It’s a relatively new executive position, but the emergence of the Chief Procurement Officer in corporations has already demonstrated the positive correlation between intelligent, cost-saving procurement behavior and the success of a business. A new survey released by Consero Group highlights the dependence upon procurement executives today’s enterprises have, but the research also reveals some troubling news about the way procurement officials operate, often with the feeling of being understaffed and under-resourced.
The findings are not all bad news, however, and the existence of new studies dedicated to the business practices of Chief Procurement Officers is, in itself, a sign that role of CPO is vital to today’s businesses, and is here to stay.
THE CPO’S ROCKY CLIMB
Consero’s research, the "2015 Global Procurement & Strategic Sourcing Data" survey, most notably pinpointed significant concerns among today’s CPOs that must be addressed by businesses.
Nearly two-thirds of procurement officials (64 percent) revealed that they do not feel they have sufficient resources they need to effectively manage their procurement operations. While more than half saw a rise in their departmental budgets last year, 40 percent of those surveyed revealed that cost reduction will remain their top priority in the next 12 months. An additional 30 percent revealed spend analytics to be their top concern for the coming year.
Supplier relationships also weigh heavily on the mind of today’s CPO, the research found. Nearly half (45 percent) of CPOs surveyed said that supplier risk remains a top concern, an issue that could grow considering that 42 percent of respondents said that they have seen an increase in the number of suppliers with which they work over the last year. It’s not surprising, Consero concluded, considering the impact suppliers have on CPOs’ operations. But more suppliers could mean greater risk, and 29 percent of CPOs said that consolidating their supplier base will remain a top priority in 2015.
Perhaps the most troubling statistic in the study is that 72 percent of CPOs feel that the talent pool available when hiring new employees is not of a high enough quality.
THE GOOD NEWS
Luckily, not all of Consero’s research revealed troubling findings about the way the CPO operates in a company. Nearly 75 percent of those surveyed said that they have noticed an improved relationship with their suppliers over the last year, and more than half (58 percent) said they expect to see supplier-driven innovation in the coming months, suggesting that suppliers and manufacturers are listening to their business customers’ needs when it comes to developing new technologies and products.
Suppliers will find the statistic to be welcoming, and could encourage even greater innovation of their products for businesses. But the suppliers of software and data analytics services may also benefit from Consero’s research, which revealed that 70 percent of CPOs use a dashboard to drive performance. These tools may have played a role in the nearly half of procurement officials reporting tangible cost reductions in the last year thanks to the implementation of a sustainability program. That figure is a significant increase from the year prior, in which only 33 percent reported cost reductions.
The figure suggests that CPOs are in-tune to technology that facilitates data and behavior analysis in their operations, opening up a space for SaaS providers to continue business with their corporate clients. The research, however, also suggests that CPOs’ technological needs are not entirely being met.
For example, 63 percent of executives surveyed feel that certain metrics that are used to impact procurement decision-making actually drive the wrong behavior within their company. In other words, CPOs are making use of Big Data and procurement dashboard tools, but there is a gap SaaS and other B2B technology providers need to fill in the quality of these services.
WHAT’S NEXT FOR THE CPO?
Consero’s survey was quite straight-forward, and with only 55 procurement officials surveyed, experts and industry players cannot elaborate too much on what these statistics could mean for the modern CPO. The research does, however, provide some insight into how today’s CPOs operate within companies, what tools they use, and what gaps exist for these officials that need to be filled by suppliers and B2B service providers.
CPOs must continue to build strong relationships with their suppliers, the study suggested, and as CPOs welcome innovative tools to better manage their operations, B2B service providers like software and Big Data analytics tools will hold an important place in the procurement department.
Looking ahead, Consero Founder and CEO Paul Mandell said CPOs should focus on talent acquisition to strengthen their department, and take advantage of their growing influence and expanding role in their businesses to obtain the resources they need to be successful.
“With businesses increasingly relying on third-party suppliers, Chief Procurement Officers are more important to their companies than ever,” he said. “CPOs will need to lead their organizations in thoroughly vetting new suppliers and improving supplier relations, both of which are essential to the efficient sourcing of goods and services for today’s global businesses.”