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Why CPOs are gaining a more strategic role

by | January 26, 2023

The role of the Chief Procurement Officer (CPO) has evolved over time. CPO is no longer a functional role. It is a strategic advisor who helps to shape the business, particularly during difficult times. As we mentioned in our previous blog, one of the trends we see continuing to emerge this year is the shift to a more strategic role for CPOs.

The pandemic revealed flaws in business processes, policies, supply chains, and resilience. As a result, CPOs must focus on driving technological innovation to improve supply chain reliability, transparency, and efficiency.

Furthermore, in order to make CPO a strategic role, businesses must invest in technological advancements. New technologies reduce the amount of time spent on routine tasks. As a result, CPOs can concentrate on strategic activities such as risk mitigation.

The last two years have demonstrated the importance of CPOs raising their game. CPOs must encourage businesses to focus more on creating value-added activities that create opportunities for business growth.

So, how will the CPO role look in the near future? Here are a few predictions when it comes to the following areas: strategising, globalisation, compensation, compliance, and communication. 

  1. CPOs will become explicit partners in developing bottom-line and top-line strategies. CFOs typically deal with financial data after the results have been posted. In contrast, the CPO can influence a company’s cost-cutting decisions in the middle of the process rather than after the fact. As more of the organisation recognises the CPO’s perspective, they will come to rely on that office for strategic realignment recommendations and will be more likely to collaborate with the CPO throughout the year. 
  1. As companies expand globally, CPOs will adopt a more global mindset as well. While the CFO works to create a favorable tax framework, the CPO must be aware of the constraints such frameworks can impose on receiving and distributing goods, as well as the taxation laws that apply to services. Furthermore, cyber security will remain a top priority for the CPO, as will all types of risks that the company faces such as big data.
  1. With these changes, the role of the CPO, which will now report directly to the CEO (rather than one, two, or three tiers below), will have a compensation package that reflects this change. In world-class organisations, seven-figure incomes consistent with CFO ranges will be the norm. The income will follow the depth and breadth of the CPO’s reach within the organisation, as well as the ability to drive long-term sustainable change.
  1. Compliance will be or will have to be a top priority, depending on where the balance of power swings in the next years. With the implementation of new rules and regulations, it will be critical for the CPO of the future to support corporate social responsibility (CSR) initiatives that can result in the abolition of abuse in their supply chain. The CPO’s office will support sustainability and can deal with second and third-tier cyber security threats. As a result, contracts may look very different than they do now, and the CPO’s ability to monitor compliance with new standards to support these initiatives will be critical.
  1. As a strategic leader, the CPO must have excellent communication skills and the ability to sell their concepts and deliverables up, down, and across the organization. The CPO must be a skilled financial analyst and be able to discuss the business imperative of initiatives with people at all levels of the organization. The ability of the CPO to translate their strategic plans into impact for shareholders and internal business units will be critical. The CPO will also need to digest, decipher, and understand each business unit’s plans in order to deliver supply chain initiatives that support those plans.

The need for CPOs to help steer the business has certainly been demonstrated in recent years. Linear procurement models must be replaced by agile supply chain networks, and businesses must quickly implement new digital solutions to increase transparency, automation, and predictive capabilities. CPOs must encourage companies to focus less on low-value and repetitive tasks and more on value-added activities that add value to the overall business. 

CPOs can help their companies evolve into intelligent enterprises by leveraging digital technologies to make processes faster, more agile, and more efficient.