Chief procurement officers (CPOs) create an organization to manage the business at hand. Most procurement teams are built on a foundation of category management which involves strategically organizing procurement activities into categories, such as goods or services. Historically, this approach has allowed businesses to optimize procurement efficiency and create deep expertise in important areas.
But with the pace of change in business today, it’s easy to wind up with an organization of great professionals who have the wrong expertise. A person who is excellent at managing printed material may not have the expertise in a new category if the business strategy changes to online marketing, for instance. Where technology and remote work policies have enabled drastic reductions in business travel, how will the travel manager pivot?
Add a few trends additional trends including:
- Increasing reliance on third-party partnerships requiring expertise in negotiating global agreements
- Increasing technology spend requiring a comfort with IT that is often hard to find in procurement professionals
- A desire/pressure to test generative AI (GenAI) and other digital technologies
- Continued constraints on headcount
Amid all these changes, the category management foundation is getting some cracks.
The new year — with new goals, new budgets, and fresh outlooks — provides a great opportunity for a CPO to be bold. Here are six concreate ideas on how to change things up and take a huge leap forward in what you can deliver:
- Adjust your team’s strategy so that it clearly draws from those of the business. You likely have cost reduction as a top priority from your CFO, but the business will also have growth objectives. Make sure your strategy isn’t too inward-looking.
- Identify the critical spends in your business. Not the largest spends, but the ones where inhouse expertise and close supplier relationships provide a competitive advantage. Note that these are not necessarily your largest spends.
- Ensure that you have the best people you can find managing those critical categories.
- For everything else, look for a way to get it done through a business partner. For example, Group Purchasing Organizations are a great vehicle for managing noncritical spend. Think of it this way: The critical spend for GPOs are the spends that are non-critical for you. They have the category management expertise; you don’t need to duplicate it. You need someone with good business skills to manage the relationship, then leverage the heck out of it.
- Make room for a blend of permanent and temporary employees. As openings occur, either organically or because you’ve moved/eliminated work, consider adding contract employees with expertise that supports important corporate projects or allows you to take a step forward in digitization/process improvement. Someone with fresh experience can help train those individuals impacted by changing demand, and when the need for that expertise has been fulfilled, you can swap for someone who can cover the next set of initiatives.
- Experiment with GenAI. GenAI can speed up supplier discovery, contract development and analysis, RFP generation, and more, enabling procurement professionals to support more strategic initiatives at a faster rate.
A few years ago, I did a consulting project at a Fortune 10 company. They analyzed their technology spend and realized that they virtually always approved requests for certain hardware and peripherals. So they stopped the requisition/approval process and made those items available to anyone who identified a need. The creative thinking allowed their procurement team to focus their energy on the projects that really mattered — which did not include procuring laptops and monitors.
By working smarter and more creatively, you will inevitably free up some headcount. Be thoughtful and strategic on how you use it, and 2024 can be the year in which procurement takes a huge leap in what and how it delivers.