Category Archives: Market Intelligence

The CPO’s Agenda: A Breadth and Depth to Rival the Pacific!

CPOs are inundated with requests and requirements from all directions on a daily basis. Not only do they have to cut costs to please the C-Suite to keep their jobs, but they have to do so while dealing with constant distress (when shipments are late), disruption (when plants go down or suppliers go bankrupt and the materials or products aren’t coming at all), and dispute (when the supplier wants to be paid for goods that weren’t up to quality standards or arrived damaged).

Plus, they are plagued with requirements from engineering to improve quality and use better raw materials, from marketing to use suppliers that will provide them with brand leverage (either due to the supplier’s brand recognition, such as “Intel Inside”, environmental responsibility, via waste reduction and/or utilization of recycled material, or corporate social responsibility, where the supplier follows fair labour practices and provides compensation and care to its employees above and beyond government mandated minimums in developing countries), and from finance to find suppliers that will either extend DPO or offer early payment discounts just for paying on time. All of this adds cost, and complexity, to the supply chain when Procurement’s prime directive from the C-Suite, which often defines the only metric they are measured on, is cost reduction.

As a result, in addition to having to constantly brush up on their skills, CPOs have a lot to worry about from day to day. That’s why a recent post over on the new Spend Matters Chief Procurement Officer site that asked What is Top of Mind for CPOs delved into the subject and identified what should be the top 20 areas of concern for every CPO (or every head of Procurement doing the job of the CPO without the recognition).

In this post, which is a collaboration between the doctor and Pierre the maverick Mitchell
(who soars through the buzz and the noise until he gets to the truth), we pointed out that, in addition to cost cutting, good CPOs are also highly focussed on:

  • availability and on-time delivery
  • contract management and spend creep
  • environmental stewardship and sustainability
  • quality, reliability, and safety
  • reputation management
  • risk management
  • supplier relationship management
  • working capital optimization

and a dozen other topics of significant concern because if any of these twenty topics are ignored or mismanaged, any identified and negotiated cost savings will disappear in the blink of an eye (and the CPO will be looking for a new job in the blink of the other eye given how unforgiving the shareholders and Board of Directors can be in tight economic times).

The first of these topics, availability and delivery, is addressed in detail in our post on ‘The CPO’s Agenda Part I: Availability and Delivery in a “Hierarchy of Supply”‘ which discusses Supply Assurance and its foundational role in Procurement. Go check it out.

The remaining 19 topics will be addressed over the next couple of months in this ground-breaking new series which will lay each and every topic bare so that you, as an up-and-coming CPO, can understand not only what the topic is and why it is important, but what you have to do to tackle it head-on and make progress while your peers get buried in the avalanche of distresses, disruptions, and disputes that will continue to increase in quantity and complexity until many of these issues are addressed and adequately solved.

Keep a close eye on Spend Matters Chief Procurement Officer in the months to come. This is the first of a number of series that the doctor will be collaborating on in order to help bring you desperately needed education that you won’t get otherwise!

What are a CEOs Top Concerns?

Over on e-Sourcing Forum, Blaine Mathieu, CEO of Selectica, penned a post on the CEO’s Top Three Concerns and How CLM Can Help. CLM (contract Lifecycle Management) and SLM (Sourcing Lifecycle Management) can definitely help with these concerns, but are these really the top three concerns of the CEO, or are they the concerns that should be the top three?

The reality is that the top three concerns of any CEO are:

  • Profit
    We all know that at the end of the day all the Board really cares about is lining the pockets of the shareholders that they answer to. That’s it.
  • Economic Collapse
    Profit requires revenue and revenue requires a reasonably strong economy where consumers are willing to spend.
  • Supply Chain Disruption
    While the reality is that the average CEO doesn’t give a rodent’s behind about the supply chain, because that’s the head of Procurement’s problem, the last thing an average CEO wants to hear about is a disruption that is going to result in a stock-out and lost revenue. The Board won’t be happy, and the CEO’s job could be on the line.

Even though the top-three concerns should be:

  • Value Generation
    Continued profit relies on continued revenue which relies on continued customer demand which requires that customers continue to see value in the products and services the companies offer.
  • Global Expansion
    Individual economies wax and wane, and sometimes connected economies surge and fall with them, but, generally speaking, the economies of entire zones or continents don’t collapse at once.
  • Supply Assurance
    No supply, no product. No product, no fulfillment. No fulfillment, no revenue, even if the organization could provide value to the customer.

As part of these concerns, the CEO should be helping the CPO with:

  • Cost Avoidance
    Forget savings. They are ephemeral and temporary. But reducing demand and avoiding unnecessary cost is permanent.
  • Innovation
    Value requires continued delivery of better products and services, which will often only be identified through innovation.
  • Compliance
    A big part of supply assurance is making sure all local and foreign laws, import and export requirements, and industry regulations are met so that the company isn’t faced with unnecessary disruptions, lawsuits, or government interventions.

which, while not the CEO’s top three concerns, are the top three concerns the CEO should share with the CPO.

