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CPOs: Beware false confidence in your procurement function

Jonathan Cooper-Bagnall
May 19, 2015 10:48:00 AM

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CPO Confidence

A recent Deloitte survey of Chief Procurement Officers suggested that more than 50% of CPOs are optimistic about their role and confident in their department’s abilities, but also raises flags about just how much of that confidence is warranted.

In addition to confidence measures, nearly a third of those surveyed indicated that they are looking to increase levels of enterprise-wide outsourcing within the next 12 months, while nearly half reported that increased outsourcing activities have been effective in reducing corporate operating costs.

And while CPOs suggest there is a need for procurement executives to increase “soft skills” such as communication and relationship building, only 13% consider training to be a top priority - a concerning disconnect.

The reported increase in outsourcing is on trend. As we have said many times, we live in an age of the hollowed-out company, whereby organizations externalize their cost base, becoming increasingly reliant on suppliers for everything from innovation to IP. We call this corporate virtualization.

Corporate virtualization demands a new type of training however, that the survey respondents seemingly dismissed as being unimportant. As more work is outsourced to a larger base of varied external suppliers, CPOs will need to re-cast their function from one of cost-control to that of a leader of an extended network of suppliers. That leadership represents an entirely new role for procurement that, to be effective, will require training on how to monitor, communicate and partner with a global supplier network.

Those who fail to effectively manage and engage their suppliers will place their corporate reputation at risk – see McDonald’s new French fry problem.

It appears that an improperly managed supplier base is no longer a viable option for businesses, neither in the eyes of the media, nor more importantly, its customers. Nor is a procurement function that is ill-trained for these new supplier management demands.

As the study suggests, the outsourcing trend will continue, significantly changing the procurement function. The CPO mindset will need to change in step, recognizing the need for more specialized, innovative and “soft skill” training to keep the company from being yet another footnote in a long line of supplier-related scandals.

As always, if you have any thoughts or comments, please add them to the box below. Corporate Virtualization

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