The CPO Challenge

With purchasing grabbing management attention left and right, the challenges that CPO's face everyday has finally been brought into the light. But this newfound attention also brings added pressure to succeed with not only the purchasing agenda but with creating real value to the organization.

In a new series of articles in the IBX eNewsletter we will highlight the five most important challenges that a CPO will face in succeeding with the purchasing agenda. Universal challenges that are valid for both direct materials as well as for indirect materials and services.

The first topic that we’d like to bring into the limelight is how to tap into the potential for value creation that is purchasing. And how can a CPO exploit on that potential and get the management mandate to transform the purchasing organization.

The purchasing potential

Farzin Saber, Professional Services Manager, IBX Group

From our perspective we see large a potential in purchasing organisations. However, this potential can sometimes be hard to visualise, and if it is blurry it is even harder to put it into clear actions for improvement.

Exploiting the potential has been one of the key differentiators between the best in class and the laggards of purchasing development.

But more often than not, purchasing departments have a hard time breaking through the wall and getting started with their purchasing transformation, the reasons for this being:

• Purchasing lacks the tradition for gaining the mandate, money and resources needed for a large transformation program 
• Purchasing lacks the tradition of bringing investment scenarios to CEO – there is no tradition in the classic risk/reward thinking that is so abundant in sales and marketing
• Purchasing lacks the tradition of marketing and selling themselves, compare purchase managers with sales managers who see investment into marketing and brand as necessary measures that are vital for success
• Purchasing needs a change of image – compete with the other corporate organisations with strong business cases
• Purchasing needs to get bolder, create a plan and present the business case, ask for the money and jump!

To support purchasing departments in this we have a standardised methodology to analyse the current situation and create a transformation plan. We call it IBX Value assessment.

IBX Value Assessment

Based on the experience from many large European companies we have developed a methodology that we call value assessment. The methodology visualizes the value and potential that can be created through a development or transformation of the purchasing function.

The current situation is analysed in 5 dimensions. Is the strategy in line with overall goals? Do you have best practice processes for source procure and pay? Do you have a good balance between centralisation and decentralisation? Does technology help you to embed the processes in the organisation and to automate things that can be automated? And are there measurements in place that support the target fulfilment?

The value assessment methodology also contains a deep dive into an organizations spend data. This means that organizations are able to quantify potential for improvements within both the sourcing and procure to pay fields.

The outcome is a transformation plan and a business case. It’s a visualization of the potential that can be found in purchasing, the potential is there in black and white. Ready to be brought to the c-level. It provides the backbone for getting the mandate to ensure that purchasing generates on the potential that it has.

Once you get that mandate, there are new challenges ahead. In this series of articles we will continue to highlight the challenges and provide details for achieving results. Next up: How to get your sourcing done. Group wide.