“The keys to the castle will ultimately be given to the procurement teams that can anticipate and adapt to dynamic change.” – Andrew Bartolini, Ardent Partners
Over 300 chief procurement officers (CPOs) weighed in for Ardent Partners’ “CPO Rising 2015” research report, and the key takeaway is this: There’s a new game in town for procurement, and it’s not efficiency or cost savings. Procurement’s new agenda, according to the report’s author Andrew Bartolini, is agility. “Efficiency and compliance are quickly becoming table stakes in a game with no limit,” reports Bartolini. If procurement teams are to keep up with the accelerated pace of competition and innovation in today’s market, then they’ll need to do what the best-in-class procurement teams are already doing.
90% spend under management
Bartolini defines best-in-class procurement according to the “spend under management” metric, and reports that this year’s “best-in-class procurement teams, on average, manage a full 70% more spend than their peers.” These best-in-class teams are achieving 90% spend under management, while all others are achieving 53%. It’s a high bar to reach, but those that do reach it tend to reveal an interesting pattern of other best-in-class characteristics. Without taking their eye off of core capabilities—and certainly without any less pressure to deliver savings—these leading teams are layering in new, agile elements across the following five arenas: organization, processes, technology, strategy, and performance. “Agility will define the next wave of procurement success,” writes Bartolini.
Agility in the context of procurement
When I think of agility, I think of cars taking sharp turns at high speeds, or an athlete’s swerving an opponent at the last moment. I see mental agility in action every time I give my daughter a good reason she can’t watch another TV show, and hear her fire off 10 good reasons she should. Want a concrete idea of what agility looks like for procurement? Here’s an excerpt from the CPO Rising Report: “Agility, in the context of procurement, requires enterprise sourcing and procurement teams to be highly responsive to any changes in stakeholder needs, supplier capabilities, and market conditions. The team must be ‘light on its feet’ with sourcing opportunities and category management. Like a world-class athlete, the CPO can develop an agile organization by blending together the collection of key resources, activities, and capabilities to create better coordination and responsiveness.” Agility in action might look like:
- Knowing when stakeholders’ business requirements are changing and being ready with alternative suppliers
- Quickly responding to a supply disruption with alternate sources for a given commodity, part, or service
- Taking a more iterative sourcing approach with shorter contracts and more frequent revisiting of the supply markets
Rally the troops
Sounds like a great rallying cry to me. And apparently today’s CPOs are ready to tackle the challenge, with 9 out of 10 agreeing that their teams should be doing better.
What to do next? Take a look at the infographic for an at-a-glance view of the key stats from CPO Rising 2015 and an outline view of the Agility Agenda. The full report, CPO Rising 2015: The Agility Agenda, includes insight into the current state of procurement, a full set of best-in-class metrics to see how you stack up, and a list of strategic recommendations for driving best-in-class procurement performance.
This post originally appeared in The Art of Procurement, an article series on SAP’s Business Innovation blog.