Once again, we find that the #1 priority placed on CPOs is cost savings capture. In the recent release of Aberdeen’s CPO AGENDA FOR 2012, 75% of all survey respondents said that top-down pressure to cut costs was the top priority.
With this continual pressure to cut costs as the perennial top priority, CFOs and CPOs need to become best friends.
Cutting cost is the top CPO priority? This is not surprising. With competitive pressures and economic issues continually pounding on companies, it is no wonder that this would be the priority for every CFO. However, the surprising statistic is that despite all the hard work and good things that the purchasing staffs accomplish, the average company only recognizes 25% of the negotiated potential savings with preferred vendors!
In our work with customers at CCP Global, we typically see 5-10% savings that result from the sourcing processes conducted by Purchasing. If only 25% of negotiated contracts are used by a company’s employees, your organization is leaving a lot of “hard savings” left untouched. Thats right! YOUR organization. We see this all the time when investigating savings capture opportunities with clients.
CFOs should take more accountability for this opportunity savings. It is not just a CPO issue. “Maverick spending” can occur anywhere in the company. Many times, the employees that are requesting items to be purchased do not have easy access to the right data to know who the preferred vendors are. Despite the sophistication of the traditional ERP systems, many of the systems are just not user friendly.
The old model of initiating a requisition in purchasing doesn’t take advantage of the ease-of-use that the leading SaaS technologies now offer. Older ERP technologies require weeks of training to use and are not intuitive for employees that have not gone through the training. Employees want to use tools at the office that are as easy as shopping at home on Amazon.com or Google.com.
This is the key to reducing “maverick spending”! CFOs need to empower the employees with tools that are as modern as what they use at home. High user adoption will drive more spending through the SaaS tools and provide both the CFO and the CPO with significantly greater, “real-time” visibility to spending.
We are now back to “you can’t control what you can’t see”. CFOs have the power to influence the IT and Purchasing organizations to adopt these SaaS tools. The choice delivers a high ROI, fast payback technology and will bring cost savings to a reality very quickly.