How CPOs See Procurement vs CEOs and CFOs – Procurement 2020 Report

Back in 2017 (how long ago it seems already), we featured a report from consulting firm Ayming. What we found interesting in the Procurement 2020 Report in particular was the comparison between how CPOs saw themselves and their teams, and how CEOs and CFOs saw the procurement function.

It showed a rather worrying divergence of opinion, with CPOs feeling that they primarily needed more resource to be successful, while a high proportion (58%) of CEOs felt that “re-organising” their procurement functions was what they needed.

We suspected that this really meant “firing the CPO” in many cases – we can’t think that many CEOs really care exactly how procurement is organised, but a desire to change that indicates some dis-satisfaction with the way procurement currently works. That is very likely to mean also some dis-satisfaction with the person in charge, so some warning signs there for procurement leaders.

Anyway, we didn’t know much about Ayming, so it was good to catch up with two of their key people, Alejandro Alvarez and Martin Hook, just before Christmas. Turns out it’s a small world, as Martin and I have met before – he worked for Achilles, the supplier risk information firm, for some years.

Alvarez leads the Operations Performance practice, which supports clients in improving their operational efficiency, procurement & supply chain performance and working capital. We’ll come back to Ayming later, but I was interested to get his take on their report and survey. What were the points that stood out to him?

“CPOs in the main still seem to believe that it is all about savings, and that is what their bosses want from them. Yet the CFOs and CEOs were in fact not as fixated on that, savings was not necessarily their top priority”.

Interesting – many CPOs complain that savings are all the business is interested in, but maybe some are deluding themselves based on that evidence?

“There are also many CPOs who think that technology – including new solutions such as Blockchain or AI – will be the answer to all their problems”, Alvarez says. “But they don’t think about the skills they need to make use of the technology. So CPOs put technology high on their priory list, whereas CEOs and CFOs want to see more proactivity and a different attitude from their procurement team”.

That fits with our view. I told him about our recent interview with George Owens at Manchester Airport Group. Owens is an advocate of good procurement technology but puts the need to have the right people with the right skills and attitude right at the top of his priorities.

Alvarez claims that “we’ve actually told clients that they don’t have the skills to use the systems they want to buy. We had one who wanted to buy an advanced SRM tool. We had to explain that his team were not yet capable of getting value even from a basic spend cube (spend analysis), let alone this sophisticated product!”

He is also a big believer in the importance of the “procurement operating model”. That’s an expression we hear more and more, but what does he think it means? “It defines the way procurement interacts with the business, and how procurement is structured to interact with the business, and the processes around that”, he suggests.

That relationship with the “business” is key, and procurement needs to be organised in a way that supports how the business works. We had an interesting discussion about centralised and decentralised procurement structures, which we may come back to again, but as Alvarez says “if executives in engineering, marketing and so on think procurement is there just to process POs, it cannot work”. But if the business and senior managers believe procurement provides value, then “our survey suggests they are prepared to invest further” – that’s pretty logical really.

Coming back to the firm, they are somewhat unusual as procurement consultants in that they’re neither a small specialist nor a “big four” giant. The firm has 1500 people in total, was re-branded as Ayming when Alma Consulting bought Lowendalmasaï, and covers three main areas of work, of which Operations Performance is one. Alvarez is ex-Efficio, with a practitioner background previously, and their work in procurement covers both cost saving and similar projects as well as capability development, six-sigma-type efficiency work and wider supply chain re-engineering.

So a name to watch out for, and do take a look at the Procurement 2020 Report if you haven’t already.

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