May 17, 2020

How to become a Chief Procurement Officer (CPO)

sectors/procurement/how-become-chief-procurement-officer-cpo
Freddie Pierce
2 min
Today's CPOs do more than just sign checks.
Like most executive-level jobs, it starts with higher education. To refresh your memory a Chief Procurement Officer is in charge of managing the purch...

Like most executive-level jobs, it starts with higher education.

To refresh your memory a Chief Procurement Officer is in charge of managing the purchases of supplies, equipment, raw materials, and products necessary in manufacturing, office, and retail settings. A CPO has to balance cost-effective spending and service. A CPO manages pending across marketing, travel, information technology, consulting, real estate, security, transportation, but must do so while enhancing customer satisfaction, quality, and on-time delivery.

It’s a job that requires conducting extensive economical research about industry to make procurement decisions. The backgrounds for CPOs usually include a bachelor’s degree in business administration or economics and most of the major CPOs you see today have master’s or doctorates with a detailed background in economics, business management, statistics, math and communications.

Our affiliate site, ExecDigital.com, profiled the top business schools in the United States recently and there are a few schools that stand above the rest in the race to set you up with a job as a CPO.

1. University of Chicago Booth School of Business
2. Harvard University Harvard Business School
3. University of Pennsylvania The Wharton School
4. Northwestern University Kellogg School of Management
5. Stanford University Graduate School of Business

See the full report here: Top US Business Schools 

As bachelor degrees become a norm in today’s society, it will become increasingly more important to enter master’s or doctorate programs to thrive in a vastly competitive job market. While difficult and like it might no seem worth it, a Master’s degree from any one of the aforementioned schools would afford you the luxury of earning $100,000 or more at your first job. If you just go the bachelor degree route, which is completely ok too, then becoming a CPO is a lot more about rising among the ranks of your coworkers. A master’s or doctorate gives you an inside track to front-end executive status.

Another important step, which is applicable to anyone in the Supply Chain industry, is acquiring certification credentials from nationally-recognized business organizations. Hopeful CPOs can take a written exam administered by the Institute for Supply Chain, which can then be leveraged against employers as proof of your knowledge of the procurement process. Most countries have national boards similar to issue similar credentials that the US does.

Whether by school, trade, or accreditation, higher learning is certainly the common denominator among today’s top executives.
 

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Aug 2, 2021

Procurement Outsourcing: Partnering with Outside Experts

Procurement
ProcurementOutsourcing
Supplychain
Sourcing
6 min
To adapt to an unpredictable world, you can transfer specific procurement processes to outside vendors—cutting costs and re-focusing on your core products

In coming years, supply and demand will fluctuate, new technology will change the way procurement teams operate, and skilled workers will be in short supply. Outsourcing procurement is now a priority. Explained John Piatek, GEP Vice President and Thought Leadership Council Chairman: “In the face of wild swings in consumer demand, trade wars, tariffs, and lockdowns...supply chains bent and frequently broke.” Therefore, companies need to know how to recover. 

The Rise of Strategic Procurement 


The pandemic placed procurement on a higher level within business operations. Executive boards that previously overlooked or undersold the value of procurement started to sit procurement managers around the table with strategic advisors to mitigate risks, optimise costs, and drive growth. ‘‘This year has demonstrated the importance of bringing CPOs into C-suite conversations”, explained Jennifer Brown, Principal, Deloitte Consulting. “They bring significant value to the table.” 

Procurement teams now race to find skilled, third-party vendors to provide services they can neither afford nor prioritise. Outsourcing of S2C can give companies access to expertise, capabilities, and scale they may not have in-house,” said Iliana Filyanova, Partner for McKinsey’s Manufacturing & Supply Chain. For example, expert outside firms can analyse market conditions, supply specialised goods such as semiconductors or uniquely designed parts, and help develop a strong IT infrastructure. 

To be clear, if your team can skillfully outsource, a whole new world opens up: you can rapidly adjust to market conditions, scale up when demand spikes, and scale down when dips hit. 

Why Outsource? 


First, you can cut costs. Suppliers in Southeast Asia and other low-cost countries can provide large amounts of materials and products at excellent prices without the political backlash that often accompanies offshoring. But outsourcing has several advantages. When you get specialists on board, you can shorten development times, hire additional staff without having to train them, and digitise your procurement systems thanks to IT experts. 

