Complexity is a fact of life in business today. Globalisation, competition, regulation and pressure for organisations to be socially and environmentally responsible are just some of the factors that are making the lives of managers and business leaders ever more challenging.
Managing complexity is a central theme running through this issue of CPO Agenda. Take organisational design, for instance. As large companies become bigger and more geographically dispersed, so the task of co-ordinating their buying power and practices becomes more complex. No longer, argues consultant Jon Hughes, is a simple decentralisation versus centralisation debate helpful in addressing this problem. Instead, building a global procurement operation requires a more subtle and systematic approach.
Demonstrating the value created by such a function – and the personal performance of the CPO who leads it – also necessitates a lot more than the familiar, inward-looking measures of old, suggests academic Sir Andrew Likierman. Increasingly, he says, CPOs need to be comparing themselves not against plans or budgets, or even with what other senior managers are achieving, but against “what is possible”. That means constantly searching for best practices outside the organisation.
Looking beyond functional excellence and out into the stakeholder and supplier communities is also the message in Hugh Baker and Fabrice Saporito’s article. With many companies finding top-line growth elusive, they are devising more complex business models both to generate revenue and to tackle costs. “Traditional supply models are changing,” they write, “and they require more sophisticated skills on the part of procurement.”
Low-cost country sourcing has been one of the main responses to this. Yet, as MIT professor Yossi Sheffi explains, longer supply chains can mean greater risk of disruption. Designing “resilience” into the supply network to ensure that the company is able to bounce back quickly in the event of either a natural or a man-made disaster is a defining characteristic of leading organisations.
This is something that Royal Dutch Shell knows only too well. With world oil prices hovering around $60 a barrel, minimising production stoppages, such as those caused by hurricanes Katrina and Rita in the US during the summer, is at the top of Shell’s procurement agenda, says its CPO, Kees Linse.
Another aspect of complexity it faces is managing the plethora of local suppliers in the 140 countries where it operates. For Uwe Schulte at Unilever, another Anglo-Dutch multinational, the burden of evaluating all of these to satisfy corporate responsibility demands is near breaking point. Global supplier assurance standards are now urgently needed to help procurement professionals cope with this growing challenge.
Geraint John
geraint.john@cpoagenda.com
