Posted: Friday, February 01, 2008, 3:52PM
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KNOWLEDGE MANAGEMENT TAGS
"Leadership"
Tensions likely as procurement rises
More wil be expected of procurement in the future, yet many companies will be unable to meet the new demands, according to a study. The research claims that there is a sharp difference in the way CEOs and CPOs see the role of procurement in their organisations.In the next five years, procurement will not only have to help reduce costs but will increasingly have to encourage innovation, cut risks and become involved in product design, the study by German consultants BrainNet says. But the report concludes that “structures are lagging behind reality” at many companies. The study, What do CEOs expect of their buyers?, was based on interviews with CEOs at 70 global companies.
It says the need to bring procurement up to date is also reflected in a lack of transparency and measurability in procurement processes. From the CEO’s point of view, adequate information and monitoring processes are only provided for the “traditional goal of cost reduction”. There is also a lack of information about contributions made by procurement to company successes.
BrainNet says procurement is being increasingly promoted in the business media but suggests that CEOs and procurement leaders have strikingly different points of view.
Comparing the survey with a similar one carried out among CPOs two years ago which found that more than a third of them regarded their function as strategic and a key value lever, less than a quarter of CEOs according to the latest results, take the same view. Procurement is moving from an operational to a strategic role, BrainNet says, and is often in the “driver’s seat” in cross-functional teams.
But CEOs are not as aware of this trend as CPOs. The author of the study, Sven Marlinghaus, a partner at BrainNet, said: “The pressure to evolve is enormous, but procurement departments lack the resources they need to cope successfully with this change. For example, most CEOs expect the procurement department to be involved in product development by purchasing innovations and defining specifications. But at the moment procurement is integrated in the R&D process in less than one in four companies. “From the point of view of procurement, in many companies the structures are lagging behind the reality.”
Most CPOs believe there is an urgent need for more staff and training as a result of a rise in procurement’s responsibilities – yet only 13 per cent of CEOs in the survey agreed.
Marlinghaus concluded: “Procurement is undergoing an upheaval. The new requirements demand significant changes in terms of resources, training and organisation. The CEO and CPO will only overcome these challenges if they work together.”
For more information on the study, visit www.brainnet.com
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