Gone are the days where procurement professionals and their Chief Procurement Officers (CPOs) could focus only on the core functions. To be heard in the higher reaches of the organisation, CPOs need to be thinking outside of their departmental box and investing in collaboration and innovation.

The previous IBM CPO study established that procurement significantly contributes to overall enterprise value and competitive advantage. This has been followed up with 2014’s ‘The journey to value’ examination of the characteristics and priorities of successful and impactful CPOs. The study surveyed over 1,000 procurement executives across 18 industries and three continents. All of them work for companies with annual revenues over US$1billion.

Looking at both ends of the spectrum

To pinpoint the differences between top-performing procurement functions and their less-exceptional counterparts, the survey ranked organisations in terms of their revenue growth and profit improvement. The top 10% were deemed ‘procurement role models’, and the bottom group ‘underperformers’.

This differentiation allowed each group’s cumulative responses to be compared and contrasted. Beyond the standard and expected functions of procurement departments, the characteristics and priorities that contribute most to procurement performance and impact were revealed.

What makes a procurement role model?

The areas in which the variance in response between the two groups was most apparent were:

• The focus on Enterprise success rather than purely procurement performance
• The engagement with stakeholders – both internal and external
• The willingness to adopt progressive procurement practices

Where these three areas are given most prominence, procurement functions not only perform more effectively, but they also bring value to the entire company.

A strategic outlook

The survey’s executive report interprets from its findings that procurement role models ‘are more likely to embrace priorities that serve more strategic enterprise objectives’. Specifically, CPOs in high-performing organisations saw the introduction of innovation from suppliers and other sources as particularly crucial in improving the way the business operates.

Performance Role Models were also found to place higher significance upon growing revenue and increasing competitive advantage. They focused on organisational measures of performance rather than just departmental ones.

Making effective connections

The survey found that procurement has a tendency to be more effective when better-connected to other internal departments. Stakeholders and end users’ needs and opinions are valued by those in the Procurement Role Models group.

As well as connectivity inside the organisation, a greater weight is placed upon external relations by CPOs at top-performers. From their responses, it was evident that supplier meetings were more frequent and there was an active interest in new products, solutions and extensions.

Towards progressive procurement

It seems that under-performers are more likely to focus on squeezing value out of existing processes and frameworks, using traditional methods. Procurement Role Models, however, value the potential for technologies to improve supplier management, streamline procurement processes and provide meaningful insights to assist in planning and decision-making.

Further to this, the report highlights that successful procurement teams tend to be taking advantage of tools that automate aspects of the process. The figures show that CPOs in these companies have been quick to implement social collaboration, automated vendor evalutation and workflow-based technologies.

A seat at the top table?

Although the survey is obviously broad in scope and detailed in its analysis, the subsequent report is keen to hammer home the benefits of adopting these advanced procurement tools and approaches. Ultimately, a strategically-minded, collaborative and forward-thinking procurement department is more likely to have a say in wider organisational matters.