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Procurement and its credibility in the boardroom

The movement in Australian organisations to deliver “more for less” and reduce risk is really starting to register on the radar within boardrooms.

The introduction of the Chief Procurement Officer (CPO) to many management structures around Australia, both in the public and private sector, is well underway and I believe it is a crucial step to build credibility of the procurement process with the Board.

From experience I have gained around the world many CPOs make claims about the savings they have achieved or the risk mitigation put in place, but fail to provide the evidence.

The board reporting pack may not highlight the huge benefits the procurement team bring to the organisation and any CPO standing up at the boardroom meeting to claim the benefits with sketchy anecdotal evidence will soon lose credibility.

All too often I have heard boardrooms complaining that the claimed benefits from procurement are just not visible. Statements like:

“You claim a level of savings but we are yet to see this in our net profit – why?”

“Our production levels appear to be less hampered by late delivery – but by how much?”

“We are less exposed to risk – but by how much?”

It is absolutely essential that proper spend analysis which backs up the procurement ROI, whether in savings or improvement efficiencies, is carried out and shared. Otherwise you are not credible with the board, internal or external stakeholders and especially not with the CFO and the finance department.

Spend transparency is critical to any organisation, as without rock solid spend and performance figures which are embraced and trusted within your organisation, the traction of procurement will be limited – or worse, not believed. Even though the statements may be true, this will not only affect the credibility of CPOs but also the profession of procurement across Australia.

The level of accurate information is vast, and at times complex, including demand, volume, currency fluctuation, cashflow impact, contract performance, and so on.

The problem for the CPO is being able to deliver consistent and useful information with the resources he has, and this can seem insurmountable.

The excellent news is that there are answers to the CPO and the procurement team’s problem!

Obviously if you are implementing a best-in-class solution for procurement (Proactis for example), the majority of these software solutions have the tools to make any of the organisational data visible and consistent. Now I can hear you say: your organisation sells one of those so you would say that! But it is true that data visibility is brilliant in a solution designed specifically for procurement, both in terms of KPIs and reporting.

For those using an ERP, multiple ERP systems or perhaps even a mishmash of solutions to capture you data, there is also a solution. I can almost hear the gasps. . .

Yes it does exist; it is relatively quick, easy and cost effective to implement. It comes in the form of one of the in-memory data visualisations tools out there in the market (Qlikview for example) which enables you to traverse your back office applications and pull data in to form one picture of the truth.

No need to build complex data warehouses that take years and millions of dollars. Taking this route you can be up and running in weeks or months for at least the key information you require.

In building your credibility as a CPO and your team within an organisation it is not only about achieving the great results you and your team know you are delivering, but also to communicate this effectively with all stakeholders.

Proper spend analysis is critical to ensure that stakeholders have accurate information that highlights the fantastic job and benefits the CPO is delivering; and secondly it provides them with information that helps stakeholders make sensible decisions.

Let the figures speak for themselves!

Scott Graham

Scott Graham

Scott is the Director of Kinetic Information Systems, an Australian specialist software and services company. Kinetic are a company that are focused on solutions to organisational problems using best-in-class software. Taking time to understand your problems understand what you want and what you are trying to deliver, we offer practical solutions and employ structured methods to deliver those solutions on time and on budget. Kinetic help clients identify business value, manage risk and realise higher levels of success from their programmes and initiatives. We specialise in eProcurement, Business Intelligence and ERP solutions. You can connect with Scott via his <a href="http://www.linkedin.com/in/scottgrahamkinetic">LinkedIn profile</a> or <a href="http://www.kineticis.com.au">website</a>.

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