In part 1 of this blog series we talked about how the role of the CPO and CFO are changing, what caused these changes and why these 2 strategic function should work together for better business outcomes. In this blog we will look at how this collaboration can set the scene for a more strategic procurement function.
1. Encompass procurement in strategic planning
CPOs and CFOs should work together to create a procurement performance plan, with achievable targets for the teams involved. As CPOs are in a strong position to influence suppliers’ decisions, they should also provide strategic insights to the CFOs about the potential of available suppliers. This is just a simple example of procurement being taken away from traditional savings-related activities and the innovative approach of offering more attention to performance and innovations.
Procurement teams really need to be involved in the early phases of the strategic planning for the business, so that we can talk about a strategic procurement function. If all the members know which are their responsibilities and which are the business’ main goals, then CPOs can work from there to align their KPIs with CFOs.
2. Use of technology for cost saving opportunities
Finding cost-saving opportunities has been for a long time one of the top priorities for companies. As both CFOs and CPOs are using a variety of new technologies, they have now access to advanced systems which can easily support their cost-savings efforts. In doing so, an important aspect in maintaining a good relationship between these two is that CFOs need to be supportive about investments in modern technologies which are needed by procurement teams to implement their strategic processes.
Handling procurement processes in a strategic manner requires technology investments. But the benefits are not only seen in procurement teams’ performance but will also help finance leaders with useful data which influences their financial processes. New technologies help monitor performance in easier and faster ways and e-procurement systems are enabling new opportunities for cost savings.
3. Collaborate to develop a balanced approach. Communication and engagement
Communication is key. The above-mentioned actions wouldn’t succeed in any way unless there is a healthy line of communication between the CPO and the CFO. They need to collaborate so that they achieve their strategic action plan, and this includes continuous communication, transparency, and a high level of engagement.
Be aware of what goes on in every area of the business , especially procurement, to better plan and avoid bottlenecks. Knowing all this information CFOs can better redirect and transfer the required levels of investment and support to each function, depending on the needs, market evolution, and business goals.
With an honest collaboration, the CPO and CFO can bring together threads from across many departments, identifying ways to improve the everyday functionality of other units, not just their own, so it should be a relationship that the whole organisation encourages.
To summarise all of the above, when talking about the relationship between the CPO and the CFO, collaboration is vital for progress on both sides: it helps finance make strategic decisions and it helps procurement on its journey to digital transformation by being more efficient.