who does the chief procurement officer report to

So, how can companies attract, develop, and retain best-in-class CPOs of the future? As a result, theyll gain greater insights into the inner workings of the organization, have an influence on major decisions, and expand procurements offering way beyond cost savings. Next Level Purchasing Association, 2222 Sedwick Road, Durham, NC 27713, We use cookies to make your experience better. Necessary cookies are absolutely essential for the website to function properly. Stay connected to our expert insights, thought leadership, and event information. The ones that succeed in making Procurement a more strategic function understand that a CPO should therefore report to the Chief Operating Officer (COO). Visit NLPA Learning, the new home to all of our certifications and online courses. Prior to CPOPartner he was Head of Procurement Advisory at PwC Switzerland, New York and Amsterdam. This approach created collaboration and trust, and accelerated our digital transformation., Some of the new technologies that are notoriously difficult to master for organizations across sectors are data and predictive analytics. This might make sense for procurement teams that are managing a huge spend, for example, because it enables comprehensive spend management strategies to be established, driving procurement efficiency and compliance across the organization. A procurement team is a specialized team of professionals that provide a multitude of services to all involved or interested parties involved in procuring goods and supplies necessary for project execution. ", 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. And yet the transformation is far from complete. As such, CEOs and boards need to ensure that they take the full measure of the value that a future-proofed procurement team can bring to their companies and challenge themselves to look at their CPOs through a much more strategic lens. 2Celine Cherel-Bonnemaison, Gustav Erlandsson, Ben Ibach, and Peter Spiller, Buying into a more sustainable value chain, McKinsey & Company, September 22, 2021. The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. As orchestrators of the business ecosystem and relationship builders with suppliers, CPOs canand mustacquire a comprehensive understanding of emerging technology trends and be able to provide informed views on which companies offer the best solutions. For example, the ability to procure masks had a huge impact, and procurement has earned a bigger license to act. 3 Jim Kilpatrick, Jennifer Brown, Ryan Flynn, Aaron Addicoat, and Pierre Mitchell, Global 2021 Chief Procurement Officer Survey, Deloitte, April 23, 2021. This cookie is set by GDPR Cookie Consent plugin. Among the many organizational challenges stemming from the extraordinary events of the past couple of years, considering the future of the procurement function is one that should definitely move higher up on the corporate agenda. Accentures Nowosel believes that good internal succession will happen if the existing CPO is already embodying the ideal new profile and has invested in developing internal talent. Should this not be the case, companies do not have a moment to lose in revamping the scope and skill set of the whole procurement office. So the question is: how can we change this? In that case, the company generally positions Purchasing under Operations/Supply Chain Management, reporting to the Chief Operations Officer or VP of Supply Chain. No longer solely focussed on cost savings, it has become a strategic player by supporting long-term business goals, driving sustainability, Typically, procurement leaders will report to one of three, There is no overall consensus as to whom procurement. Accentures Nowosel said, The CPO of the future should work with start-ups, sit on select boards, scout new talent, and influence the technology development road map. Heinekens Le Faou added: While the chief technology officer (CTO) would also participate in introducing new technologies, the CPO supports him or her in the sourcing process, helping validate solutions., As the topic of supply chain risk management moves up on the executive leadership and board agendas, CPOs need to be able to help inform any relevant strategic decisions. If you have just graduated, procurement is the best place to start. As procurements overall strategic importance has increased significantly in recent years, it is essential for companies to fundamentally rethink the role of the CPO. It will provide you with a comprehensive view of the whole organization and also allow you to grow your external network.". I have seen a lot of transformation happening recently, with the procurement functions shifting from an insular, contract- and process-heavy organization to a wider, more insightful function that is connected to what is happening in the broader market, and this will only accelerate. As Accentures Nowosel put it, CPOs, by virtue of their close connections with key stakeholders of the business, are custodians of the companys brand. You also have the option to opt-out of these cookies. The upsurge of new, data-powered technologies, the ensuing accelerated digitization of work, and the evolution of supply chains into highly networked ecosystems where sustainability and risk management have become critical topics have significantly elevated a role that not long ago was primarily focused on process efficiencies, cost control, and compliance. We need to create our own shell to think the Procurement way for business. They also wish to thank Nick Parfitt for his contributions to this article. PYiZCcR`]72+,##3b'f5_6B#?4qYA"?pH!