The 2010’s are increasingly looking like a decade of consolidation and convergence. Large M&A deals leading to industry consolidation, merging of business units within corporations to create leaner enterprises, generating scalable shared service strategies – all of these seem to have helped the cause of effectively responding to competition as well as building innovative and differentiated products and services and tighter customer engagement.
Inside the enterprise, functional boundaries have been breaking to make way for heightened collaboration as well as morphing of traditional functional roles to more evolved ones. The Chief Procurement Officer (CPO) and the procurement function have been no exception. In a recent survey of 273 CPOs conducted by supply management research firm Ardent Partners, a number of new functional responsibilities emerged as those wherein procurement now plays increasingly critical role as illustrated in the figure below.
Christina DeLuca, CPO for the Refining & Marketing business of British Petroleum was quoted as having said, “There has been a change in context, speed and risk. It’s time for procurement to be the hero.”
To deliver to the new expectations from the enterprise, the CPO and the procurement function need to continue to deliver on the following on the following objectives:
- Increase spend under management – have clear visibility of what the enterprise is spending on and bring more and more spend under centralized and process driven controls
- Find more savings – here the perspective seems to have changed from, “do more with less” to “do better with the same”, nonetheless there is a relentless squeeze on known budgets as investments shift to newer ones. Better category management, sourcing and price discovery and identifying opportunities to do them better is of paramount importance.
- Improve supplier performance and supplier management – better visibility and assessment of the supply base, supplier groups, spend thresholds as well as supplier profile and risk helps to lend the right perspective here.
- Enhance overall effectiveness, compliance and functional influence – better visibility and control of maverick spend, better transaction management and lean spend operations lends the sheen to the CPO’s domain which gives him or her added influence in enterprise management
It’s quite needless to mention that the one answer to all the above objectives is better spend visibility. Spend analysis and insights hence, quite rightfully occupy center stage in the CPO’s agenda.
A recent APQC (American Productivity & Quality Center) study reveals that the average organization with an active spend analytics program spends about 12% less on procurement costs compared to a similarly-sized one without it.
The study also states that the average organization with an active spend analytics program has 2.5 times higher productivity in purchase order processing per FTE than an organization without one. The one answer to all of these objectives? Better spend visibility. Spend analysis and insights, hence, quite rightfully occupy a prime place in the CPO’s agenda.
Its time that a packaged analytics solution that gives the CPO a 360 degree view of spend under management, category and supplier portfolios as well as contract and payment terms, finds a rightful place in the CPO’s arsenal. Such a solution should deliver –
- A customizable UNSPSC spend categorization engine, ideally with artificial intelligence and self learning abilities
- A pre-built repository of spend reports and dashboards Dashboards that provide actionable insights in areas such as category & supplier management, supply base rationalization, transaction management, spend compliance, contracting and working capital effectiveness
- Savings calculators and estimators.
Equipped with such tools and powerful insights on how to “do more with less”, a CPO would be sure of becoming a hero for the enterprise and his ilk.
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Capgemini has recently launched a suite of procurement analytics solutions branded as Spend Insights 3600, details of which is available here.
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