- Find common ground
- Agree on metrics
An effective procurement system often can come down to a pair of C-level personalities: the Chief Financial Officer and the Chief Procurement Officer. If these two don’t have a collaborative partnership, then efficiency—and the bottom line—will suffer.
Andrew Bartolini, managing partner & chief research officer at Ardent Partners, says that today’s volatile business environment demands such a partnership.
“The current business environment is one that allows for much smaller margins of error an done that, for many enterprises, will mean a constant reevaluation of business processes and cost structures,” he says. “This has helped align the focus and agenda of the CPO with the top priorities of the CFO, and awaken the CFO to the opportunities that exist within procurement to support key enterprise initiatives. There are other large drivers and trends that have conspired with the business climate in recent years to help increase the alignment between procurement and finance.”
In September, Suppy & Demand Chain Executive magazine presented a Web seminar on this topic, featuring Bartolini and Daniel Warn, assistant vp-head of strategic sourcing and vendor management at Blue Cross & Blue Shield of Rhode Island. The Webcast, The Measuring Stick: Strategies to Manage and Improve Procurement Performance, was sponsored by Puridiom, and can be viewed at our Web site, www.sdcexec.com.
In a white paper, The CFO and the CPO: One World, Two World Views, Ardent Partners listed a number of recommendations for a healthy CFO-CPO relationship. At the top of the list is open communication and visibility. Next, active, formal and constant collaboration; alignment on goals and objectives; agreement on metrics; and a shared world view.
“Partners that take no action to resolve diametrically opposed views are not built to last,” the report says. “Build upon the common ground that exists between procurement and finance and work to frame the activities, strategies and results of each department into a context that the other can understand and appreciate.”
When Warn joined BCBSRI in 2010, he spearheaded efforts to lower vendor-related administrative and medical expenses. Working with the CFO, he created a centralized strategic sourcing and vendor management function, delivered significant realized and cost-avoidance savings and implemented Puridiom’s Purchase to Pay (P2P) System.
Within three months, the ROI showed projected savings through increased spend under management of $1.9 million.
Warn’s advice: “Have well-defined business requirements and an understanding of what you want to implement prior to engaging a P2P vendor. [Then] stick with best practices and a basic implementation. Once in place, employ continuous improvement principals to build upon your base solution.”