Time to break the Procurement / Finance link? Join our webinar next week to hear more

I’ll be contributing to Proxima’s  webinar exactly one week today. Titled 'Shifting corporate management's attitudes towards procurement,' the session will pick up on the implications of the report from Proxima, “Corporate Virtualization  – A global study of cost externalization and its implications on profitability” which came out late last year.

The evidence in that report – showing just how much of most businesses revenue is spent with suppliers - should put procurement right at the heart of business priorities. But we know that is not always the case. Why? Well, here are a couple of broad observations that I’ll try and get into more during the session.

The first, and it seems an obvious thing to say, is that procurement must focus more strongly and clearly on value – that’s real value to the business, measurable shareholder value in fact in so far as that is possible. Now I’m not claiming this is new thinking of course, but I never cease to be amazed how few procurement people really follow the consequences of this through into actions. Value of course comes from good cost management and margin improvement, but also from a number of other factors, such as corporate and brand reputation, for instance.

So it is no good for the CPO to nod and say “yes, I agree” to this value imperative, without making it real. If you accept that proposition, then this approach has consequences for pretty much every aspect of procurement, from strategies to prioritisation, from skills and resourcing to measurement. and we’ve found that even organisations that talk the value talk often revert to measuring “savings” as the key (or indeed only) indicator of procurement success!

Secondly, as time goes on, I Increasingly wonder whether the Procurement reporting line into Finance in many organisations, particularly non-manufacturing businesses, is a negative rather than a positive. Guy Strafford’s article here was fascinating – although he put a positive spin on it, I found it depressing that the Finance profession seemed to see cost control as the most important aspect of the CFO’s role. And if the CPO reports into a CFO who thinks like that, then you can quickly work out just how that will translate to procurement’s priorities.

So these and other issues will be discussed, I’m sure, when I get together with Guy Strafford and Scott Sparks of Proxima, under the chairmanship of broadcaster and blogger Jon Hansen next Thursday. Join us (free of charge) by registering here.

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