CFO View of Procurement: - Sponsored Whitepaper

CFO View of Procurement:
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U ncertainty, slower revenue growth, and lower profit margins caused by higher interest rates and commodity-driven inflation will place greater demands on both Finance and Purchasing to control costs. Despite the advancement of the pur- chasing function and executive support of procurement policies and procedures, CFOs see broader business limitations that must be addressed to ensure the enterprise- wide procurement activities are established as key contributors to corporate competitive- ness. This report provides insights into procurement, its strengths, and weaknesses from the viewpoint of finance managers.

Issues At Hand CFOs acknowledge the increased influence of procurement over the past five years, and most see it as a growing contributor to corporate competitiveness. CFOs and CPOs (chief purchasing officers) agree on the priorities for procurement going forward. Initiatives that directly manage supply availability, transportation/logistics costs and escalating commodity prices are areas where procurement should play a leading role. Business model changes are areas in which procurement must have “some role” and actively sup- port the line-of-business managers. These initiatives include evaluating outsourcing make/buy decisions, improving cash flow, complying with new regulatory requirements, and manage sales, general and administrative cost. Finance managers surveyed indicate that procurement's current skill-set strengths lie in their negotiation and contracting capabilities. But the weaknesses ─ costing, project management and process innovation ─ are indicators of the enterprise-wide limitation of the procurement program.

Key Business Value Findings No surprise, the CFO's real concern is getting savings to the bottom line. Financial man- agers estimate that 34% of projected procurement savings, on average, getting booked is dramatically lower than the 75% to 80% savings capture rate being reported by sourcing managers.

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Figure i: Estimated Percent of Projected Procurement Savings Booked
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