The role of a Chief Procurement Officer (CPO) in most industries has been more fundamentally transformed over the last couple of years than almost any other leadership role. In fact, according to LinkedIn Economic Graph Research, Chief Procurement Officers are one of the fastest-growing C-suite hires with 15% growth in 2020. With this additional influence comes change, which begs the question: What does the role of the CPO look like, today and in the future?
The elevation of the role of Chief Procurement Officer
In general, procurement’s strategic importance has grown considerably in recent years, meaning that there’s so much more to the function today than just cost savings, operational efficiency, and compliance. Digital transformation, innovation, the introduction of new products and services, not to mention pressing external factors such as geopolitical stability, raised societal expectations, global health concerns, and climate change are rapidly becoming a strategic priority for many organisations. In fact, recent research suggests that two-thirds of the average company’s ESG footprint comes from its suppliers. In light of these issues, senior business leaders have a unique opportunity to rethink what the role of the CPO in their organisation should look like, both now and in the future.
What qualities make a good Chief Procurement Officer?
According to Hervé Le Faou, CPO at Heineken, “Fundamentally, the CPO is evolving into a ‘chief value officer’, a partner and co-leader to the CEO who is able to generate value through business partnering, digital and technology, and sustainability, which are new sources of profitable growth in a shift toward a future-proof business model.”
Procurement leaders today need to be expert strategists who are able to prioritise based on a deep-rooted understanding of the business environment they operate in and emerging procurement trends. Research shows that, while most CPOs spend 74% of their time on transactional and operational activities, high performers spend approximately 63% (~15% less) of their time on these activities. Finally, CPOs need to be adept at people skills. As Dr. Kathrin Thiesen, Head of Procurement at Düllberg Konzentra, puts it: “A good CPO is like a ‘captain on stormy seas’: they keep an overview, set the direction and the goal, and motivate their ‘crew’ even in difficult times.”
The CPO of tomorrow: New responsibilities and opportunities
As the CPO’s role continues to evolve and expand, CPOs of the future will need the matching skillset to thrive. The next generation of CPOs will be expected to innovate, digitalise and - as the last few years have shown - to help guide their organisation through volatile and complex times. They must continue to demonstrate strategic, defined, and results-oriented leadership, as well as further develop their political savvy and influencing skills.
“A lot of people think that the future of procurement is super technical and abstract. I both agree and disagree. We have a lot of power on our hands with all these tools on the market. At the end of the day, procurement is still a business that requires human relationships as much as anything else.” - Nils Brauckmann, Procurement Lead at Personio
The three biggest trends affecting the CPOs of the future
While technology and innovation will provide procurement teams with the means to be more efficient, procurement will also continue to require human interaction for strategic decisions. Here we take a look at some of the major trends that will impact the role of the CPO in the future.Innovation and digital transformation
The value chain has transformed from being a linear process into an interconnected ecosystem that is continually evolving. Innovation and digitalisation are the driving forces of this transformation. More and more CPOs are leading digitalisation in their organisations by implementing innovative sourcing, planning, and analytics procurement tools. In fact, according to a survey by SAP and Oxford Economics, organisations that have embraced new technologies achieve better results, with 81% of leaders saying that the digital transformation of their procurement function improved supplier performance management, and 78% of leaders have realised improvements in transaction accuracy.Understanding risk and crisis management
Intricate supply chain networks can mask dangerous vulnerabilities: A problem in one area can quickly travel up and down the supply chain, leading to drastic reputational damage. A Deloitte survey shows that very few CPOs (18%) were formally tracking the risks that existed in their direct (tier 1) supplier base, and only 15% had visibility beyond that. CPOs will be required to build crisis-proof supply chains in order to reinforce their organisation’s ability to be agile and resilient and to mitigate against risk and crises.Sustainability
Organisations are also facing an increasing number of regulations and a heightened awareness among consumers around the sustainability of the goods they buy. Consumers and regulators today hold companies responsible not only for their own practices, but also for those of their suppliers. To meet these demands, CPOs must be prepared to increase transparency of the sustainability and compliance of their suppliers. The SAP and Oxford Economic survey shows that 83% of UK consumers would be more likely to purchase from a brand that supports and sources from local suppliers, and a further 83% would also be willing to compromise on delivery times, have less choice, and pay more for ethically sourced products.
Now is the time for CEOs and company boards to proactively evaluate their procurement leaders and think about their future operations in the short, medium and long term. In turn, CPOs must drive companies to focus less on low value, repetitive tasks and create value-add activities by adopting digital technologies which create greater value for the business overall, and increase organisational agility in difficult times. Leaders who start this process now will be in the best position going forward.
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