You’d Think It Would Be Obvious By Now that You Should Not Poison Your Customer

After the plethora of lawsuits filed in 2008 against Sanlu Group for putting melamine in the milk (or, to be precise, a baby formula that was based on milk) as per this article in the New York Times, against the individuals responsible for importing rip-off toothpaste (that was not manufactured by Colgate) contaminated with diethylene glycol (which is a sweet tasting poison used in anti-freeze and which kills poor defenseless LOLCats), and against Mattel for importing toys coated in deadly lead paint (as per this article from USA Today), you’d think that even if they were run by sociopaths without any ethics whatsoever, corporations focussed on the bottom line would know better than to poison their customers.

However, after reading Pierre the maverick Mitchell’s Friday rant which was “an open call to hotels to NOT poison their customers”, all I have to say is, apparently not!

Maybe they don’t know they’re doing it, or they do but believe that the average customer doesn’t stay often enough or long enough to be exposed to enough toxins to be damaged. Now, this might be the case for the average person who only uses a hotel once or twice a year on vacation, but what about the travelling salesperson or executive who spends more time in hotels than in their own home? How long before BPA builds up to toxic levels in the bloodstream, given that a new study has determined that your body absorbs more BPA than previously thought (rodalenews.com)? If the coffee maker and plastic stir sticks that you use to make your coffee every day leaches BPA, how long before you are sick, whether you realize it or not?
And that’s just the tip of the iceberg! According to Pierre, the non-dairy creamers many hotel chains provide are full of toxins — sodium caseinate, monoglycerides, and diglycerides. We might as well eat glue!

It’s scary. And the worst part is that the cost savings the hotel realizes from buying cheap coffee makers, non-dairy creamers, and other toxic products are negligible. Compared to the revenue a hotel chain can see on a nightly basis from a quality offering that puts them ahead of their peers, a few pennies of savings versus a few dollars in profit is not only negligible, it’s just stupid!

Another Prediction LOLCat Can Get Behind

We all know what LOLCat thinks of futurists and their ideas. (Just see this post.)

But every now and again, someone comes along with an insightful, and true, prediction that LOLCat can get behind.

Earlier this year, LOLCat discovered an amazingly accurate prediction by Peter Smith (of Spend Matters UK) who, as summarized in this post, predicted that all predictions will be wrong.

However, LOLCat recently stumbled upon this great post by Pierre Mitchell who, in LOLCat’s view (and the doctor‘s view), predicted that “2015 Will be the Year of the Chief Buzzword Officer” [Spend Matters].

And it will. If you thought filling up your Buzzword Bingo card was easy last year, just wait and see what this year, the year of Procurement Damnation, brings. (In fact, this will likely be the year that Buzzword-Free Bingo hits the scene. Once your office mates get tired of filling their card before the boss takes his second breath, they will be searching for a game that lasts the entire hot-air filled meeting.)

What do you think LOLCat?

I Win!

The CPO’s Agenda

A CPO has a lot on her mind these days. As per SI’s recent “Future Trends” expose series, the reason that so many ancient trends are being recycled as future trends is because so many issues are still current for Procurement organizations struggling to catch up to the times and become best in class. That’s why we have to continually deal with:

  • Governmental Regulations
  • Globalization
  • Increased Competition
  • Margin Pressure
  • Outsourcing
  • Risk
  • Collaboration
  • Demand Planning
  • Governance
  • Systems
  • System Integration
  • Process Convergence
  • Raw Material Scarcity
  • Strategic Focus
  • Talent
  • Supplier Relationships
  • Product Life Cycles
  • The Cloud
  • Sustainability
  • KPIs

and a dozen more issues that should have been put to rest a decade ago. But which of these issues are the most important issues and which issues are being overlooked by a CPO who is being blindsided by false issues? And which issues are top on the list?

Fortunately for you, this is a question you don’t need to ask anymore. On the new Spend Matters Chief Procurement Officer site, the doctor of Sourcing Innovation and Pierre Mitchell, of Hackett Group and AMR fame, have collaborated on a 20-part series on the “The CPO’s Agenda”, which is overviewed in the preamble post on “What is Top of Mind for CPOs”, that will tell you, as a new or aspiring CPO, what you need to focus on.

And stay tuned to this new, first of its kind site which, for at least the next six months, will be bringing you a cross-blog collaboration between the doctor of Sourcing Innovation and Pierre Mitchell of the Spend Matters Group (with occasional contributions from Thomas Kase and Jason Busch). The new Spend Matters Chief Procurement Officer site is the first of its kind and the education that is coming your way will be unequalled! This is only the first of three in-depth series between the doctor and Pierre Mitchell that are almost ready to roll, with more in the works. Stay tuned!