Top-performing CPOs will emerge from the recession able to demonstrate value created from innovating with suppliers, rather than just cost cutting, according to a leading headhunter.
Walter Friederichs, who leads the global automotive practice of Russell Reynolds in Frankfurt, told CPO Agenda that a “capability to deliver improvements in the product, despite the limitations” on resources and time would mark out the top performers in the sector from the rest.
This meant looking beyond short-term needs and even total cost of ownership, he said.
The automotive industry was a hotbed of innovation – exemplified by General Motors’ new Volt electric car. The question that he and his clients would be asking CPOs post-recession was this: “Have you been a driving force in gaining access to this for your organisation – not just big, fancy stuff but things that will make a difference to your customers?”
CPOs needed to be the “voice of the supplier” inside their firms, Friederichs added, breaking down functional silos and communicating to internal colleagues in marketing and elsewhere the incremental value suppliers could deliver.
Procurement’s importance and influence inside the major car makers had “increased dramatically” in recent years, he said. And CPOs had a “major part” to play in determining the quality of supplier relationships.
Last year, Russell Reynolds and management consultancy Booz & Co published a report, Navigating a Path to Change, which found that most firms in the industry wanted to build more collaborative relationships.
Despite the pressures many companies were under, Friederichs did not see much evidence of tactical squeezing of suppliers and did not believe that trust would be damaged in most cases.
“The crisis reinforces the need to pair with companies,” he said.
While in future there might be less “shopping around” of new technologies, the painful experience of supplier insolvency was prompting a more transparent approach to risk management – including the development of alternative sources.
Mark Short, a partner at Ernst & Young in Detroit who specialises in supplier risk, told CPO Agenda that the automotive industry generally had better processes in place than other sectors for assessing and managing distressed suppliers.
“The good news is that procurement officers are now a very active part of the management team charged with mitigating risk – whether they like it or not,” he said.
But he warned that there was “no silver bullet” or one-size-fits-all approach that could be applied to all categories or suppliers.
