The ascension of procurement: From spend analysts to innovation strategists

Downplaying the integral role spend management has in a company's operational flexibility isn't appropriate, but restricting procurement officers from conducting tasks other than benchmarking and expenditure analysis may be hindering your business from achieving the growth you're striving to attain.

The versatile capabilities of a procurement officer

In a way, procurement specialists are multi-talented individuals. First, they can consider the demand incited by customer contingencies with a creative eye and deduce that certain market segments may feel the need to purchase certain products in the near future. This insight enables them to collaborate with research and development experts to determine how the enterprise can satisfy demand for those items with adequate supply.

Once the R&D department blueprints a commodity that target audiences will value, the procurement team can act as liaisons between R&D, the financial department and suppliers to figure out:

  • Which materials will be needed to create those new products
  • Which suppliers are well-equipped to manufacture those items in a cost-effective manner
  • The transportation costs associated with distributing the goods from factories to the market

It's this level of attention that procurement management experts put into the development of a new or innovative product that has placed them higher on the totem pole of business value. These professionals are being considered as key contributors to organizations' growth - competitive differentiators in their own right.

Standing at the center of business expansion?

The IBM Institute of Business Value conducted a study of chief procurement officers, surveying 1,000 senior procurement leaders working at billion-dollar-plus enterprises in 41 countries. The organization's research found that enterprises committed to procurement strategies are almost twice as likely to find new innovations, which can be used to position themselves as industry leaders. Overall, IBM focused on how CPOs are evolving from their roles as cost-control gatekeepers to positions as key contributors to enterprise ascension. IBM noted CPOs are achieving this aim by conducting three primary endeavors:

  • Assessing the broader goals of the enterprise as opposed to focusing only on purchasing concerns to determine how their roles can help achieve those ends. The top-performing CPOs are twice as likely to assess ways in which revenue growth can be driven and competitive advantages realized.
  • Serving as a diplomat between their companies and partners to identify leadership opportunities. IBM's research found that 92 percent of high-performing procurement management experts look for tactics that will allow them to add value to external supplier and stakeholder relationships. In addition, 52 percent of the best-in-class CPOs have collaborated with suppliers to develop new technologies to improve their businesses. These professionals also examine the expectations of internal stakeholders and customers.
  • Embracing new innovations to improve the value of their organizations. Data-driven tools are apparently all the rage among senior procurement executives. Enterprise resource planning has been the technology of choice among these experts, but the sophistication of these systems expands every year. For instance, data analysis functions have become critical components of what makes a good ERP solution, and 41 percent of CPOs have integrated analytics into their decision-making processes.

"The most advanced CPOs are proving that focusing on the nuts and bolts of procurement processes is not enough to bring real value to the business," said IBM Director of Strategic Supply Management Terrance Curley. "True procurement leaders who see the bigger picture can use their unique vantage point in the organization to drive innovation, grow revenues and expand competitive advantage."

It appears we've reached an age in which the procurement officer does more than examine expenses and the market value of certain products. Through strategic sourcing and other approaches, these professionals are elevating their organizations past their competitors, or at least trying their best.

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