Role of the Chief Procurement Officer: Essential in Corporate Management
Procurement as a field has changed drastically over the past few years. And unsurprisingly, so has the role of the Chief Procurement Officer. But how is this change affecting the industry and how can CPOs ensure they stay relevant? Read below to find out more…
How has the role of a CPO changed over time
There are no two ways about it, the role of the Chief Procurement Officer (or Head of Procurement) today has evolved dramatically - they are no longer “just” the go-to persons for managing suppliers, contracts and orders. Today, a modern CPO often plays an integral role in determining the business strategy of an organization and brings a multilayered skill set and perspective to the table.
As Dr. Kathrin Thiesen, Head of Procurement at Düllberg Konzentra, notes:
“The role of the CPO has changed significantly in recent years: the focus has shifted from pure cost savings as a KPI of the purchasing organisation to ensuring the availability of raw materials and services, minimising risks and building a resilient supply chain.”
Recent technological advances have made it mandatory for CPOs to learn and adapt, so that they can spearhead innovation in their organisations. eProcurement tools are a great example of this - they have enabled CPOs to handle and process huge amounts of data effectively, something that would have taken an immense amount of effort and time only a few years ago. AI, machine learning and big data analytics are just a few examples of new tools in the arsenal of the modern CPO, who wants to drive innovation.
“The CPO or Head of Procurement has changed from a mere owner of a back office function to a very proactive driver of efficiency and innovation. For a long time, the focus has been on product innovation only but people forget that there are so many external suppliers that can bring more to the table than just the one product you need.” - Nils Brauckmann, Procurement Lead at Personio
The pandemic, combined with supply chain disruptions, shortages and ever-increasing inflation rates, hasn’t skipped the procurement industry either. New digital solutions are more readily adopted, as the need for digital acceleration is becoming more urgent. Thus, CPOs are playing a key role in the long-overdue digital transformation in their organisations.
What makes a good Chief Procurement Officer?
A CPO today has to wear many hats, but one thing raises a good CPO above the rest - an in-depth understanding of the business, the practical priorities of their organisation, and how it all ties together.
“A good procurement leader will not only understand the numbers they are expected to deliver but also the business needs, and will be able to manage both things equally. Differentiating between nice-to-haves and realising when an opportunity will really pay off is a key element. Managing this together with all stakeholders makes a good CPO.” - Nils Brauckmann, Procurement Lead at Personio
Procurement leaders today have become skilled strategists who are able to prioritise based on a deep understanding of the business environment they operate in and the up-and-coming procurement trends. This skill can often be the differentiating factor that takes a CPO to the next level.
“A good CPO can connect the dots, foster relationships and not only manage the bottom-line but also add to growth.” - Nils Brauckmann, Procurement Lead at Personio
Finally, CPOs today need to lead and guide their teams, even when times are tough. As Dr. Kathrin Thiesen, Head of Procurement at Düllberg Konzentra, puts it:
“A good CPO is like a "captain on stormy seas": they keep an overview, set the direction and the goal, and motivate their "crew" even in difficult times.”
How to stay relevant as a CPO
How can CPOs future-proof their careers and make sure that they stay relevant and ahead of the curb? The answer is simple:
“Similarly to every other employee or function, by delivering and creating value. The big difference in procurement is that you have to learn to enjoy and foster the success of others. If other teams realise and appreciate the role you played in their success as opposed to you being just another hoop to jump through, you’ll have no problem staying relevant.” - Nils Brauckmann, Procurement Lead at Personio
**CPOs provide the biggest value as “connectors” and enablers **- they are in the very center of a complex interconnected network of suppliers, customers, employees and other stakeholders. In order to stay relevant, CPOs need to educate their organisation on the value that their department brings, as procurement is often considered “a black box” for many.
“The CPO has the task of optimising the image of purchasing within the company by emphasising its value contribution and importance, following the motto 'do good and talk about it'.” - Dr. Kathrin Thiesen, Head of Procurement at Düllberg Konzentra
Another important factor is adaptability and willingness to learn. With the ever-changing makeup of the procurement industry, CPOs need to remain flexible and continue learning, e.g. to understand and apply new regulations such as the Supply Chain Act. Building on existing knowledge and expanding their skillset is often the competitive advantage many CPOs need to remain relevant.
The future of the CPO role
The landscape of procurement is ever-changing and this will ultimately lead to an evolving future of the CPO role. While technology and innovation will equip procurement teams with the tools they need to be more efficient, procurement will continue to require human interaction for strategic decisions.
“A lot of people think that the future of procurement is super technical and abstract. I both agree and disagree. We have a lot of power on our hands with all these tools on the market. At the end of the day, procurement is still a business that requires human relationships as much as anything else.” - Nils Brauckmann, Procurement Lead at Personio
But what are some of the biggest trends we see affecting the future of the CPO role?
Innovation and digital transformation
The value chain has evolved from a linear process into an interconnected network of systems that is constantly being transformed. Innovation and digitalisation are the driving forces of this transformation.
“The CPO of the future will be leading a team of data-driven project managers and will feel the pressure of constantly innovating to keep up with the mass of information coming in.” - Nils Brauckmann, Procurement Lead at Personio
More and more CPOs are spearheading digitalization in their organisations by implementing innovative sourcing, planning and analytics procurement tools. They are also becoming the ones enabling other parts of the organization to drive change and disrupt the status quo by scaling up digital solutions.
Sustainability in the procurement field has become a crucial topic. More and more companies are addressing the environmental footprint and social impact of their supply chains, as a result of growing consumer expectations.
The result? Sustainability in procurement is now re-classified as a strategic initiative with a lot of visibility, both inside and outside of the organisation. The driver of this initiative is highly likely to be the CPO, who will merge responsibilities connected to the supply chain, procurement and sustainability into their role.
Risk and crisis management
During the pandemic and the infamous periods of supply chain disruptions, many CPOs were in the center of risk management campaigns. They had to guide their organisations through a dynamic business and economic environment, and build a crisis-proof supply chain. This will likely continue to be the case in the future and it will require CPOs to strengthen their organisation’s ability to be agile and resilient against unpredictable market conditions.
“The importance of the CPO will remain or even increase: the current global crises have to be well managed by Purchasing - only if this is successful, a company will survive. A good CPO and their team will tip the scales in the competition for raw materials and resources.” - Dr. Kathrin Thiesen, Head of Procurement at Düllberg Konzentra
In conclusion, the role of the Chief Procurement Officer has undoubtedly evolved and is now essential in corporate management. This trend will likely continue in the future, with growing strategic importance of the procurement team. CPOs who want to stay relevant and ahead of the curb need to prioritize digitalization and innovation, thus increasing their organizational capacity for agility in difficult times.
If you wish to find out more about how Lhotse can help you to improve your procurement processes, book a demo with us today!