CPO Crunch: Follow the money

David Rae

Focusing on profit contribution can provide a starting point for improving supply chain transparency

“So, you’ve mapped Tier-2. Now what?” This was the deliberately optimistic title of a very recent CPO community call that explored just how far into the supply chain our members have visibility. 

As we know, having knowledge of who our suppliers are is one thing, but it’s quite another to have a good understanding of who our suppliers’ suppliers are – not to mention those even further beyond.

In a complex, risk-riddled world, such visibility is crucial and can bring meaningful competitive advantage. 

The reality, however, is that we’ve an awful long way to go. I asked the group of CPOs who attended what level of visibility they felt they had into their supply chains. None said they had cracked the code, and fully 90% said they only had reasonable visibility in “critical spend areas”. The remainder said they had poor visibility.

Not surprisingly – and probably as a result – it’s an important focus point for investment. Almost two-thirds of those on the call said a “moderate” amount of financial and resource investment was being put into building greater visibility, with a further 12% saying it was a “significant” area of investment.

Of course, the crucial question is where that investment should be focused. Here, we heard several examples of member organisations driving pilots to explore how they can build greater capability in this space.

There is no magic bullet, but focusing on the areas that matter most is a crucial first step. Working backwards from your highest contributors to revenue and profit is key. This gives a much-needed starting point and is a far easier narrative when seeking investment or support from the wider business.

In other words, start with those supply chains that play a critical role in delivering shareholder value. Understanding who our suppliers are, who our suppliers’ suppliers are, and so on, allows us to understand where we need to spend time and which suppliers we need to develop when it comes to ensuring resilience and quality.

Planning for 2025, already

Please look out for an invitation to participate in our 2025 Strategic Planning Guide survey, as I’ll be reaching out to you next week. Every year we seek input from the community on important areas for CPOs and it provides a key benchmark of where organisations are planning to place their bets and make investments for the year ahead.

It only takes a few minutes to participate in the survey, but the insights it provides can fundamentally improve the decisions you make as a leader.

To receive weekly insights from the Procurement Leaders community, sign up to the CPO Crunch newsletter using the link at the top of this page.

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