Daily Archives: June 1, 2015

Top Procurement Challenge

What is it?

We all know the CPO has a jam-packed agenda. One just has to review What is Top of Mind for CPOs for a list of 20 hot issues that are keeping the CPO up at night. But what is the top CPO challenge?

If you Google Top Procurement Challenge, the top hit is Spend Matters’ post on The Top 5 Challenges for the Chief Procurement Officer, based on an overview of the chief findings of a 2014 survey of European CPOs conducted by Xchanging.

The survey found that the top five challenges affecting those CPOs were:

  • spend creep and cost containment
  • realized savings visibility
  • compliance to contracts
  • technology leverage
  • a lack of deep sourcing or industry expertise in the team

Even though each of these is easily solved by way of an:

  • e-Procurement platform that enforces budgets
  • analytics and reporting platform that regularly produces savings visibility reports
  • contract management platform and procurement platform that enforces rules
  • e-Sourcing technology to support strategic sourcing
  • training, training, and more training

So what’s the problem?

It most likely relates to alignment with Finance (as recently investigated by the maverick, summarized in this recent post on When it Comes to Procurement, Don’t Forget Finance!), and, more specifically their alignment on ROI. As far as Finance is concerned, Procurement systems are IT systems and IT systems cost too much, return too little, and never do what they are supposed to. They don’t understand that it’s not the early noughts where systems cost (close to) seven figures. It’s the teens where the systems barely cost six figures. The systems are not first generation systems with limited functionality. The systems are second, bordering on third, generation with extensive functionality. It’s not the early noughts where it takes months to implement an on-site system. It’s the middle-teens where it takes hours to create a new instance in a true multi-tenant SaaS solution.

Most modern Supply Management Systems — including e-Sourcing, e-Procurement, SRM, and CLM — deliver a return within six months, and some, like Spend Analysis and Decision Optimization, can deliver a return in six weeks. The ROI is there, and is often substantial, but Finance doesn’t always see, or believe it. As a result, Finance doesn’t always support Procurement with the funding they need to acquire the platforms, services, and knowledge they need to not only be effective and efficient at their jobs, but successful. Which is a shame considering how far Procurement success can take an organization.

Which would indicate that the top Procurement challenge might actually be to align Finance and Procurement on the ROI of platforms and processes Procurement wants to implement for the good of the organization.