>M{7jRj&R1h.S]dJ!toAuhArpK9}Sf17J="PfT W|Xn`UK}sBF'%4oK*0OYu7H, # 9t` j^XWO5~vYG^-YX$^u[5BOYw5N\p4@,yT(d7,zQZ Qs}XlD[?luG=Fz AY@aKvWrc> v;pwQ x>a$R"pT{*I='Hk{+f?bL,L0{Xb-e38 Stay up to date with our helpful tips and topics from our blog. Report to COO will make Procurement to operations and become problems solving and the KPI will become Ensuring Supply. ", Companies will need to rebalance the talent pool with more explorer types. The fundamental changes identified in the procurement function center around the emergence and acceleration of newer, more sophisticated drivers of value creation: These new strategic drivers are rendering the traditional ones (cost reduction, process efficiency, and compliance) less differentiating going forward, but not less essential for the organization; these historical drivers have been evolving to keep up with both technology and the broader business context. No longer solely focussed on cost savings, it has become a strategic player by supporting long-term business goals, driving sustainability, ensuring supply chain transparency, and mitigating risk. Wr$S&: While this is good news for organizations, they will also quickly face the challenge posed by the scarcity of suitable talent. ", People and relationship considerations will therefore be most important, given the massive transformation that is happening. Become a member of one of the worlds largest procurement associations today. In fact, the leaders we talked to predict that the future CPO will become increasingly embedded in the business and viewed as a peer to the C-suite executives in terms of responsibilities and influence. By the same token, procurement professionals and the organizations representing them need to step out of their comfort zones and project a renewed image of the function that focuses on its growing, more strategic impact on value creation. As a result, we see a new breed of procurement executive that is externally focused, able to bring the outside in and advise the CEO on how to win better.. I have seen a lot of transformation happening recently, with the procurement functions shifting from an insular, contract- and process-heavy organization to a wider, more insightful function that is connected to what is happening in the broader market, and this will only accelerate, said David Ingram, CPO at Unilever. We help our clients change the world, one leadership team at a time. So hopefully the COO will soon become the most important role in Procurement! They have a unique opportunity, if not an obligation, to reset and rethink both the role of the CPO and its succession planning. Siemens Staubitzer described how the diginetwork he created at Siemensa new team of digital natives within his organizationoperated: It was a bottom-up approach, starting with a small group of people evangelizing about digital across our organization; at the moment, our diginetwork is more than 500 people. X[ 7u0ZU`XQ7cBFI}5V.xVbs.9y+E)h6E'fL04Sf H0"D Angela Qu, CPO at Lufthansa Group, brought the point home: CPOs need to hold high ethics and moral standards, have a strong sense of corporate responsibility, and make sustainable decisions regarding their suppliers. The CEO expects the procurement function to achieve sustained cost-reduction, Finding ways to positively impact the brand through, When procurement is aligned with finance, the overriding focus will be on. I believe that a CPO should report to Operations in Manufacturing, but to the CFO in a non-manufacturing (Services) organization. You make an excellent point. It is self-organized and self-motivated and generates ideas that are evaluated by the procurement team. They all agree: the traditional pyramid of value-creation drivers in the procurement function is reshaping fastif not inverting. Learn more about Una and contact us to discuss how a Group Purchasing Organization can help you meet these goals. ", Klaus Staubitzer, CPO and head of supply chain, Siemens, CPOs must live up to the values of care, respect, and humanity. The organization at large wouldnt trouble itself too much with the profession because it didnt appear to be delivering a huge. _=M|WF1dm9\Tpi"]2O%`1]`}0bc|MfWU endstream endobj 631 0 obj <>stream Filling their talent needs will therefore require leaders to not only completely rethink the competencies and associated talent development strategies for the role but also pave a future career path for CPOs who will have reached the top of their game. Any unethical or unlawful shortcut will lead to long-term damages of a companys reputation