 By

The windmills that CPOs fight daily are not just illusions, but the process is equally annoying and only differs depending on a company’s size.

In most cases, when a CPO leaves their job – voluntarily or otherwise – management will often use the phrase that “CPOs didn’t meet their expectations”. Yet, paradoxically, that same management often cannot express their expectations clearly or measure success systematically.

The reason behind that inability is that demands and expectations are moving targets in most companies. In that environment, windmill blades are a good metaphor for ever-changing priorities that CPOs often get slapped in the face with.

Who would want to walk a mile in a CPO’s shoes?

Let’s get reminded of the main tasks of a modern procurement function in a nutshell. Besides its traditional role of delivering quality goods and services on time, at the right place and the right price, procurement must always consider the added value it can contribute. Especially regarding supplier relationships and keeping the supply chain risk-free as much as possible.

Essentially, the demands and challenges keep increasing, but the attitude towards procurement and procurement’s own behavior has remained the same as it was a generation ago.

Drasko Jelavic, CEO of Cirtuo, has worked with hundreds of CPOs ranging from SMEs to multi-business multinational companies. Throughout his career, he observed that pattern arises from a set of challenges that leaves CPOs high and dry:

  • The CPO is separated from the company on three levels:
    1. CPOs are perceived as the least of all C-level positions.
    2. In most organizations, a CPO’s competencies and experience somewhat differ from the rest of the procurement team.
    3. CPOs are the furthest away from the end consumer in many companies.
  • Companies often suffer from a pre-existing genetic condition where CPOs are given minimal access to promotions into other functions. CPOs themselves are rarely interested in that kind of mobility.
  • CPOs get consumed by operational/ tactical activities, leaving them no time to devote to procurement’s strategic development.
  • CPOs don’t have at their disposal sufficient spend data, combined with a general deficit of procurement and supply market analysis.
  • The aforementioned “moving targets” in companies make it increasingly challenging to maintain systematic progress because something else is more important every other day.
  • The industry is losing sight of strategic procurement transformation based on business requirements, competencies, and accurate data. Combined with a single focus on operational/tactical software solutions, that trend keeps pushing CPOs back into firefighting mode.
  • The supply market has no sympathy for the CPO. Compliance and regulation issues, supply risks, political upheavals, and commodity prices increases need to be methodically addressed.
  • What CPO challenges have you witnessed?

Given all these issues, the CPO’s position is not a desirable one. Especially if we look at development paths for SMEs and multinationals in the future:

Strategy gap I relates to the fact that a whole generation of procurement professionals was not awakened by the strategic matrix developed by Peter Kraljic. The focus resumed being on sourcing. The only change was that such a practice got an undeserved title of strategic sourcing.

Strategy gap II shows that some big companies with large teams and big budgets did manage to enable the development of strategic procurement. However, the gap remains between companies that invested in procurement and those that still have not seen the actual value of strategic thinking.

What does size have to do with it?

Apart from general procurement trends, there are distinct challenges for different company size CPO:

Small companies: Procurement outsourcing is gaining traction and there is considerable concern that small companies won’t be able to keep up with digital and automation challenges. Low-profile buyers will no longer be cost-effective in this area. CPOs in this environment, who are ambitious, should simply look for a more competitive position.

Medium companies: Here, CPOs can encounter that procurement is still having image issues compared to the rest of the departments. Also, proper support management is hard to come by or carve-out. Most of the employee profiles are on the operational/tactical spectrum, and there are often issues with the successful integration of digital tools.

Big companies: Complexity is the root of the problem here. The system is difficult to navigate, interests and organizations are often contradictory, and accurate and integrated data is seriously lacking. Also, escalation of buyer power and over-compliance can keep pushing strategic procurement efforts back into pure tactical thinking. What remains is to stay strategy focused and keep delivering.

Is everything really that bleak?

“If you take a look at all the issues, you might wonder why any person would put themselves through this? However, challenges are not put in front of people who can’t conquer them. A good CPO is an economist, analyst, strategist, negotiator and a true communicator, and all those qualities account for a lot.

I remain a firm believer that such a shift in perception can reduce those giant windmills so they can fit in the palm of your hand as you push forward with grit and confidence,” says Drasko.

CPO - Chief Procurement Officer