C-Suite to Leverage Procurement as a Strategic Enabler
Sanjay Agarwal and Rudrani Bose, Proacure Research Team | February 15, 2022
Collaboration across the C-suites builds confidence and enables organizational growth by making procurement risk robust.
The CIO and the CPO
While the CIO is responsible for setting the organization’s overall technology goals as well as the day-to-day digital requirements of different business units, the CPO is responsible for finding the appropriate suppliers and evaluating them to select the right one in light of the company’s goals and objectives.
Deloitte’s Global Chief Procurement Officer Survey highlights 75% of CPOs believe in an increased role of procurement in delivering future digital strategies. Optimization of the supply chain, organizational spend and sourcing strategies requires data visibility, possible only through the CIO-CPO collaboration.
The CPO operates via a deep understanding of the needs of both customers and suppliers and guides the sourcing of products to reduce costs and generate revenue. The CIO provides the technological infrastructure to do so. The CPO understands what to source, from where and from who, for who. The CIO fulfills the how.
The CIO leads digital transformation across the organization, by providing strategies for individual business units keeping in mind the long-term business objectives of the organization. Digitalization of the organization paves the way for the use of advanced analytics in procurement, which allows CPOs to provide data insights to facilitate more digital change. The value addition to the organization from the IT spend especially involves the CPO. Spend management frees up resources for investments in innovation and R&D.
Priority solutions to transform the organization and mitigate risk range from investment in automation software to cybersecurity technologies. Delivering an innovative digital-led business strategy is no longer just the role of the CIO, but involves collaborative efforts by the entire C-Suite.
Laying a foundation of trust among these executives while embracing new innovations so as to boost organizational growth is essential. The 2019 CIO survey by Grant Thornton and the Technology Business Management (TBM) Council explored the shift of the CIO’s role from “cost center” to a trust center, powering strategic initiatives and driving financial performance.
In EY’s report “How Private Company CIOs Can Use Data To Make A Difference,” the C-Suite has an insatiable appetite for data insights from advanced analytics and the CPO is often charged with the change. Synergies between the CIO-CPO can significantly improve the company’s strategic direction with clear KPIs.
The CFO AND THE CPO
Both the procurement and finance function are integrally connected by the mutual goal of cost savings and revenue generation. The CPO’s influence over sourcing and the supply chain allows long-term sustainable business strategies that deliver financial performance.
Differences arise over performance measurement metrics. Procurement savings involve different stages (identified, negotiated/contracted and realized savings) while CFOs recognise only realized savings, which can be reflected on the profit and loss statement.
Spend analytics can give CPOs better visibility into all tiers of their supply chains and make informed decisions resulting in lower disruption and compliance costs and sustainable sourcing. Spend analytics also give CFOs a clear picture into spend and savings and help minimize unnecessary spending.
Tail spend management reduces risk from smaller unregulated suppliers and helps contribute to the P&L by regulating the numerous trivial expenditures that add up to a large amount.
Proacure is a procurement technology & data-science organization based in the San Francisco Bay Area. Our ‘Koreografy’ model leverages multiple frameworks like congruence of different data sets, fusion of digital, analytics and business processes, and synchronous collaboration between various stakeholders. The model enables 100% Spend Visibility with prescriptive actionable insights to transform Strategic Sourcing and help realize untapped value in the Supplier and Tail Spend. Proacure’s deliverables include cost savings of 7-30%, a 20%+ increase in EBITDA, cash flow optimization, and reduced supply-chain disruption.