How the CFO Should Work with Procurement – Angelika Zacher Explains

There’s a good article on LinkedIn here, part of a  5-part series from Angelika Zacher, looking at the role of the CFO.

It is titled, “Beyond Finance” and this chapter (number 5)  is “how the CFO can embrace disruption and become a Game Changer – Powering Procurement”. It is all about how procurement and finance can work together more successfully, written from an informed perspective as  Zacher is a finance person with a blue-chip background, who has worked in procurement and had procurement reporting into her in past roles.

This is one of her key comments.

“After all, one of the key roles of a finance leader is to ensure that the business is actively helped to make intelligent decisions based upon hard financial facts. Well, in fact, one of the roles that the procurement organisations should be tasked with is to help the business make good decisions about how it spends its money externally (decisions that are often financially based)”.

Very sensible – and she is totally aligned with our views on savings and value as drivers for procurement:

“For the procurement teams, their zealous search for savings in order to report them (as the de facto way to demonstrate their contribution) shuts down the whole question of how the organisation perceives value. Their role should be as a relentless hunter of value (not savings) in collaboration with the business”.

Of course it should – we love the “hunter of value”! But there is still a role, as she says, to remove costs from ongoing operations, improve working capital and so on – the basics, if you like.

But she is keen on procurement contributing to key outsourcing decisions, and wants procurement (working with finance) to  “bring the outside in” (another good expression) and “act as the company's tentacles in the marketplace ...  searching out, discovering and internalising new sources of supply (potentially new sources of value), new innovations (not just buying the same old stuff again at a cheaper price), and new sources of extracted value (outsourcing and off-shoring)”.

She obviously has had her fingers burnt in the past on savings measures, as she mentions the tendency for procurement to report positive market moves (in commodity areas for instance) as “savings”, when clearly that is nothing to do with procurement’s actions. When there are negative market moves, they get ignored of course! Yes, we’ve all been there, but I’m sure I never did that (the great egg price collapse of 1980-something? Record savings for the egg buyer … ahem …).

Anyway, the article is well worth a read, and its good to see a finance person who understands procurement so well and is contributing intelligently to the debate about our role.

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