Procurement is in a strategic role to find the best price while identifying vendors and suppliers-often with an assist from AI and ML.
When Jeanne Branthover started working in executive search decades ago, chief procurement officers didn’t exist.
“There was no such person. [The role] wasn’t at the C-level,” Branthover, co-head and managing partner at global executive search firm DHR International’s New York Office, told CIO Dive in an interview.
Instead, the person in charge of approving vendors and suppliers was called the head of procurement.
When it came to software or hardware, procurement largely left technology decisions to department heads.
They either didn’t, or weren’t able to, see if the software was redundant, if the company had already purchased software that would fit the organization’s needs, if that solution would work with that of other departments.
Departments — and their technology buys — were siloed.
“A lot of people felt procurement was a pain in the neck,” she said. It was seen as an extra, unnecessary step.
Heads of procurement also didn’t do much vetting. They weren’t able to take a bird’s eye view of how a vendor and technology fit into the overall fabric of a company.
Today the role has completely changed. Procurement is in the C-suite, a strategic role to find the best price while identifying vendors and suppliers — often with an assist from AI and machine learning — whose products align with business needs and strategies.
Any technology procurement needs are made with the organization in mind, not just what one department head requires.
“CPOs today are more focused on quality and the level of solid experience that can be built upon with vendors, rather than just focusing on where to save funds,” Dan Neiweem, co-founder and principal of digital commerce and marketing solutions provider Avionos, wrote CIO Dive an in email.
CPOs make a strategic change
As technology became more important across organizations in all industries, the role of procurement started to change, which lead to its C-suite elevation, according Branthover.
“Think about all that a company buys. They buy consultants, they buy supplies, they figure out how something goes from A to B in logistics,” she said. That’s why it’s no longer a back office, but front office role.
Good CPOs look “not only for cost savings but making the processes and the procedures much better, so when a contract comes in, it can go to everybody who’s important to look at it immediately,” Branthover said.
Companies are also looking for CPOs with leadership skills, which is new for procurement.
“The level of person and the skills of the person and the background of the person have changed,” Branthover said. “This person has to be credible in the C-suite and to the entire organization, but that person also has to be credible in the outside world to vendors and to suppliers.”
The future CPO
When Chris Sawchuk, leader in procurement advisory for the Hackett Group, speaks with a company that is unhappy with the CPO or procurement office in general, the issue isn’t always about costs.
“What we tend to hear is not ‘they don’t save us enough money’ but ‘they’re too slow,'” he told CIO Dive in an interview.
That may not be fair to a procurement office that has already sped up processes from what they were 10 years ago.
But “if you look at some of the things procurement does, there’s still a lot of repetitive activity, even if it’s in strategic sourcing,” Sawchuk said.
Sawchuk expects that procurement processes and vendor vetting will continue to speed up as technology become more advanced and prevalent.
When that happens, the CPO role will change again, or even disappear from some organizations.
The Bureau of Labor Statistics expects the overall employment of purchasing managers and buyers and purchasing agents to drop 3% from 2016 to 2026, largely due to automation and outsourcing.
Procurement will focus more on data and analytics, Sawchuk said. “You don’t have somebody in your group that does spend analytics. Everybody has to be comfortable engaging with data at a very high level.”
Indeed, a 2018 Deloitte survey found that 70% of U.S. procurement leaders saw analytics as the most impactful technology area in their field.
The role will focus more on productivity, and looking across the organization and determining the best places to spend, Neiweem said. CPOs will also work on and where to get the best value and where to consolidate suppliers to fulfill an organization’s needs.
CPOs need to be proactive about where improvements can be made. “We’re already seeing this today, where the CPO is serving more as trusted advisor, rather than just a negotiation buyer,” he wrote.