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Procurement & Finance: Why Can’t We All Just Get Along?

Getting chief procurement officers (CPOs) and chief financial officers (CFOs) working from the same playbook can take some effort, but the rewards that come from the heightened levels of collaboration can be significant.

Business is a team sport. And just as with different sports, developing a solid game plan that encourages various departments to act with a purpose—rather than just constantly “reacting” and putting out fires as they surface—is the first step toward a winning outcome. In the sports world, achieving positive outcomes on a consistent basis takes a common playbook. The idea is simple: When everyone is using and working from the same playbook, teams score more, win more, and work together cohesively for the greater good of the team.

The same rules apply in the business world, where the collaboration between procurement and finance is crucial as companies seek out more cost savings and strategic procurement capabilities. Finance plays an important role in both missions, but when the relationship between these two critical departments is strained, lacking in trust, and characterized by “transactional” alliances (versus strategic ones), organizations miss out on significant value and benefits.

“It has become increasingly clear that, for an enterprise to achieve operational excellence within both its procurement and finance operations, the CPO and CFO must enjoy the benefits of a healthy inter-departmental partnership and achieve alignment on cash management, savings, and P2P performance,” CPO Rising points out in Five Ways to Improve the CPO-CFO Relationship.

Streamlining the Supply Chain

By bridging the gaps that exist between purchasing and finance, and by creating a more collaborative environment between the two departments, organizations can improve contract negotiations, extract higher returns from supply chain management assets, and improve their bottom lines.

In its recent Drive Your Own Disruption: Is your supply chain in sleep mode?  report, Accenture highlights how the “digital reinvention” of industry is pushing more procurement departments to rethink their relationships (or lack thereof) with the finance department. In short, the consulting firm points out, the full, value-driving potential of a digitally reinvented, next-generation supply chain still eludes many chief supply chain officers—and it’s clear why.

“They are just not working strategically with the right people in the C-suite,” Accenture asserts in its report, noting that more than 80% of procurement professionals identify the chief information officer (CIO) or chief technology officer (CTO) as the key stakeholder. The chief executive officer (CEO), CFO, and chief operating officer (COO) did not rank at the top of that list.

“This is a serious strategic oversight given the critical role of the CFO in technology investment decision-making, and the rapidly developing role of the COO as architect of the flexible operating model and extended, end-to-end processes,” warns Accenture, which admits that this strategic disconnect between supply chain and C-suite is prevalent at many enterprises.

“Business as a whole simply doesn’t see the supply chain as a driver of differentiation and aggressive growth,” Accenture concludes. “CSOs, meanwhile, blame the absence of a clear business strategy, together with an inadequately skilled workforce, and incompatible legacy systems for their function’s failure to drive value.”

Three Ways to Strengthen the Bonds

To get procurement and finance working from the same playbook, Accenture says the two factions should focus on these three core strategies:

  1. Create conviction in the C-suite. To build a new and productive working relationship with the business, align with business strategy, and turn the supply chain into a competitive differentiator, CSOs must create conviction in the C-suite, and particularly with those executives responsible for long-term digital investment: the CFO and COO.
  2. Build out a workforce that embraces core supply chain workers, with “liquid” (part-time and on-demand) workers, and AI/Robotics assisting to drive productivity at speed. Supply chain executives can leverage their C-suite connections to secure support for a reskilling strategy founded on continuous learning.
  3. Decouple data from legacy systems and move it, in real time, to cloud-based data “lakes” that are accessible to customers. “By decoupling applications from their legacy IT infrastructure,” Accenture advises, “they can then create the flexibility to scale new product and service offerings, new businesses and new markets, and accommodate diverse application workloads.”

Speaking the Same Language

Speaking to Supply Chain Digital, The Smart Cube’s Omer Abdullah gives CPOs tips on developing positive and productive relationships with their CFO counterparts. Like most multi-department initiatives, this one starts with creating open and transparent lines of communication between the two factions.

“Communicate clearly; show the nuances, take a total cost approach, and show all of those aspects so that you are clearly communicating with the CFO,” Abdullah advises.  “Make sure your team has quantitative depth and the analytical capabilities, and that [it’s] aligned in terms of definitions with finance as to how their actions translate into numbers.”

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