Procurement is Part of the C-Suite. What Now?
Procurement is no longer an afterthought, a back-office function, or simply operational – it has the opportunity to leverage its increased visibility and influence to drive change
In 2020, Chief Procurement Officer was one of the fastest growing C-suite titles. And it’s been on an upward trajectory ever since.
Procurement is no longer an afterthought, a back-office function, or simply operational. The pandemic sparked a change in procurement and supply chain, and now in the midst of record inflation, nonstop shortages and disruptions, and ongoing geo-political conflicts, procurement has taken a permanent role in the C-suite.
Given the newfound stakes, today’s procurement teams have a unique opportunity to leverage their increased visibility and influence to drive change. Here’s how to ensure success.
Create a clear line of communication with the C-suite
Communication goes beyond yearly check-ups and monthly reports. Keep your leadership team aligned and informed regularly.
According to Deloitte’s 2021 Global CPO Survey, for the first time since they began the survey, “reducing costs” was not the number one priority for CPOs. Instead, it was replaced by “driving operational efficiency.” Other priorities – like ESG, risk reduction and innovation – have also increased in importance and now outweigh many traditional metrics.
Does your C-suite understand this change or do they still maintain a traditional view of procurement?
The C-suite must be aware of how the procurement strategy can affect their priorities so they can equip your function and drive the business forward.
“You don’t want anything to get lost in translation from your team to the C-suite,” says Katarzyna Fonteyn, Director, Procurement Product Management at Basware. “Often times clunky, unstructured communication ends up like a bad game of telephone. It’s important for the C-suite to know exactly what’s going on, what’s possible and what you need so they can make the best decisions for the business.”
Emphasise the Value of Modern Spend Management
Many executives don’t quite understand the full implications of spend management. This creates an opportunity for you to be more strategic.
Communicate early and often to ensure all key stakeholders understand the full picture:
- Who are the top suppliers and how much are you spending with each?
- What strategic business objectives are you driving with your spend decisions?
- The initiatives your procurement team is driving (ESG, climate, diversity, and more)
Similarly, ensure the C-suite sees the potential of your spend management decisions to affect ESG outcomes. As you know, procurement’s influence and impact go beyond limiting maverick spend and reducing risk (although those are very important). We wield the power – through our spend decisions and supplier selection – to affect communities everywhere and inflict positive – or negative – change.
“Talk with your team about the potential to enact deeper sustainability and social change through the supply base,” says Fonteyn. “Most executives are focused on what they are doing internally. The real opportunity lies within the supply chain.”
Know your suppliers and diversify
Knowing your suppliers is crucial to your spend management program. Visibility into suppliers’ practices is as important as visibility into your own practices, not just to support strategic business outcomes, but also for responsible procurement.
Provide your C-suite with the full picture on supplier risk — specifically around supply continuity issues and how that could impact revenue and profits. Then, showcase how a shift in strategy (like a move to nearshoring) could impact your overall resilience.
Similarly, supplier diversity programs provide another opportunity to add value and differentiate. The Hackett Group expects an increase of over 50% in diversity spend goals by 2025. Talk with your leadership team about what’s driving the change, the value of getting out in front, and the resources you need to start making a bigger impact.
Manage risk and remain watchful
Risk will also be top of mind for the C-suite. It’s the backdrop of every decision that’s made.
You play a key role here. Failing to see the full picture and mitigate risk at scale could damage brand reputation, sales, customer satisfaction and more.
Take, for example, the National Emergency Supply Agency in Finland, which managed to purchase millions of face masks from rogue suppliers that had fraud and debt recovery claims against them. This resulted in a multi-million euro purchase of face masks that were not suitable for hospital use. These and other negative repercussions could have been avoided if the agency properly verified its suppliers.
Financial risk is also coming back to the limelight with the risk of a global recession seemingly increasing by the day. Get ahead by identifying where you are vulnerable and taking action to protect your business and supply partners.
Stop, Collaborate and Listen
Remember that at this level, procurement is only one piece of the pie. It’s an important one, but you need to work within the broader goals of the organisation.
In other words: procurement is a means to the end — not the end itself.
Listen to and collaborate with your C-suite peers so you can develop more clarity on the initiatives they are driving, and how you can support them through your procurement strategy.
Ready to learn more? Check out the whitepaper, The Great Procurement Reset: Five Musts for Managing Business Spend in the Modern Economy, for more helpful insights for your spend management strategy.
You can also view a recording of our recent webcast to hear from experts Katy Fonteyn from Basware and Antti Suorsa from Zeal Sourcing on the five musts for managing your business spend.
