Today, I received the most recent edition of CFO magazine in the mail. I was disappointed at the headline on the cover:
LET’S TURN THIS THING AROUND – How to kick-start 2011 with new strategies for:
- Capital raising
- Top-line growth
- Career development
- And more
No mention of procurement. =(
The article represented by this headline also didn’t mention procurement. In fact, it demonstrated that CFO’s are not as concerned this year with what has traditionally been viewed as the specialities of the procurement disclipline: cost cutting. The following excerpts highlight this sentiment:
- “‘Cost cutting for us is over,’ says Taiyo Yuden (U.S.A.) CFO [Joseph] Wilkinson. ‘Obviously, we’re always going to be looking for ways to be more efficient, but overall cost-cutting is essentially complete.’”
- “While American Woodmark expects to find additional cost-cutting opportunities in 2011, [their CFO Jonathan] Wolk says, they are likely to be minor by comparison [to cost cutting efforts in prior years].”
So, if cost cutting is a lower priority, does that mean that the procurement function will face a decline?
But it shows that it is time that we all start thinking about procurement more broadly and not just as a producer of cost savings. Here are ways that the procurement function can contribute to organizational success – and remain important to CFO’s – in a growing economy that is more focused on revenue growth than revenue reduction:
- As demand picks up, work more closely with suppliers to ensure that supply keeps up.
- Bring in innovative ideas from the supply base that may help your organization’s goods and services be more marketable and superior to the competition’s.
- Know your spend so well that you would be able to quickly identify synergies in the event that your organization acquires another company. CFO’s interviewed for the magazine article expressed a desire to grow, a challenge of growing organically, and an easier time getting credit – an environment that is ripe for mergers and acquisitions.
- Be able to identify cost savings even when overall expenses rise due to increased volume. This is tricky, but is thoroughly covered in our online class “Finance For Strategic Procurement, Part I.”
This is a critical time for procurement. We’ve made a lot of headway in getting CFOs’ respect. As the focus shifts away from cost cutting, you need to modify your strategy to retain and increase the recognition that your work gets from senior executives in your organization.
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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