Insights & Ideas

Three questions a CPO should be able to answer

This is a guest post from Pierre Laprée, co-presenter of the recent webinar  How to build a sourcing pipeline through forward -looking spend visibility . A former Procurement Director turned entrepreneur. Founder of Per Angusta, a SaaS solution that help CPOs manage their sourcing pipeline, track their savings and make them visible.

 

Your life, as a CPO, is made of a lot of exciting challenges and rewards. Be it collaborating with suppliers to devise new, innovative solutions or shaping the right requirements with your stakeholder to serve, and ultimately improve, the business.

Unfortunately there can be awkward moments; seemingly easy questions that leave you silent because you don't know or can't give the answer instantly. Why? It is usually because you don't have the data or tools available.

Let's look at 3 of these questions, who may ask them and why it's important to be able to give an instant answer with some hints on achieving it.

How much do we spend with supplier “X”?

Who may ask? Any C-Level Officer. For example, the Chief Sales Officer before a negotiation meeting with a client that also happens to be a supplier.

Why is it important? When your Chief of Sales asks you this question, it will generally be right before a meeting and of course, they need an answer NOW to know whether they are in a strong or weak negotiating position (note: we're not discussing whether taking cross business into account is a good thing or not, we're just saying that this happens).

How can you be prepared? The challenge is not so much to extract an ABC list from your ERP(s) - although if you have 10 ERPs in 10 countries this could be an issue. The real challenge is to make sure the data makes sense. 

For example: How can you be sure that you are not forgetting half the spend because part of your spend has been recorded with supplier HAL and the other with supplier Heuristic Algorithmic Computer (who happen to be the same company)? With large multinational organizations, it becomes even trickier.

How do you ensure you can capture spend of the whole group, even if the names are different in one country or the other? These are major challenges that a lot of CPO’s are struggling with. There is unfortunately no silver bullet: investing in data quality (and maintenance) is paramount to the job we do. So make sure this is treated as a priority.

What savings will you deliver by end of the year / next year?

Who may ask? Your Chief Financial Officer.

Why is it important? There is a significant chance that the CFO is your boss. This alone is a good enough reason to answer promptly. More importantly, the CFO constantly needs to keep costs under control or arbitrate investment decisions. To do that, they need to know the room Procurement can give them to manoeuver.

How can you be prepared? We're not talking here about what you've already done. The answer is not in your books or your historical spend data. It's in your pipeline, if you have one. The only way to be prepared is to manage your action plan methodically. What events are you working on this year? When are they planned? What is their status? More importantly, what is their (up-to-date) savings potential? Armed with this information it becomes easy-as-pie to tell your CFO how much you should deliver and the opportunities to do more.

How can you help me with my budget?

Who may ask? Any budget holder, in particular when economic conditions are tough.

Why is it important? Your stakeholders are often stuck between a rock and a hard place. They have their objectives to meet but they are also constantly nagged by the CFO to reduce their budget. In this context they may want to come to you for help. Helping your CMO maintain his TV campaign, even though the CFO mandated a 15% budget cut across the board, will surely buy you an ally.

How can you be prepared? This is mostly a communication exercise, for which you need data. This is because you need to "sell" your help to the CMO by explaining how you will cut costs without endangering the relationship with suppliers or lowering the quality, how you will help with requirements to buy what's actually needed and so on and so forth. To do that, you need data and hard evidence that you've done it in the past for others and that it has worked. For that, you need to keep a history of your past events such as what you achieved, how you achieved it and the fact that your stakeholder was happy and validated your numbers.

 

These are 3 of the most common questions I’ve been asked. What are the questions you get constantly asked… and what do you do to answer them promptly?

Share your story with @rosslynbi and @per_angusta on twitter!

 

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