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Organisations that are using decentralised procurement models because of their rapid growth, merger and acquisition activity, and so on may face the following challenges:
· use of the same suppliers in different departments or business units; · non-standard terms and conditions in supplier contracts; · too many suppliers used for the provision of the same category of product or service; · missed opportunities to leverage the organisation’s power in negotiations. In decentralised structures, the lack of central or co-ordinated accountability makes the documentation of procurement processes necessary for the adoption of consistent practices across the organisation. However, our survey results suggest that these types of organisations actually have less structure around their procurement policies and processes than those that are centralised. The procurement director of a group of consumer products companies highlighted the need for “ increasing the spend that is managed by the central procurement function and the synergies between the companies in the group ”. He continued by saying that “ pockets of good management should be shared between the various business units and the ones that have recently been acquired ”. Accountability in procurement The facilitating and guardian role of procurement is typically represented by an individual who has overall accountability for the procurement of products and services. Six out of 10 organisations have appointed a chief procurement officer (CPO) to undertake this role. In the absence of a dedicated role for managing the procurement and supply chain function, this role is fulfilled by COOs (10%), heads of departments / business units (9.1%) or CEOs (9.1%). For only 2.7% of the respondents is accountability not clearly defined.
Figure 6: WHO IN YOUR ORGANISATION IS ULTIMATELY RESPONSIBLE FOR PROCURING THIRD-PARTY PRODUCTS AND SERVICES?
Chief Procurement Officer (CPO) Chief Operating Officer (COO) Head of Departments / Business Units
60%
10%
9.1%
Other Procurement Committee Not clearly specified Chief Executive Officer (CEO) Chief Financial Officer (CFO)
9.1%
4.5%
2.7%
2.7%
1.8%
0
10%
20%
30%
40%
50%
60%
We didn’t find any significant correlation between the size of the organisation and the accountability of procurement, other than the fact that in smaller organisations (less than € 100m turnover) the CEO is twice as likely to be ultimately accountable for procurement as in larger organisations. Accountability, whether in the form of a part-time or full-time role, is crucial in ensuring that procurement governance exists and is monitored for compliance. In many cases, the existence of a CPO role is an indication of the focus that is given to procurement in an organisation or the size of spend that has to be managed (so that it necessities a dedicated
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