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Procurement's destination: How far can it go, really?

Our latest executive research, CPO Strategy 2011: From Breadth to Depth, analyses a number of topics that surround the function this year: from the impact of the recession to risk mitigation, CEO engagement, changed and unchanged priorities, all the way to mega trends.

 

Intrigued by the changes that have taken place since we last did the research twelve months ago, we revisited two widely accepted measures of procurement’s influence within the wider organisation. One is the proportion of spend under management, an indicator of the breadth of procurement’s influence; the other is the proportion of spend covered by category plans, which we define as the depth of spend influence that procurement manages.

 

The change that we observed on both levels was rather reassuring. While spend under management has climbed from 65% to 72% in the past 12 months, spend under category plans has managed to rise at its own speed, albeit a little slower compared to its counterpart, from 52% a year ago to 56%.

 

We also asked the question as to how procurement departments had benefitted from the recession, with 81% indicating the function had done so in some shape or form. Even more, one quarter (25%) had even received additional resources.

 

If there was that 100% ceiling, we further analysed, it would take procurement some four plus years to complete the task of gaining full control of company spending but more than twice that, over a decade, to develop the associated category plans. All provided this is happening at the current rate of change, of course.

 

Procurement has come quite some way over the past year, one could claim. It now manages more spend, develops more strategic financial plans and, in some cases, has even increased its headcount. And yet one can’t help but wonder if this progress is something that procurement has earned by its own merits or if, perhaps, this could be a temporary reflection of the recession - in other words, the wider organisation giving procurement increased support and responsibility in order to make it back to normality. A one-hit wonder, maybe?

 

Perhaps we should give procurement the benefit of the doubt and claim that, yes, it has made some noteworthy improvements on its own over the past year. But even then, how sustainable is this success and further progression in the long term? Procurement may be good and quick at taking on a breadth of responsibilities within the organisation, but it still has a way to go to develop the tools and processes necessary to manage these new remits successfully.

 

CPO Strategy 2011: From Breadth to Depth has helped us to identify future research topics that we will address for our procurement community this year, with category strategy management, the future design of procurement and third-party risk management being on top of the list.

 

If you are a member and would like to read our full CPO Strategy 2011 report, please click here. Alternatively, if you are not a member and would like to find out more about our CPO Strategy 2011 report, please click here. You can also email me feedback and suggestions regarding the content of this on maggie@procurement-iu.com.

Maggie Slowik
Posted by Maggie Slowik