Very few people make it to the top office of any business without first holding other major responsibilities. The chief financial officer (CFO) role is typically regarded as just such a standard precursor. However, according to a 2015 survey of CEOs in the Forbes 2000, only 13% of CEOs came over from the CFO position. Instead, the trend in recent years has been to move those CFOs into more operational roles, giving them an opportunity to bolster their hands-on abilities within the organization.
One of those opportunities comes in the form of supply chain management. In fact, guiding and directing supply chain decisions (or procurement, as it’s known more succinctly) is maybe one of the best possible foundations for both the knowledge and skill that a CEO can lean on in order to be successful.
The power of procurement
Most businesses today are extremely supply chain dependent. The supplier network consists of all the nodes and pathways that allow customers (including businesses themselves) to get the products and services they want or need at the time they want or need them. The Coronavirus disease (COVID-19) pandemic provides an excellent, overarching example of how local, regional and global economies are affected when supply chains are suddenly disrupted. It’s put an even brighter spotlight on the benefit of excellent management of supply chains and the inherent risks found within them. More and more companies are responding to this knowledge by widening the executive suite to include a chief procurement officer or chief supply chain officer.
Even at lower, non-executive levels, exposure to supply chain dynamics is a reliable and effective foundation for mastering business fundamentals. Smart negotiation, product delivery, capital management, environmental concerns, working environments, regulations -- all of these are critical components of both procurement specifically and business in general.
In other words, strategic procurement policies and processes do more than just ensure business continuity by managing risks and maintaining compliance. They can also support sustainability measures, contribute to innovation and long-term growth and rise to the occasion with regard to pressing social issues.
An executive who understands all of this is in an especially good position to take the reins of an entire company and potentially become a true leader in business.
Amazon’s 2017 acquisition of the Whole Foods grocery chain is a compelling example of creative procurement at its finest. On the surface, it looks like a clear-cut case of a huge retailer simply expanding its empire. In a sense, that is true, but probably not in the way most people believe.
Amazon didn’t want Whole Foods because of the allure of the grocery sector. In fact, grocery stores are a notoriously low-margin enterprise. But, along with a solid, relatively future-proof investment (albeit with small margins), Amazon got much more.
For one, it got the ability to track customer behavior and ostensibly discover ways to either convert them to online shoppers or otherwise improve the customer experience while growing the bottom line. Second, it got a place to stock popular Amazon products for quick fulfillment and distribution.
For the price tag of Whole Foods, Amazon got a nationwide chain of grocery stores, research and development stations and delivery hubs. The ultimate, it could be argued, in sophisticated supply chain decision-making.
To the obvious extent that supply chain management is a way to not just maintain a business, but to guide and grow it, leadership within organizations can benefit from looking closely at what they are doing to attract top supply chain talent and include that talent in executive capacities. Previous generations of industry required little more than purchasers; today, thanks to the rise of technology and globalization, success is built on a much more elaborate approach to procurement.
For those who aspire to lead or influence the future of business -- whether employees, students, educators or others -- the way forward is to embrace the concepts above, spread them far and wide and leverage them for individual and organizational benefit. Better supply chain management means better businesses, and better businesses make for a better world.