A letter to the board from the chief procurement officer
Sorry to bother you, I know you’re all so much busier than I am. It’s me, the chief procurement officer; the one who buys the custard creams.
Just wanted a word about this procurement lark that I’m beavering away at, while you all do much more important stuff like tweeting the latest thought leadership thought. It’s just that I’m feeling a bit, well, ignored by you all.
No, finance director, I haven’t come over all touchy-feely, though it would be good if you did; don’t you know empathy is one of the key skills of the future, even in the finance function? I have more hard facts than you can shake a stick at, if you’ll bear with me. Yes, that means you too, CEO.
I know procurement is hardly the bad boy of the C-suite, but let me tell you, that’s about to change. Think Olivia Newton-John at the end of Grease; that’s how much procurement is about to change. No less a person than Kai Nowosel, Accenture’s procurement chief, agrees with me. “I want to break the mould of traditional procurement,” he says. “Procurement is the tinder of innovation. I want to get into that model of being sexy instead of being a back-office function.”
Chief procurement officer role is business critical
See? But I’m not feeling the love. I know some of you are a bit vague about what I do; let’s face it, less than 10 per cent of global corporations have a board-level procurement director. So here’s your starter for ten: how much of the value of a company’s products or services is derived from its suppliers? Anyone? No? Almost two thirds, that’s how much. Write it down in your notebooks; 65 per cent, according to CAPS Research for the Institute for Supply Management.
And here’s another fun fact: world-class procurement organisations have 22 per cent lower labour costs, according to the Hackett Group. I heard that, marketing! Yes, of course I’m running a world-class procurement organisation. This company’s costs would be a darn sight higher without me.
That means you’ll miss me when I’m gone. No, public relations, it’s a figure of speech, I’m not actually going. Here’s an example of why procurement is important. The government has plans to name and shame anyone breaching the slavery law. So I’m the one standing between you and those headlines about our products being made by vulnerable illegal immigrants living in sheds, because you used some dodgy temp agency. Do you want to finesse that kind of PR disaster? Thought not.
But I could do so, so much more if only you’d put a bit of welly behind me; everyone seems to be getting a piece of our digital transformation except me. Fewer than 10 per cent of companies have deployed procurement solutions based on key technologies such as big data, the internet of things, serverless architecture or blockchain technology, according to Procurement Leaders (that’s an intelligence and networking company just for people like me).
What digital transformation could do for the procurement function
It’s just not fair, especially when I could save up to $86 billion a year with a fully automated procurement function. Well, when I say “I”, I mean the Global 5000, but that’s 5,000 of my closest friends.
The thing is, digital is going to mean a bit of an upgrade in the old skills front. I’ll be honest, chairman, it’s going to be tough for that uncle of yours who works with me. But he did join the procurement department in 1973, didn’t he? I bet he’d rather work on his golf handicap than learn about embedding data science and analytics expertise.
So there might be some work to do for you, HR. Egeman Tumturk, global sourcing director at Bugaboo, said digital “requires a huge change in talent and the way we do our day-to-day activities, our jobs”, when he was interviewed by Procurement Leaders for its CPO Insights. He called it “a revolution”.
See, that’s really what’s happening here. We’re not talking about a bit of an upgrade, a few new smartphones and fling in a bit of software while we think about it. This is properly transformational; it’s not just about efficiency.
Procurement strategy is central to business innovation
My job is about to morph from tactical biscuit-buying to strategic business innovation; that’s what management consultants Bain & Company says, anyway. “Artificial intelligence and robotic process automation are automating manual tasks and freeing up time for more strategic activities,” wrote Coleman Radell and David Schannon last autumn. “Digital technologies also provide a competitive edge by improving the speed and quality of procurement, reducing risk and enhancing innovation.”
Let’s face it, you need me to do this stuff, otherwise we’ll be overtaken by our competitors, who are already using advanced analytics to get value out of their historical data. It’s not really an option to leave me with an Excel spreadsheet and a glitter pen any longer.
Like me, Accenture’s Mr Nowosel sees the procurement role moving away from simply control and compliance, and into a core business function. It’s now about finding the right partners in the ecosystem, mitigating risk, protecting the brand and staying competitive. He says: “Getting competitive is more than having a great negotiated price. It is having the right solution for your customers at the right point.”
Couldn’t have put it better myself. We have a hyperconnected and increasingly transparent world out there and I’m the one with the bird’s eye view of it. If you invest in me and provide me with the right tools and people, I can develop an agile ecosystem that learns from its mistakes, protects our corporate reputation, cultivates a sustainable supply chain, delivers real-time data insights and predictive analytics, and saves you money – worth more than a few chocolate Hobnobs I expect…
Chief procurement officer