 

Additional Benefits 

  • Increases focus on core tasks 
  • Provides staff more time to fulfil their priorities 
  • Supplies next-gen technology expertise 
  • Reduces operational costs
  • Helps prevent duplicate payments 

 

These benefits only accrue, however, if your team carefully defines the scope of the operation. When you try to hit the bull’s-eye on a dartboard, you aim directly at the centre. It takes a certain angle, force, and skill. Likewise, procurement teams must figure out what and how much to outsource. Outsourcing still requires spending, and teams will want to get good data before they sign a final contract. In addition, staff members should be on board with the rationale and objectives of the outsourcing project—otherwise, your darts will miss their target. 

How To Successfully Outsource Procurement 


According to McKinsey, teams should focus on three main steps. 

 

  1. Determine which categories to outsource. Focus on non-core business areas. These are any services that support your core product, such as freight and shipping, facilities, and IT infrastructure. 
  2. Select the right metrics. Build supplier scorecards, in which your team decides upon two to three key criteria such as low unit prices, supply chain resilience, and quality of product. 
  3. Partner with the appropriate people. Ask potential firms questions to assess their domain expertise; diversify your search to take in a variety of global organisations, and consider their technical skills—even if you’re not hiring the vendor for IT. 

 

If these focus areas seem too broad, Deloitte recommends a phase-by-phase process.

Deloitte: The Seven Stages of Outsourcing


Starting the Search

First, companies should Assess and Prepare. These steps include defining vendor requirements and starting to engage. In these phases, you may do some background research but not engage with them directly. Web searches can yield initial results, and consultants can also help—especially those who know the strengths and weaknesses of your industry. After you have your list narrowed down, you can produce a strong, detailed RFP.

Naturally, your RFP will attract the relevant suppliers, and you’ll be able to move to Evaluate. If you’ve chosen strong metrics, two to three top vendor proposals should stand out. Be forewarned, Deloitte said: the next part is tricky. Committing, or negotiating your final contracts, will lock you into a potentially multi-year collaboration with a vendor. Take your time: you can deliberate over competing offers, as well as request that additional support be built into the contract. 

Negotiating the Best Deal

Advocate for your best interests! “I moved forward to negotiate with a current contract manufacturer with whom we had an important volume commitment with high prices,” said Elodie Cramer, Associate Director of Biogen. “We were in a single-source situation, with no active alternatives.” She opted to pursue dual sourcing, as well as insist on open vendor discussions. At the conclusion of the talks, she had bartered better terms: 29% lower costs, 75% less volume commitment, and improved vendor quality and service. 

Additionally, teams should discuss details such as how to optimise taxes, meet regulatory compliance, and protect ESG standards. Safety-catch measures like these may seem to extend the outsourcing process, but they’ll ensure that you don’t end up spending more over the long term. Compliance, after all, can drive 30% to 50% of savings, and talking about it upfront is for the best for all concerned. 

Closing the Case

Once you’ve reached acceptable terms, you can Transition, handing the project work and resources over to your vendor, and Optimise, following up to manage and improve the relationship. Don’t forget to dot your i’s and cross your t’s—Deloitte even recommends an end checklist. Sign the contract; create a people transition plan; complete consultations with any oversight committees. After signing the paper with a flourish, you can then rest easily, confident that you’ve followed a strategic outsourcing system. 

Companies To Emulate 

Procter & Gamble, Unilever, Slack, Alibaba, Acer: even major multinational companies seek to outsource specific systems, technical skills, or materials. When Unilever integrated its ERP platforms into a single system, outsourcing saved the company an annual €700 million. Slack outsourced its universally-known colourful design label to MetaLab. Alibaba outsourced to US firms to compete with eBay. Acer outsourced manufacturing to maintain a small, agile team. As a result, these companies improved their international reputations, offset their internal weaknesses, and built strong vendor partnerships. 

As executives increasingly turn to procurement to make their global operations less costly and more resilient, teams that strategically outsource work will stand a better chance of bringing good news to the next management meeting. Said Ryan Flynn, Principal, Deloitte Consulting: “CPOs are uniquely positioned to help their organizations navigate a historically disruptive time and build the agility required to thrive.” 

Yet to do so, they must act with intent. “Successful outsourcing—outsourcing that drives transformation and helps achieve broad strategic goals—requires companies to follow a disciplined process,” wrote Deloitte. In short: Outsourcing initiatives succeed not by luck, but by design. 

 

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