By Mark Clouse and Chris Windfelder
"If I could change one thing in my career,
it would be the attention paid to internal stakeholders
and their ultimate satisfaction. This is what makes one's reputation."
— R. David Nelson, retired chief procurement officer from TRW, Honda, John Deere and Delphi, speaking at the A.T. Kearney Center for Strategic Sourcing Leadership, March 2010
The above words by Procurement living legend Dave Nelson points to an important, yet sometimes overlooked, aspect of Supply Management leadership. Today's CPO requires as much sales savvy, people prowess and "marketing mojo" as he or she does supply chain skill. At the risk of too much functional self-aggrandizing, Supply Management is at the nexus every business' income. They select and manage the suppliers that corporations rely upon for innovative ideas, quality products and services, and prompt delivery. They are responsible for an increasing majority of the costs incurred by the organization, and they are one of the few functions whose role actuates interactivity with other functions across the enterprise.
A select group of Supply Management leaders understands this inter-dependency and connectivity and, more significantly, the role teaming plays in driving collaboration and assuring success. These leaders become invaluable, networked executives, capable of further growing their influence. In some cases, they step into larger roles outside the traditional boundaries of Procurement. The following article explores how these select leaders place themselves in the center of corporate strategy and consequently propel their careers and the Supply Management function forward.
A Case for Crossing Functions
Many factors shape a CPO's agenda. The most recent A.T. Kearney Excellence in Procurement (AEP) Study shows CEOs are increasingly asking more of Supply Management and its leaders. CEOs report the importance of "cost reduction" to the overall organization would increase 10 percent in the future, compared to an increase of 30 percent for "value beyond cost." More specifically, chief executives expect Procurement to step up its role in innovation and growth, value chain optimization, sustainability and risk management — in addition to the ever-present need to reduce costs. (See Figure 1 at right.)
Each objective presents unique opportunities for Procurement and supports the argument that Supply Management must be leaders at teaming as an imperative for the function's future standing. The following exemplifies various scenarios where teaming becomes key:
If the mission is Innovation, Procurement must...
- Align closely with Engineering, Marketing and R&D — developing liaisons from those areas and coordinating interaction at all levels — even temporary assignment into those areas.
- Understand the roadblocks to innovation — both internal (qualification and testing time/cost) and external (raw material costs, rigid specifications) — and aim innovation workshops at solving these.
- Incorporate innovation into supplier selection, KPIs and scorecarding — and overall category strategy.
If the mission is Value Chain Optimization...
- Work with Engineering, Logistics and Manufacturing for direct materials, and with functions like Marketing and HR to understand the complete value chain for key goods and services.
- Model costs to understand conversion value at each step.
- Leverage collaborative optimization techniques to unbundle traditional, category-oriented value chains to allow suppliers with extended capabilities to expressively offer new value chain bundles.
- Stay close to Business Development/Strategy when acquisitions are in play to help size the value in due diligence and execute quickly on synergy savings.