Cap Gemini CPO Report; mixed findings and lots of reading

by Peter Smith on October 22, 2010

Cap Gemini published their Global Chief Procurement Officer 2010 Survey report a couple of weeks ago. (Available free, registration required).  It is a slightly unusual document in that it is very much in two halves.  The first part is a fairly conventional but useful  survey of procurement leaders, with analysis and comment as you would expect.  I’ll come back to that in a moment.

The second part though is a collection of seven papers written by Cap Gemini procurement and supply chain consultants, designed to address the changing needs and new strategies for procurement, under these headings:

  • Building a collaborative relationship with the CFO
  • Establishing and delivering longer-term strategic objectives through data, technology, processes and talent
  • Building the right organization and operating model
  • Extending influence into service spend
  • Employing procurement-as-a-service to transform the organization
  • Understanding best practice in procurement performance measurement
  • Using Lean procurement to remove barriers to innovation.

They are quite technical, detailed – some are almost ‘academic’ in style.  I need to read more thoroughly but while some of the content does push the Cap cause a little (such as a positive spin on procurement outsourcing), there seems to be some good IP amongst it as well.  I’m somewhat surprised though that these papers have been presented as add-ons to the survey results, as I’m not sure how many people will actually get to them, let alone read them in detail.  I wonder whether they might have been better as separate ‘white papers’ or similar?

Anyway, back to the survey.  From the responses, most firms believe we are coming out of recession, but Cap say that:

“If that is the case, then the behavior of most Procurement organizations seems to be slightly misaligned”.

CPOs and their organisations are, in Cap Gemini’s opinion, too focused on cost reduction rather than on,

“…innovation and bringing growth to the company’s top line.”

I’m not sure I agree; when you go through difficult economic times, it doesn’t seem surprising that procurement will reflect the organisational need to batten down the hatches and drive for savings and value.  Anyway, more positively, 70% of respondents report directly into the Boardroom, and a quarter to the CEO or Business Head, which means procurement is better positioned to take on a more strategic role than ever before.

CPOs seem to be aware that their role is changing and needs to change, and there is also a trend towards more centralised or centre-led organisational models; perhaps in response to tough times and / or a recognition of the value procurement can bring where it has appropriate control.  Spend under control of Procurement is showing a steady growth across the sample as well; this to me is one of the two or three key metrics for measuring procurement success.   However, when we look at the detail, only 49% of CPOs have contingent labour under control; as we’ve said before, a key area with a lot of potential.  Legal services coverage is even lower at 38%.

The most shocking finding for me is that 64% of organisations are putting less than 20% of their spend through ‘eProcurement’.  As Cap seem to define eProcurement as pretty much anything from eSourcing to auctions to transactional platforms (catalogues, workflow), then that seems very low and suggests huge untapped opportunities.

Anyway, the survey results are well worth reading; and the papers worth a browse to identify where they may address any current issues you’re facing.

{ 1 comment… read it below or add one }

Kevin Potts October 22, 2010 at 12:21 pm

Peter – thanks for this sanity check CPO research. What interested me in the report was the topic of the first whitepaper, “Building a collaborative relationship with the CFO.” Do you think this is an untapped area of opportunity for CPO’s to gain broader executive support?

I believe it is a great opportunity because CFOs are more aware of the strategic role of procurement than ever before. CFO Magazine recently published a benchmark survey titled, “Supplier-Side Economics: Making Vendor Relationships an Enduring Source of Competitive Advantage.” For full disclosure, my company Emptoris sponsored the research. What surprised me in the results was how many CFO’s recognized the importance of the procurement team.

For example, the study found that CFOs know that new technologies for supply management have impacted their companies. I.e., 56% of survey respondents– reported savings of 5% or greater in their spending on materials and services through the use of such technology.

The survey also indicates growing CFO recognition of the importance of supplier relationships that extend beyond baseline prices for materials, products, and services. A majority of senior financial executives identified the following elements of supplier performance as the ones having the greatest impact on their companies’ overall business performance: the ability to meet commitments (58%), the quality of materials and services (54%) and price (51%).

If any of your readers want to read this research, they can access it by clicking this link and filling out a short registration form. It is the top document in the list. http://www.emptoris.com/cfotoolkit.

Kevin Potts
VP of Product Management and Marketing
Emptoris, Inc.
http://emptorisinc.blogspot.com

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