Results from two recent studies suggest that, although some companies view supply-chain management on a par strategically with other functions, many chief purchasing officers (CPOs) are having a somewhat difficult time talking about supply-chain management to their chief executives.
Nonetheless, executive perceptions of supply-chain management is apparently undergoing a sea change, with 37% of respondents' companies having recently created a chief purchasing position, said Aaron A. Buchko, Bradley University, Peoria, Ill., the author of "The Making of the CPO: The Mobility Patterns of Chief Purchasing Officers." The study was sponsored by the Center for Advanced Purchasing Studies (CAPS), based in Tempe, Ariz.
It used to be that a purchaser could become vice president of purchasing, Buchko said, but was still considered one step below other executives.
But that is changing, Buchko said.
"You're going to see people moving out of the supply-chain area into upper levels of management. The CPO now has a seat at the table, and is given equal weight and equal status [with other officers]," he said.
However, only 3% of CPOs responding to a Deloitte &Touche study reported directly to their chief executive. Lack of direct communication and an inability to discuss supply-chain management issues in terms familiar to the chief executive are major reasons that sourcing and strategic supplier management are not being used by corporations to reduce costs, said David S. Furth, practice area leader for the New York-based consulting firm, at the recent NAPM-New York Purchasing Executives Symposium.
Promoting the supply-management organization to the chief executive is also critical for recognition, Furth said. "You can't neglect the importance of marketing what you do. Work with a business unit to get a win, then advertise it," he said.
This is exactly what one symposium attendee said he did when a new chief executive joined his company three years ago. He promoted purchasing until he, as CPO, became part of the chief executive's staff, he said.
The title of CPO itself is not that important, said Gene Richter, vice president and CPO at IBM Corp., Somers, N.Y., in an earlier interview with EBN. What is critical is that the supply-management function be recognized at a high level for its technical and international complexity, and the large budgets for which it is responsible, he said.
Contrary to what one might suppose, the CAPS study indicates most CPOs have spent much of their careers outside purchasing, gaining the multifunctional background needed to manage a complex supply chain.
"The purchasing and supply-chain functions are significantly changing. Companies are now trying to use the supply chain as a strategic weapon," Buchko said.
"Purchasers used to be administrators. Now companies need people who understand business needs and the supply chain's value within the system," he said.
To understand how purchasing affects a company's operations, potential CPOs must be exposed to all facets of the organization, Buchko said. For instance, employees must work in marketing, to understand the customer; in operations, to understand how the purchasing function can augment the company's operations; and in finance, to understand how purchasing can generate positive returns, he said.
"You've got to spend time in the function to develop that hands-on knowledge of how the function works. You can't go to a training program to get it," Buchko said.
When a company hires from outside, it seeks a career purchaser with top technical skills, Buchko said. On the other hand, when a company promotes from within, it chooses someone with broad knowledge across functional areas.
The Deloitte &Touche study found that about 25% of new CPOs responding had entered purchasing from another discipline, perhaps because purchasers with a traditional background don't have the required skills, Furth said. However, it could also mean that executives believe that purchasers think transactionally, not strategically, as required today.