Chief procurement officers (CPOs) play a fundamental role in driving an organisations’ revenue while driving down costs, but must step up to the challenge of spreading their reach across their organisations, according to a new report conducted by Booz Allen Hamilton.

By looking at a number of companies across different industries, the report analysed the strategic role that procurement units can actually play in an organisation, but cites they must reach across the supply chain, pursue cost reduction and emphasise collaboration, innovation, flexibility and resilience.

The report demonstrates the successes of a number of procurement teams, allowing them to excel in bottom line growth and in terms of innovation in their various fields.

“Many chief procurement officers (CPOs) no longer seek to influence the supply chain or strive to tackle the underlying driver of cost and value. They are increasingly focused inward, implementing sophisticated ways of improving procurement itself but neglecting coordination with the wider organization,” said a principal with Booz Allen Hamilton, a global management consulting firm with offices throughout the MENA region, Karim Ragab.

“Focusing on cost reduction leaves untouched the significant potential for creating value, generated when procurement engages the rest of the business and its suppliers,” Ragab added.

 “For procurement to be considered more than a functional tool for other departments, CPOs need to build influence and credibility with their internal management colleagues. By engaging with peers — that is, by taking a cross-functional approach — procurement can influence the decisions that impact value all along the chain,” added a principal with Booz Allen Hamilton, Dubai, Fabrice Saporito.

A recent study by CPO Agenda however, says CPOs have their work cut out for them: An online survey of more than 200 CFOs, vice-presidents, and directors of finance in North America revealed that only one in five believed procurement’s ability to provide ‘timely and accurate spend data’ was excellent, whereas one-third believed this ability to be poor.

CPOs must measure the efficiency of the organisation as a whole and enforce cross-functional decisions. They must ensure the interests of the whole enterprise are considered when deciding to invest in inventory, and manage the inevitable trade-offs that arise from tensions among the company’s key functions.
Spanish clothing company Inditex‘s Zara - the report found, competes with other mass clothing brands, and encourages customers to buy often, rather than a lot at once. Procurement contributes to the brand’s success by ensuring supply network flexibility, which requires speedy decisions and strong cross-functional teamwork among procurement, design, manufacturing, logistics, and sales teams.

“Having a procurement department with the ability to synthesize cross-functional requirements in an aligned operating model is key to Zara’s success,” said Saporito.

“Ensuring procurement is highly integrated with all the other functions, has created a strategic advantage for Zara. The traditional model of retail procurement is a back-end service function that merely sources fixed designs at the lowest cost, usually irrespective of the delivery lead time,” he added.

For the full report or a more detailed version for industry experts, please visit: www.boozallen.com. – TradeArabia News Service