The evolution of the procurement function and the CPO to meet new global demand

Today’s top Chief Procurement Officers (CPOs) do so much more than simply procure. It’s not simply about buying goods and services, it also about helping to nurture your suppliers.

If you look at how the Chartered Institute of Purchasing and Supply describe procurement they say, “Procurement and supply management involves buying the goods and services that enable an organization to operate.” But this description falls far short of what best practice for procurement officers is all about.

The CPO’s duty of care to the supply chain13

The very act of buying goods and services presupposes that the suppliers of these goods and services already exist. But if the CPO simply sets out to buy these goods and services at the lowest price, the very act of doing so would driver suppliers out of business because, with no other constraints, the lowest price in this context is zero. The constant driving down of costs if left unrestrained will eventually force suppliers to shut down.

The very essence of business is to make a profit, and as much profit as possible. Profit, if reinvested back into the commercial business world correctly, generates more liquidity and more commerce. Tightening down on profit means also tightening down on future commercial growth and that is simply bad for the global economy.

A good CPO not only has a duty to his own company to procure goods and services at fair prices, but he/she also has a duty of care towards the well-being of the suppliers in their supply chains too. When this duty of care is carried out properly the result is the procurement of goods and services at fair prices that facilitate the CPO’s company turning over a healthy profit, but that also nurtures the supplier, allowing them to make a healthy profit too and remain in business to carry on supplying into the future. Supply assurance is key.

The healthiest supply chains are those where all companies, from the CPO’s company downwards to all suppliers of goods and service providers in the supply chain are all in a stable state of financial and commercial well-being.

The diversification of global demand

The global consumer scene of today is more diverse than ever before and it will continue to evolve as the Internet of Everything becomes a reality, bringing a hitherto unprecedented source of goods and services into the reach of the everyday consumer. Consumer demand is on the verge of a new boom period and the procurement profession needs CPOs that can rise to and meet the challenges that this new world will pose.

What we expect from tomorrow’s CPO

There is room both high-end luxury and low end value. Consumers expect local and global availability. They demand customized products and services at fair prices that mirror mass production. The challenge for tomorrow’s top procurement professionals has already begun and in order to meet it CPOs must:

  • Embrace their employers corporate social responsibility (CSR) and sustainability and have an active green agenda
  • Develop a sound digital business strategy
  • Be aware of and counter economic instability
  • Promote globalization
    • from a supply chain perspective
    • from a market perspective
  • Work within a regulatory environment
  • Reputation

The necessary evolution of the procurement discipline in already underway and is set to produce a new breed of CPO to create global supply chains that can meet the next level of global demand.

What measures do you take to assure your supply chain and how are you preparing the challenges ahead?

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