and market position. Added Henkels Conquret: Regulators and consumers are asking for transparency along the value chain, which can have a huge impact on the function. The challenge can be considerable, and leaders may not always have a lot of latitude to move, for example, if they are contractually linked with partners that dont align with desired sustainability goals. The CPOs we interviewed suggested the following approaches. To view or add a comment, sign in 4Ryan Bulkoski and Kristin van der Sande, 2021 Europe and US Data, Analytics, and Artificial Intelligence Executive Organization and Compensation Survey, Heidrick & Struggles, forthcoming on heidrick.com. ", Now, board members and business CEOs ask procurement for their view on the supply situation ahead of talking to investors. 1State of Supply Chain Complexity 2020 Report, Krber, 2021. It will provide you with a comprehensive view of the whole organization and also allow you to grow your external network. Indeed, companies have a huge opportunity to make procurement leadership roles more attractive by framing them in a more appealing way for ambitious, talented, up-and-coming executives. Consider developing a simple, at-a-glance dashboard showing key metrics for the CEO. The role will also be instrumental in how companies as a whole respond to changes in the ecosystem, in terms of agility and resilience. Today, customers and investors alike demand transparency when it comes to ESG performance, and therefore a companys reputation can be severely affected by any transgressions, regardless of whether or not the company is aware of any wrongdoings. A CPO reporting to a CFO will continue to struggle and financial indicators will always be leading in the discussion. Many organizations have thousands of suppliers in their networks, which makes scrutinizing them a challenging but necessary task. aNf UyS2=-I@u+x0'CR,PN"Hxt=(0jw^}v$%_D^A_`:c59%_dfcHc/zvX)A1:E._c. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. All rights reserved. Given the perception of procurement professionals as expert cost-cutters, its unsurprising that the profession often reports to the CFO. Resetting the role of the chief procurement officer. Copyright 2020 Next Level Purchasing, LLC. The appropriate reporting structures would vary by industry and be based on relative levels of maturity toward value creation (some sectors will still rely heavily on procurement organizations that focus on the bottom line), but a move closer to the CEO would likely make it easier to attract and retain top leaders. ", In truth, I cant think of a better place to form a future CEO than procurement. Fabrice Lebecq (flebecq@heidrick.com) is a partner in the Brussels office and the regional managing partner of the Industrial and Supply Chain & Operations Officers practices. The fact that the matter is up for debate just goes to show that procurements growing influence reaches across operations, finance, and even into the CEOs office. My 2 cents thought . A recent study revealed that 91% of businesses cannot stay ahead of their supply chain complexities.1 Therefore, to succeed in the future, CPOs will have to up their game and immerse themselves in the ever-growing maze of relationship building with suppliers, partners, customers, employees, investors, and other stakeholders. How will this help assure continuity of supply? Its difficult to overstate the complexity of most large companies ecosystems. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet. Both roles require superior influencing and networking skills. Indeed, companies such as Diageo and Givaudan went as far as rolling supply chain, procurement, and sustainability into one executive role. It's likely that pressure on CPOs will only further increase after the European Commission releases its human rights and environmental due diligence policy, which is expected in 2022. The role is more and more anchored in connecting networks and ecosystems rather than in running processes and competitive tenders., Geopolitical events and tensions act like wild cards on ecosystems. Digital platforms are easy to connect and can create new value for the organization. To view or add a comment, sign in. Within the scope of a procurement team, there are several broad functional areas: Purchasing Manager, Supply Chain Manager, Enterprise Solutions Manager, Marketing Manager, Supply Chain Analyst, Engineering Manager, Financial Manager, Documentation Manager, and Support Services Manager. A new breed of CPO is needed, as the scales continue to tip in favor of greater emphasis on inclusive, purposeful leadership, board-level impact, acceleration of sustainable innovation, and the ability to work collaboratively and efficiently with an increasing number of diverse stakeholders in highly networked, digitally enabled ecosystems. Typically, procurement leaders will report to one of three C-suite executives: Reporting lines are determined by several factors, including: There is no overall consensus as to whom procurement should be reporting, though. