Supply Chain Management belongs with the Chief Procurement Officer Level at Board Level

More and more companies are beginning to realize the importance of having their Chief Procurement Officer (CPO) sat on the board.

The Sales Director is clearly focused on making new sales. The Chief Finance Officer is clearly concerned foremost about ensuring the company accounts conform to the appropriate legal requirements, and the Director of Engineering is striving for new innovations.

But it is the CPO that has to juggle a number of conflicting priorities within the supply chain in order to maximize the return on investment, while at the same time ensuring delivery targets are met and that customer service and satisfaction are achieved in full.

The importance of managing costs and maintaining customer service

Most business men and women are fully aware of the part that cost plays in terms of profitability, but some overlook the affect that service has. Nothing loses clients faster than poor service, particularly if it becomes the norm.

When and where costs fluctuations hit is also key.

Careful management of costs can help to mitigate the effect they have further down the supply chain and that’s why it’s important that the CPO has to shoulder this responsibility and where she/she needs to be present at board meetings in order to keep everyone up to speed.

Supply chain cost savings outweigh business running costs

Supply Chain Station recently interviewed a top Chief Procurement Officer who is getting ready to pull the plug on the old centralized system that is currently in place, and replace it by restructuring the supply chain from end to end. The cost savings his department has already lined up are already significantly more than it costs to run the whole organization.

What is equally impressive is that this guy and his team are also putting best in class supply chain risk mitigation into place; something that when not fully operational can easily result in millions of dollars being wiped off share prices overnight. A CPO of this quality and caliber surely has to seat on the board.

Centralizing supply chain operations

Centralizing the supply chain is often an excellent way of managing procurement spend; resulting in keener prices and better support from suppliers. It’s quite normal for a centralized supply chain system to return a 5% saving in the first year of operation.  Bristol Myers, Konecranes and Vodafone can all validate this from their own personal experiences.

It is also well known that good channel logistics, well organized field operations and shared distribution networks can all contribute to further cost savings, and  can improve supply chain performance, as recent figures from General Mills, KLA Tencor and Xerox all go to show.

In addition, top performance product launches from the likes of Axis Communications, Johnson Controls and Microsoft show that when procurement and engineering get their act together, there is profit to be made.

It’s about time that more companies take the view that Amazon and Apple take; that the CPOs who manage their supply chains are an intrinsic part of their boards.

Does the CPO in your company sit on the board of directors? If not, what case would you make for it to be so?

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