The Source of Value: A Chief Procurement Officers (CPO) Study

What is the source of procurement's value to the enterprise? How do organizations become more effective and efficient in achieving sustainable cost savings? How can procurement deliver even greater value to the enterprise? These questions are essential to the continuous improvement of the sourcing and procurement function. They are the questions at the foundation of the IBM Institute for Business Value (IBV) Chief Procurement Officers (CPO) Study which examines the "journey to value" for procurement organizations – and details the specific procurement strategies that drive business results and bottom-line impact. The study, based on a survey of more than 1,000 procurement executives across more than 40 countries, takes a deeper look at "procurement role models," the 100+ companies in the study that achieved the most impressive revenue and profit performance relative to their industry peers. The research identifies three common attributes that tend to separate these procurement role models from the pack. These high-performing procurement organizations:

  • Focus on improving enterprise success, not just procurement performance
  • Engage with stakeholders to understand and anticipate their needs and values
  • Embrace progressive procurement practices and technologies to drive results

Role models, along with their peers at average procurement organizations, agree on several key priorities including reducing costs and delivering sustainable savings, as might be expected. What notably differentiates the role models from the pack is that they take a more holistic view of the enterprise – in part because of the close connections they form with its various constituents. Procurement role models think about procurement in broader terms than their peers, they are more likely to embrace priorities that serve more strategic business objectives. For example, almost half of procurement role models say that revenue growth is a top priority for their organization, as compared to less than one-third of lower performing procurement organizations. Role models also meet more frequently with internal and external stakeholders, and they deeply value, and in some cases act, on the suggestions these interactions produce. This helps them to deeply embrace the objectives of key stakeholders, which, in turn, makes it easier for them to deliver against shared enterprise objectives. More than 90% of procurement role models believe interactions with external stakeholders are of considerable importance, whereas a third (30%) of lower performing procurement organizations failed to describe these relationships as highly important. As a result, procurement role models were also twice as likely to list bring innovation to the business as a top priority. Procurement role models are also less restricted by the traditional methods of procurement execution than their underperforming counterparts and are more willing to embrace innovative procurement solutions. For example, procurement role models take a more comprehensive approach to procurement technologies. Similarly, role models are significantly more committed to procurement automation. More than eight out of ten of procurement role models see supplier management technologies as critical to their success. They are also much more likely to employ and integrate risk management technologies into their systems – and much more likely to embrace advanced analytics, while lower performing organizations rely on standard reports. The executive summary of the of the IBM IBV 2014 Chief Procurement Officer Study provides a wealth of data and recommended actions for procurement organizations. The report can be downloaded from www.ibm.com

Matt McGovern, Market Segment Manager - IBM Procurement and Contract Management Solutions

Matthew McGovern, Market Segment Manager - IBM Procurement and Contract Management Solutions, has more than 15 years of experience in Enterprise Software. Matthew is responsible for product marketing of IBM's Emptoris Procurement software solutions, a suite of supply and contract management solutions which are employed by more than 350 Fortune 1000 and Global 2000 companies. He has been with IBM Emptoris for just under five years focusing on contract management solutions and more recently extending solution coverage to include the entire procurement process.