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. This means two things for procurement: CEOs tend to be time-poor, which means procurement can help by keeping their communications and reporting as concise as possible. This creates a direct link between business priorities and the focus of Procurement. By virtue of being closely connected with so many players in the external environment, CPOs can acquire and filter the insights necessary to define a winning growth strategy. The cookies is used to store the user consent for the cookies in the category "Necessary". Leaders with the profile matching the requirements of the CPO of the future are currently very scarce and in high demand. How much do you understand about the roles in a purchasing Team? If Procurement want to be a Strategic BP to Business, I believed Procurement are not suppose to report to CFO nor COO nor Supply Chain, but really to the CEO. A focus on short-term saving can distance the profession from the organizations long-term business goals. If not directly to the CEO, the CPO could very well report to a chief transformation officer, providing a new orientation to the role, one outside of the traditional links to either supply chain or finance officers. What does this decision mean in terms of risk? But opting out of some of these cookies may affect your browsing experience. BTs Pourrat said that predictive procurement can help build a much stronger negotiation position by using all available information and data. However, a recent Heidrick & Struggles survey found that only 9% of data and analytics officers said that supply chain was one of the two functions they spent the most time working with, which is pretty low compared to other priorities such as marketing and customer engagement (54%), operations (28%), and sales/go to market (25%).4, The ability to bring digital innovation to the function and the broader organization will depend on how well the CPO is connected with start-up technology companies. ", Klaus Staubitzer, CPO and head of supply chain, Siemens, When it comes to ESG implementation, it is often down to procurement to make it happen with suppliers, which involves significant effort and resources. This cookie is set by GDPR Cookie Consent plugin. It varies across organizations and industries and there isnt necessarily a right or wrong answer. 629 0 obj <>stream %PDF-1.7 % Indeed, according to a recent Deloitte survey of chief procurement officers, only 6% of organizations have fully deployed predictive analytics systems, 15% are scaling them, and a further 36% are piloting such tools.3 Getting an edge on data use throughout an organization can prove a critical competitive advantage, and the procurement function sits in the right place to facilitate that learning. It's leading to friction and disappointment of Procurement leaders, eager to make a difference. When procurement is aligned with finance, the overriding focus will be on driving savings for the organization. (Many of these leadership capabilities are consistent with those identified in a global study of chief supply chain officers. So businesses need to look for young talent with expertise where they are, which can be in unconventional spaces like start-ups.. Ninian Wilson, CPO at Vodafone, said that the accelerated focus on ESG, and the decarbonization of the supply chain in particular, is changing who procurement is working with as a function, both internally and externally. And, indeed, the reputation of many companies today rests to a large extent on how they walk the talk on sustainability, and how transparent they are about choosing and treating their suppliers and partners. The value proposition of a well run, technologically enabled Procurement team is usually buried to deemed nonexistent in an environment where most spend is Indirect. umHz\i.HEW"3|(ZN_a8P~XM{ I]IS5(qGvL#b*!NI!< You might be thinking "isn't the most important role in Procurement the Chief Procurement Officer (CPO)?" BTs Pourrat added that the most challenging combination to find in terms of skills is the right balance between category expertise and the ability to see the big picture. Additionally, some of the CPOs suggested that future procurement organizations may end up being split into two sub teams, as UCBs Bals explained. The organization at large wouldnt trouble itself too much with the profession because it didnt appear to be delivering a huge amount of value. This reporting line is sometimes considered the most limiting, however. As the role of the CPO expands, some experts believe its natural evolution could lead it to become a member of the C-suite, reporting directly to the CEO. Does that mean the CPO should report directly to the CEO? (For more, see Why successful digital officers dont always have digital in their title.), CPOs must also be able to help their organizations understand the opportunities and risks that need to be managed when scaling digital innovations and be able to advise on how to pilot and experiment with new technology. How can we close the gap and help the CPO to fulfil his or her ambition?

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