“When the CPO and procurement team participate in every critical stage of a product’s evolution – from concept development and the award of supplier contracts to the start of production and through the end of production – they can significantly lower costs and ensure that the company benefits from the accumulated knowledge and expertise of suppliers in a way that generates value across five other sources of competitive advantage: innovation, quality, sustainability, speed, and risk reduction.”
- Profit from the Source, p. 70
Having worked in and around procurement for the last (almost) twenty years, I see most news stories through the lens of the supply chain. I think this practice has gotten more pronounced after two years of supply chains in the headlines and above the fold.
But do Chief Executive Officers think about procurement? Maybe. And if they do, they are definitely not thinking about their suppliers nearly as often as they should.
Profit from the Source: Transforming Your Business by Putting Suppliers at the Core by Christian Schuh, Dr. Wolfgang Schnellbacher, Alenka Triplat, and Daniel Weise (all members of consulting firm BCG), makes the case for why CEOs need to involve procurement more often and personally engage with strategic suppliers.
As Dr. Wolfgang Schnellbächer said in a recent interview with Philip Ideson on the Art of Procurement podcast, “The typical CEO spends seven minutes a day thinking about procurement or suppliers. We need these CEOs to spend hours in meetings with core suppliers, thinking about how they can best generate value and build a personal relationship.”
The book is divided into three sections, each of which emphasizes a different kind of change:
Each chapter ends with a set of notes for the CEO related to the content in that chapter. Assuming these ideas need to be introduced to the CEO by procurement, this book becomes less a reading assignment for him or her and more a roadmap for the concepts and strategies that procurement should advocate for. These bulleted lists can be used as talking points, contextualized for a specific situation, spend category, or supplier.
Even given the amount of time I spend thinking about procurement, there were a few real-world examples that made me stop and think. These companies and circumstances raise interesting questions about the role procurement is in currently and whether corporate habits are keeping us away from the spend that would give us the best opportunity to throw off outdated notions about what we can achieve.
Apple – and as of July 12th, Peloton: Because tech companies usually design what they sell but do not produce it, suppliers are even more important to financial stability and operational health. And while dependence on a (complex global) supply chain reduces a CEO’s ability to drive change quickly, it should elevate the importance and influence of procurement. But does it?
SpaceX: It is hard not to be impressed with what SpaceX has achieved as a supply partner to NASA. We’ve come to expect private companies to out-innovate the public sector. But the way this particular supply relationship was represented in the book, I could not help but wonder if the negative PR (and of course responsibility for the loss of life) associated with the space shuttle Columbia disaster wasn’t behind NASA’s decision to partner with a private company. I suspect that shared responsibility was evaluated alongside capabilities and cost effectiveness.
And back to Apple: I’m familiar with Apple’s history with different microprocessor companies, but as with the SpaceX/NASA partnership, I don’t think I had considered their relationship with Taiwan Semiconductor Manufacturing Company (TSMC) in quite the same light before. For instance, although the mutterings have quieted down, the world was watching China in the early days of Russia’s invasion of Ukraine. Would they make a move on Taiwan? If they do, Apple is in serious trouble (along with the rest of us).
In addition to plenty of examples from real companies, the authors offer valuable advice like avoiding “procurement language” when speaking with the C-suite because of the impact it can have on agency and impact and emphasizing “profitable growth” over savings.
If you would like to hear more from authors Daniel Weise and Wolfgang Schnellbacher in their own words, listen to their recent interview on the Art of Procurement podcast (available on July 18, 2022).
When you subscribe to the blog, we will send you an e-mail when there are new updates on the site so you wouldn't miss them.