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Supply Chain | May 15, 2012 | CFO Magazine
The Rise and Rise of Procurement
Like CFOs of yore, procurement executives are shedding their
roles as stewards and becoming what their
companies need them to be: strategic thinkers.Josh Hyatt
Look how much youve grown!Finance executives dont actually say
that, of course, but when they talk about their
colleagues in procurement they sometimes sound as if they are
surprised at themselvesfor taking the function so seriously. It
wasnt long ago, after all, that finance executivestended to think
of procurements role as strictly transactional: acquire goods
andservices at the cheapest possible price (locking it in, where
possible) and on the mostfavorable terms. The departments progress
would be measured solely by its ability tocut costs.
But a recent study conducted by CFO Research Services, in
collaboration with Ariba, amaker of collaborative business
software, found that finance executives are well awarethat the
procurement function has matured into making an increasingly
higher-valuecontribution. In the survey of 263 senior finance
executives in North America, Europe,
and Asia, nearly 75% of respondents said that the procurement
function at theircompany had become more strategic minded, rather
than purely tactical ortransaction-focused, as compared with three
years ago (see Getting Serious aboutProcurement at the end of this
article).
Why has procurement begun to take to borrow the phrase of one of
the seven seniorfinance executives we interviewed a more globalized
perspective? The reason isntmuch different from why other corporate
functions, like the CFO, have earned a highercorporate profile in
an increasingly complex economic environment. As business getsmore
complicated and more global, it has added another facet to the
whole issue ofprocurement, says Paul Janicki, CFO of Roquette
America, a producer of carbohydrate-
based products used in food ingredients, pharmaceuticals, and
other industrialapplications. Thats why procurement has become more
strategic; its now no longerjust the means to do business, but also
an area of optimization.
As much as procurements effectiveness especially in a
slow-growing economy depends on understanding and focusing on
shared companywide goals, the functionisnt abandoning its duties as
a fierce cost-cutting function that has a direct impact on
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consisted of people who were not high up in the hierarchy. Back
then, he adds, aprocurement workers job was to look for three
estimates . . . and the one that won wasthe one that always won, so
as not to cause any problems.
And now? Today, if you are doing it right, procurement is much
more of a strategic
tool, says Paul Lehmann, CFO of manufacturer Overhead Door Corp.
And, he mighthave added, the sharper that tool gets, the more
effective it can be.
