A few weeks ago at Iasta reSource Indianapolis, I had the privilege of hosting a roundtable discussion, “Finding the ‘Zen State’ for the Modern CPO.” During the breakout session, I challenged thirteen procurement leaders to identify ways they can find a “state of harmony” in the dojo of the modern enterprise.
After brief introductions around the room, we looked to find our Zen state by breaking down the challenges of modern CPOs into two core areas: Internal Pressures (Yin) and External Pressures (Yang).
Based on our discussion, the group found the following internal and external challenges:
The group identified ineffectively working with peers and superiors towards driving change as their core internal challenge. For procurement, this has always translated into the failure to improve and promote areas such as cost containment, savings recognition, and revenue contribution.
In fact, during the session a director noted that the challenge of savings remains, because budgets often do not get reflected in the savings being identified by procurement. Another common challenge uncovered was the inconsistent definition of savings from one business unit to the next, making it difficult for procurement to standardize its efforts in identifying savings.
In addition, it was shared that business units are often not doing enough to work with each other for establishing common corporate goals based on similar spend categories, thereby duplicating procurement’s efforts at creating value to the organization internally.
Overall, we found in order to find a Zen state, modern procurement leaders today must act as internal consultants or even as internal diplomats between the respective business units and operating stakeholders. But how this is done is through the power of information using spend analytics. With spend analytics efforts in place, procurement can influence decision making by showing spend trends and demonstrating opportunities where procurement can add value.
Information on spend can also provide the power of persuasion through the ability to help business stakeholders meet their own needs, by identifying or even predicting trends based on corporate spending behavior. Through improvements in areas like spend and wider procurement analytics (e.g. supplier, contract), procurement can promote its efforts and demonstrate evidence of its wider impact on the organization.
The group identified improving collaboration with suppliers as their core external challenge. Specifically, making a best effort at achieving the value of the supplier contracts to maximize the benefits of the goods or services being provided and avoid the risks of non-compliance.
During the session some shared there is often a lack of collaboration due to a lack of supplier trust. Still others mentioned that common suppliers have been used to purchase the same or similar goods, without the supplier realizing they are providing goods or services to the same company. The savings opportunity is thus lost to consolidate spend with suppliers for increasing economies of scale and creating a deeper relationship with that supplier.
Additionally, another member mentioned lack of insight into a supplier given inability to access information on that supplier as disconcerting. Specifically, putting the company at a higher risk for certain spend categories where there are only a handful suppliers in a specific spend category were available.
In order to find the Zen state with external challenges (i.e. suppliers), procurement must be able to collaborate beyond traditional means. What this means is being able to have deeper insights into supplier relationships and addressing suppliers as partners, rather than merely looking at them as a vendor of a product or service. In addition, it also means that improving information collection in a more systematic way mitigates risk.
How this Zen state is accomplished cannot be found in one solution or process, but in overall supplier relationship management. Many in the session even admitted that they currently do not have a formal SRM program in place, but were actively in the process of working on one with their top tier suppliers.
What are some of the challenges you face as a modern CPO? And how do you overcome those challenges to find your Zen state? Share your thoughts by commenting below or tweet me at @climberakis.
Stay tuned for part two where we will take a look at how the conversation converged under the context of innovation.