The cost of supplier management
Pre-rationalisation, supplier records are usually a minefield of duplication and inconsistency - all contributing to administration costs and inefficiencies. Something as simple as creating a supplier portal could slash as much as 80% off the cost of supplier management, just by automating the appointment and list cleansing process.
For the CPO, this will be the foundation for supplier policing and performance monitoring, generating risk intelligence and an audit trail of adherence to corporate supplier policies. For the CFO it opens up the possibility of driving savings through more efficient, automated supplier relationships - by introducing direct, electronic invoicing, for example, and practically eradicating the cost and inefficiency of manual processes.
A host of further, rapid cost-saving benefits will follow, not least enterprise-wide spend management with the potential for banishing paper-based processes, enabling the real-time visibility of spending status across the organisation and the instant identification of anomalies and inefficiencies.
With automated policies in place, the CFO can drive specialist sourcing with a list of preferred suppliers and pre-negotiated terms in place, taking the Yellow Pages out of the equation and cutting the 'maverick' spender off at the pass by removing their easy option of buying a new PC from the stationery budget.
Contract overruns - widely accepted and taken for granted - could be another target as the CFO wakes up to the benefits of closer alignment with Procurement. Automation will generate timeline reports and trigger alerts that prompt contract managers to review progress well ahead of any unnecessary and costly renewal.
Technology: the primary enabler
Clearly, leading-edge technology is the primary enabler for these shifts in strategy and influence. And here, too, the CFO might need to adjust their attitude towards procurement.
With past involvement in extensive ERP implementation projects, they might consider themselves well versed in procurement technology. But the procurement module lurking dormant in the existing ERP system may not be the optimum choice.
In fact, the status quo is probably a disparate array of systems for managing the various areas of management across the organisation, rather than a specific, best-in-class platform fit for the purpose. What's required instead is a system that extends beyond fragmented supplier relationship management applications to deliver comprehensive spend analytics, derived from tight integration with relevant financial and ERP suites and supporting the arc of the source-to-settle cycle
Such a system will answer both the CFO's need for a mechanism that delivers instant cost saving, a demonstrable ROI and scope for further refinement and the CPO's desire for a vehicle that can drive evolutionary change. Again, though, it will meet their shared objectives.
And it will facilitate the necessary shifts in attitude. Armed with the intelligence generated by the system, the CFO will have a new appreciation of Procurement's strategic value to any spend management project; and the CPO can be more open to the benefits of pragmatism in supporting the CFO's quest for short and long-term efficiency gains.
Together, and united properly for the first time, they can drive the benefits of spend management projects directly to the bottom-line.