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You've got the best sourcing professionals - but do you get the results?

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"Our Group CPO and all other CPOs in the company all make great contracted savings and the incentive structure in our sourcing function reflects this." claimed the Head of Strategic Development for Sourcing & Procurement in a global company...


Not too many years ago I met with the Head of Strategic Development for Sourcing & Procurement in a global company, a market leader in its industry.

Early on in our meeting he claimed frankly that his company has the best sourcing professionals, working out the best sourcing activities, and contracted savings in his industry.

And I believe him! The company is actually renowned worldwide as being one of the best schools for sourcing professionals.

He continued "Our Group CPO and all other CPOs in the company all make great contracted savings and the incentive structure in our sourcing function reflects this."

And then he went on - "But!.. We don't see these savings translating into bottom line results. It has actually come so far that our Group CPO and Group CFO are in a continuous disagreement about the outcome of our sourcing success. Therefore we have even installed a new role in our company - The Procurement CFO, in order to start measuring what really is the outcome end-to-end in our Source to Pay process. At least we must start knowing how big our leakage between contracted savings and operational savings results really is."

I do agree with the Head of Strategic Development. It is important to know how big the difference between sourcing savings and operational procurement results really is. That is a great start. But it is far from complete.

The challenge is to make the S2P orchestra play in harmony. In parallel, companies are managing captive and outsourced resources as part of their Sourcing & Procurement and Finance & Accounting organizations. They are also leveraging investments in technology, robotics, and process automation.

Of course the above provide opportunity to increase Spend Under Management at a much lower cost and with much higher efficiency. But what is it that really makes the difference?

How well and efficient companies can execute and realize their savings potential is what makes the difference. With a holistic S2P approach we can transform sourcing opportunities into bottom line results, pleasing both CFO, CPO, and probably the Board of Directors in any company.

What are your thoughts? Leave a comment below!


Comments

I agree completely as most of us record only the contracted savings and do not look at realized savings.. The gap will really highlight a number of opportunities as well

Nice article Niklas..keep writing !

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