Given the significant turbulence affecting the world economy, it's unsurprising that the majority of respondents to Capgemini's latest Global CPO Survey rated the impact of recent economic challenges as being either high or very high impact on their current activities. When asked how the economic downturn was affecting procurement planning, the majority of organizations said it was a challenge to look beyond the short term.

Today, financial issues remain center stage among procurement professionals' top challenges. For many chief procurement officers (CPOs), savings targets have increased dramatically from those that prevailed prior to the economic downturn.

"The main challenge for small and midsized manufacturers in the year ahead will be to manage the increase in demand with capacity, monitoring how much of the uptick is due to inventory replenishment versus customer-driven demand, and matching that with throughput and hiring decisions," Louise O'Sullivan, president and founder of buying consortium Prime Advantage, said last month. "Strategic procurement planning will help with these decisions, and also enable these manufacturers to control costs while rapidly and efficiently responding to new demand."

However, though the CPO plays a vital role in equipping the procurement function to play its part, many continue to face external and internal barriers.

Last year, Accenture polled procurement leadership at companies in a variety of industries across the globe. The consulting firm's findings, highlighted in Painting a Portrait of the Chief Procurement Officer, revealed that while CPOs are gaining greater traction in strategic decision-making, internal constraints are preventing organizations from realizing the true value of the function.

When asked if managing costs was within their control, the majority — 60 percent — said they had only moderate or some control. Just 40 percent of CPOs felt they had complete control.

"This suggests there is still a significant gap between the best-performing procurement organizations (where complete control is seldom an issue) and the majority of procurement organizations," the findings conclude.

Another key challenge CPOs face: addressing organizational barriers.

More than one-fifth of respondents (21 percent) singled out internal barriers as their biggest issue. Only 14 percent of CPOs felt they had complete control to manage organizational barriers, and another 18 percent ranked their control as low or negligible. "This is clearly an issue that can reduce the effectiveness and the impact of the best CPOs," the report stated.

The findings also point to the following as the remaining top concerns of CPOs:

• Attracting and retaining the right talent — Nearly one-fifth of respondents cited talent management as their greatest challenge, though they felt more comfortable in terms of control, with more than three-quarters (79 percent) having complete to moderate control. However, approximately 21 percent felt they had little or no control. Accenture refers to this as "another area of disenfranchisement."
• Supply risk — "Although not as actively sought out as some of the other areas," Accenture says, "14 percent of respondents identified supply risk as their single most important issue." Supply risk along with several other external issues (e.g., supply chain, sustainability, supplier qualification) seems to be of far less concern than some of the more internal problems.

Surprisingly, CPOs feel more in control of supplier-related issues, despite the fact that these remain outside their own organization, than issues they have with their own internal customers.

Nonetheless, in CPO Agenda's latest half-yearly economic climate survey, "an overwhelming majority" (91 percent) of CPOs surveyed across sectors reported that pressure to reduce supply costs "has actually intensified." The U.K.-based international business review says this is "slightly up on the previous survey in November 2009 [...] but down on a year ago."

While it's clear that procurement departments continue to wrestle with the challenges of cutting costs and maintaining supplier viability, it is interesting that "some procurement departments are now beginning to focus on strategies for growth and recovery," according to CPO Agenda. A majority of respondents (58 percent) said they are focusing on strategic supplier relationships rather than simply cutting costs. Approximately 41 percent said they are actually hiring new staff.

Accenture also confirmed the important role procurement excellence plays in helping an organization achieve high performance.

When Accenture asked CPOs to indicate the factors affecting their success as procurement professionals, CPOs were clear and consistent about what constitutes success factors (or, their definition of "what good looks like"):

• Passion (100 percent);
• Perceptions (99 percent); and
• Capability (96 percent).

However, CPOs are hardly satisfied that these priorities are being met.

"Generally CPOs believe they are perceived as effective, though less than 50 percent on each issue consider they are very satisfied," the report stated. Satisfaction scores are lowest when it comes to their success with internal stakeholders and, in particular, the board, where more than one-third is dissatisfied with their share of voice.

"In summary, we could conclude that CPOs know what they need to do, but often feel constrained in their ability to do it," Accenture said.

Clearly, these are areas where CPOs need to pay attention in the future.

Earlier

Purchasing 2009: Unexpected Opportunities

Risk Management a Top CPO Priority

Resources

Global Chief Procurement Officer Survey 2009: Responding to the Challenges of Economic Meltdown
Capgemini, July 30, 2009

Industrial Manufacturers Show Confidence in a Sustained Recovery in 2010
Prime Advantage, May 10, 2010

Painting a Portrait of the Chief Procurement Officer: Career, Challenges and Metrics Behind the Role
Accenture, 2009

A Road Map to High Performance for CPOs
Accenture, 2010

Procurement in Turbulent Times: Creating Opportunity from Economic Adversity
by Kris Timmermans, Jeremy Robinson, Joelle Price and Jasmine Stephenson
Accenture, 2009

Life After the Downturn
by Rima Evans
CPO Agenda, Summer 2010

Procurement Leadership: Dos and Don'ts
by Stephen Wills
CPO Agenda, Spring 2010

Turning the Corner
by Nick Martindale
CPO Agenda, Winter 2009-2010

The 7 Habits of Highly Effective CPOs
by Gerard Chick and Michael Lewis
CPO Agenda, Winter 2009-2010

What Does it Take to Be Chief Procurement Officer?
by editorial staff
Supply Chain Quarterly, May 20, 2010