For as long as I’ve been involved in the procurement space, CPOs have shown varying degrees of enthusiasm for broadening the function’s value proposition.
Over the past few years – not surprisingly – their focus has been focused on keeping the lights on, with almost all of their energy devoted to keeping key supply lines open and critical suppliers in business. It’s hardly surprising, given they’ve faced a global pandemic and the long list of subsequent crises.
But while today’s business environment is far from straightforward – and despite the chaos of trade wars, real wars and escalating market turmoil – there are indications that CPOs are reigniting their passion for nontraditional growth drivers. The bandwidth to focus at least some energy on expanding procurement’s value proposition – including the function’s top-line contribution – appears, to me at least, to be back.
A recent Procurement Leaders CPO Connect call provided a good example of this and a great reminder of how some functions continue to think outside of the box. Ryan Verbecken, CPO at US grocery giant Kroger, shared the story of the Retail Procurement Alliance (RPA) – a group purchasing organisation formed by Kroger and Walgreens.
“Through sourcing aggregation, optimisation and the collective buying power of our members, we maximise savings, achieve bottom-line KPIs, improve working capital and improve service levels with positive collaboration from our supplier base,” the organisation’s website reads.
In other words, with the benefits of scale, collaboration and knowledge sharing, procurement has been able to create an entirely new business model and drive meaningful additional value.
Of course, there are other ways that CPOs can drive value beyond their traditional remit: from supplier-enabled innovation to partnering with the sales organisation to providing the data to support real-time pricing, but it’s a good time to take a step back and review your function’s value proposition.
Are you doing enough to drive additional value? Do you have your equivalent of the Kroger RPA example? Have you reignited your supplier-enabled innovation programme?
It’s worth noting that while procurement’s impact on revenue might not always be directly measured or credited, the function’s activities in these areas are crucial enablers of business growth and financial success.
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