A look at CPO Rising 2017: Tools of the Trade
In Chapters One and Two of CPO Rising 2017: Tools of the Trade, we looked at the current states of the CPO and procurement as a whole — what leaders are thinking and doing, and why. Chapter Three – Procurement Performance – delves into those strategies in more detail, offering up best-practice benchmarks for technology, processes and performance from leading CPOs and organizations worldwide.
Another quote to start with: A procurement department that operates on its own agenda, independent of any real input and oversight from either executives or business stakeholders does itself and the enterprise a disservice.
In recent weeks and months, we’ve explored and discussed alignment — a lot. Procure-to-pay alignment with accounts payable (AP, or what Ardent Partners calls “ePayables”), procurement alignment with finance, procurement organizations aligning their persona with their technology platform – the list goes on. Dave Quillin, Manager, Procurement and Vendor Management at Determine customer Alliant Credit Union also talked about it at length in a discussion with Phillip Ideson on Art of Procurement.
The reasons, as detailed in CPO Rising 2017: Tools of the Trade, are numerous and varied. With more than half of all CPOs reporting directly to the CEO or CFO, aligning procurement’s goals with those of the larger enterprise is an unparalleled opportunity to gain influence, confidence and stakeholder buy-in. Still, knowing this, only 38% of procurement organizations are tightly aligned with business objectives. Fixing that goes back to what Dave Quillin said in the AoP podcast: listen to your business units.
Spend under management: flatlining?
Chapter Three also dug into these procurement benchmarks for 2017.
It seems many procurement teams are hovering at +/- 60% spend under management – and happy about it. For those who still have a ways to go in getting to that mark, the incremental gains make it very worthwhile; Every new dollar placed under control realizes a savings benefit of 6-12%. But, that 60% is an average – what defines Best in Class? 87%. That’s impressive on its own, but those procurement organizations also do better across all benchmarks. Strategic sourcing, contract compliance, supplier enablement – leading CPOs are consistently looking for ways to drive improvement in processes, strategies and relationships. Considering that benchmark-setters achieve alignment with business objectives of 63% compared to 29% for all others, just driving that metric in your own organization will mean major improvements.
Where source-to-pay solutions play a role in all this is by providing control and visibility – spend, contracts, automation. But, to achieve those, you have to go beyond implementation to deployment and adoption. A Gartner report last year indicated that over 50% of suite deployments fail. The reason is, trying to bite off too much, too fast. Users don’t get on board.
Procurement leaders are shifting from that model to something much more doable – a phased approach that allows for cumulative expertise, usage and ROI. With a modular solution-based structure, companies can start with one or two solutions and add on as needs – and business complexities – grow. The goal is to empower CPOs (and their teams) as they rise, in step all the way with collaborative, consumerized cloud solutions that are focused on meeting business challenges.
As Chapter Three sums up, to be a truly best-in-class procurement organization, you have to fire on all cylinders, all the time. This is no place for a cobbled-together, pseudo platform.
Next up in Chapter Four: Strategies for Success, takeaways you can use to make your procurement and people best-in-class, too.
Don’t miss our live webinar on May 24 with Andrew Bartolini, Managing Partner and Chief Research Officer of Ardent Partners, and Greg Tennyson, CPO of VSP as we dissect CPO Rising 2017: Tools of the Trade in more detail.