BVD: Do CEOs have a good enough understanding of procurement?

One area where many chief executive officers (CEOs) have room for improvement is their understanding of the company’s procurement department and exactly what it does, research has suggested.
Management consultancy 4C Associates conducted a survey of more than 500 procurement professionals, nearly half (48 percent) of whom said their boss doesn’t fully grasp what their team does or its full potential.
A slightly higher proportion (55 percent) felt their role was seen as a support function, with a greater emphasis on reducing costs than the possible strategic benefits of good procurement practices.
The research highlighted a number of ways in which the procurement department can contribute to the success of a business, such as improving risk management through stronger supplier relationships.
Discussing the findings, Mark Ellis, partner and procurement transformation specialist at 4C Associates, said the profession has “come a long way” in recent years.
Some organisations now view the procurement department as a key part of commercial strategy, but this is not true of all companies.
“Not all businesses are recognising the true extent to which procurement can add value,” said Mr Ellis. “As the economic climate begins to change, enterprises, which before could thrive by implementing cost leadership models, now need to re-evaluate their offerings.”
4C Associates also stressed that procurement professionals must do a better job of representing themselves and demonstrating how they can add genuine value to the business.
Mr Ellis advised: “Highlight how the department’s risk management programmes minimise the potential impact that a disaster could have on the business bottom line or the added value it can bring to the company’s corporate social responsibility programme.”
In a recent blog post, 4C Associates’ Milan Panchmatia explored the challenges posed by the reverse supply chain. The ongoing growth of online retail has led to a rising rate of product returns, and consumers increasingly expect the same service when they return an item as when they receive one.