Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I’ll be reviewing a whitepaper entitled “European CPO Executive Debates: The Path to Procurement Excellence” from CPO Agenda and Emptoris. Actually, at 60 pages, this whitepaper is a bit long for a cover-to-cover review so, in this post, I’ll be focusing on the first chapter “What does world class procurement look like?
This whitepaper is essentially a transcript of a roundtable discussion among dozens of European Chief Procurement Officers (CPO’s). So, if you want to learn what world-class procurement is, these are the folks who are defining it with their work.
As you may expect, there was no universally accepted, one sentence definition of world-class procurement. If there was, this chapter would be very short instead of being 10 pages. That being said, there were some common threads in the CPOs’ responses. Many of these revolved around the concept of contributing value to the business moreso than surpassing third-party benchmarks. Here are a few examples:
- “World-class procurement is about making a significant and valued and measurable contribution towards your organization’s performance,” John Taylor, Global Vice President of Purchasing at Astra Zeneca.
- “The first (view of world-class procurement) is the board level in terms of support for the procurement strategy. Where you have a best-practice procurement capability, invariably you can tie that back to executive buy-in at the CEO level,” John Collington, Group Commercial Direct at the United Kingdom’s Home Office.
- “I would view myself and the Britvic procurement department as world class if we are clearly supporting the drive for corporate goals,” Andrew Boyd, Director of Procurement at Britvic.
- “There are many organizations I’ve worked with where people are absolutely fascinated about how we compare with everybody else…I think if you asked anybody within Barclays what does world class look like as a customer of sourcing, they would say ‘You understand what we’re trying to do and you can tangibly evidence that you’ve helped create more value,’ rather than we’re great against XYZ company,” Jon Kirby, Chief Procurement Officer at Barclays.
Another fascinating topic discussed among these executives was the set of challenges each faced. Surprisingly, there was also a lot of commonality among these responses as several cited the ability to get customers to be unified in their support the procurement strategy as the top challenge. Here are a few examples of those responses:
- “It’s making sure that up and down our organization we are talking with one voice. I often find that the suppliers know our company network far better than we do, and so corralling people together and talking with one voice is a big challenge,” Heather Rodgers, Head of Group Procurement and Supplier Management at Centrica.
- “One of our challenges is moving away from 17,000 buyers in the bank to 17,000 requisitioners,” Ian Wilmot, Head of Methods, Development and Network, Group Procurement at Lloyds TSB.
- “One (challenge) is getting communication right and getting middle management, in particular, to walk the talk. You can get the messaging right at the top table, you can get your own function to understand it, it’s the people in the middle – how do you get them to consistently adhere to what we’ve said we’re going to do,” John Taylor.
- “I’d say the biggest transformation challenge for retailers in general is on the indirect side, where the whole dynamic is of many hundreds of stakeholders not accustomed to using or deploying great sourcing practice. So the challenge there is articulating what are we trying to get to and what does it mean for you? There is a transfer of control that underlies a lot of these changes and there’s a natural reluctance for parts of the business to give some of that up,” Michael Walsh, Head of Value Chain at Home Retail Group.
Though these first two topics saw a lot of similarity in the executives responses, the opposite occurred when asked about the value and results a world-class procurement function delivers. The four respondents to this question had quite different responses:
- “We help our business win business from our customers,” David Gilmour, Purchasing Director at Pilkington.
- “It’s about competitive advantage. If we can buy better than our competition, that’s probably the best measure of it,” Andy Collopy, Global Procurement Director, Fuels Marketing at BP.
- “When I joined Barclays I asked our COO what success looked like and he said ‘No More Bad Deals,’” Jon Kirby.
- “It’s really having the understanding and the commercial awareness to drive those discussions and know what profit margin we make out of each of those individual brands,” Andrew Boyd.
Surprisingly as well, the four respondents were very vague when asked about the most important metrics of world-class procurement:
- “The metrics we look at are the value we get from our direct spend,” Andrew Boyd.
- “The voice of the customer is a big one for us,” Ben Jackson, Head of Policy and Strategy at Network Rail.
- “The span of influence of procurement across the organization’s third party spend, and then the quality of that influence…Then on the transaction process, a very simple one is the number of invoices that arrive without a purchase order,” Rob Woodstock, Lead Partner, Sourcing and Procurement Practice, UK & Ireland at Accenture.
- “[A] measure for us is are we a net attractor for the top talent in our enterprise,” John Taylor.
These responses were a bit troubling for me to read because there was only one true metric cited – number of invoices that arrive without a purchase order – and it isn’t a metric that is exactly integrated with the corporate success so often mentioned earlier in the chapter. It makes me wonder: were these CPO’s holding out information to prevent competitors from catching up?
I think so. Great metrics are like the “profit per x” statistic that Jim Collins explained in his book “Good To Great.” I would have a hard time believing that such a distinguished panel would not have a few powerful metrics that guide their work.
As you can see, this whitepaper features a lot of great insights into what makes procurement world-class. I’ve only scratched the surface of all the fine material covered in this whitepaper. I may review some of the ensuing chapters in future editions of Whitepaper Wednesday. However, if you don’t want to wait that long to explore world-class procurement further, you can download your own copy from Emptoris’ Web site (registration required).