What You Need to Know Before Becoming a CPO
In the height of the early 2000s telecommunications boom, Reza Hagel joined Sony & Ericsson during their joint-venture and started as BU Data analyst and Market Intelligence. From there, he became the Mobile Phone Product planner, where he led conceptualization and development to introduce the global market to Sony Ericsson outsourced products. Later, Hagel joined Sharp Europe as Head of Mobile Phone Portfolio Management before being offered to join the Vodafone Group Procurement Organization lead by Mr. Karl Heinz Muller as Group Supplier Manager.
Since 2006, Reza has been one of the founding partners of Rexcom Consulting and was formerly the Regional VP of Procurement & Logistics at Huawei, CPO at Hamrahe Aval, and a CPO Advisor to Cisco Systems.
Here at Procurify, we had the pleasure of interviewing him to share a few points on his career.
You mention in your LinkedIn profile that you are a “Supply Chain & Procurement transformation leader, capable of developing a new breed of knowledge workers, who know how to be, think and act differently, and thrive, within an agile organizational culture.”
Can you please elaborate on what you mean an ‘agile organizational culture’ and give some examples of what this looks like in supply chain and procurement?
This means to be business driven, and being more reactive to market dynamics and shifting customer demands.
Right now, we are living in an age of disruption, where changes are accelerating making innovation a strategic and systemic habit for any organization looking for survival. As such, the pressure on procurement to support business continuity is becoming greater than ever before.
Achieving an agile supply chain organization requires change across people, processes, tools, and systems and most importantly a shift in culture and mindset. With a vision, strategies and related technologies — this complexity is simplified to a transformational program that addresses all challenges with clear objectives and measurable outcomes.
Data Analytics and the emerging technologies for intelligent data discovery are essential to improve workforce productivity and identify actionable business insights. With a digital foundation in place, companies can capture, analyze, integrate, easily access, and interpret high quality, real-time data — data that fuels process automation, business modeling, predictive analytics, artificial intelligence, and robotics. Many are today using robotics or artificial intelligence to digitize and automate labor-intensive, repetitive tasks and processes such as purchasing, invoicing and accounts payable and Predictive analytics are helping companies improve demand forecasting, so they can reduce or better manage volatility and increase asset utilization.
Transforming an Agile Procurement Transformation Includes the Following:
1. Organization Design introducing new functions, roles & responsibilities
2. Resource Pool strategy & Body-shopping Budgeting
3. Process Re-engineering & Automation
4. Business Modeling – Process & Tools
5. BI & Data Visualization Platform enabling a fact-based decision making
6. Added Value Services Portfolio Development – Clear stakeholder value proposition
7. Integrated Platform: Risk Management & Reporting – Co-creation & Value Innovation
8. Informational Supply Chain Platforms and processes for information sharing and coordination.
9. Physical Supply Chain Platform as a foundational set of digital enabled physical assets and technologies–warehouses, factories, robotics, sensors, etc. – which companies leverage to enable breakthrough physical product handling and flow performance.
10. New skills and new hires to fit these skills
What are some of the major knowledge gaps you see in procurement and CPOs today?
What I’ve noticed is that many senior procurement executives and CPOs lack an entrepreneurial approach with a holistic view of the business.
In most cases, value creation has not been clearly defined and quantifying the value, developing the monitoring mechanism by procurement have been absent.
Another improvement area is risk management. Without a profound understanding of risks, organizations may face great challenges to gain the required agility to cope with today’s market dynamics. Risk management is not a priority of the supply chain, nor is an integrated cross-functional process. Consolidating, monitoring and analyzing vast amounts of risk data from a range of internal and external technologies is an overwhelming and costly task that often falls short. Supply chain organizations must ensure that the individual needs of different functions are supported by enabling continues use of separate technologies while connecting them, and the data they manage, in a way that produces a holistic view of risk, supporting informed business decisions.
How is the Role of the CPO Changing Today?
Instead of focusing on cost-cutting (which in itself is not a strategy), the new role of the CPO includes secure business continuity, and to look to improve bottom-line by efficiency and productivity in operations and cost. This is very different from cost-cutting in general – it’s a more strategic and holistic view of looking at procurement as a value-added function to the entire organization.
In order for CPOs to be successful at making this shift, they must enable collaborative engagement across the value chain and Identify new opportunities for revenue growth.
This could mean investing in data analytics, new software, and being able to extract the data needed to make better decisions.
You mentioned that “procurement people do now know what they are buying” – can you elaborate on this?
Actually, to put it in the context today purchasing“>category managers are procurement experts using the Kraljic Matrix as a strategic tool to define sourcing approach. The foundation for business modeling is absent, and the use of data in decision makings and strategic planning is not part of an established process.
I believe that the current category manager role as we know it should be spit-up into a domain expert role with the aim to manage stakeholder relationships and a purchasing manager role focusing on the new generation of added value procurement services.
Why do you think Procurement fraud still happens in large organizations today?
Many organizations have successfully applied changes across their P2P processes to mitigate some of the risks, but fraud is still happening. As the Procurement organization moves towards digitization, it will be easier to prevent and earlier to identify. Having an excellent technological system in place can make catching these issues more accessible.
Having sufficient internal controls and making sure that there is a chain of approvals is vital to catch procurement fraud, as there are multiple parties who review a purchase before it occurs.
What are some tips you would recommend when starting a new CPO/Procurement Manager job?
1. Stay in the Loop – CPOs wanting to stay at the top of the food chain must remain hungry for technological trends and willing to digest the disruption that will follow. This also means understanding what other trends are happening outside of the procurement function.
2. Invest in Technologies to Solve Ineffective Processes – CPOs should also be open to change and investing in new technologies that will help make more efficient and effective process changes.
3. Be Open to Change – Do not stay stagnant and accept the status quo and move towards identifying new avenues of value creation, and being a leader that helps the whole organization move towards better processes.
In your experience, what are some of the reasons why purchasing processes are so slow in many organizations? What are some strategies to scale the speed up?
Most of the time, the reason why the purchase to requisition order process is so slow is that there is a lack of an approval threshold. Also, there needs to be an effort to reduce the approval chains, as in many organizations, there are too many people involved with approving a purchase or vice versa.
Many smaller companies have a system where all purchases need to be signed off by the CEO or the founder – this is inefficient. To do this, its important to implement and set clear approval thresholds – not all purchases need to be routed through every single person.
This way, it will prevent purchase requests from being stuck when other people in the approval chain are away from their desks or on vacation. Alternatively, using technology such as a mobile procurement app can make approval times much shorter.
What is the relationship between Procurement and Finance? From talking to many controllers, they have many pain points that correspond to procurement. For example, when issuing POs, the POs sometimes get lost, or there is no visibility for the items ordered by the procurement department –which leads to long reconciliation timelines for the finance team. Have you heard of similar stories?
Unfortunately, this still happens but can be prevented; organizations are typically structured around individual functions with their objectives and operations. This is particularly the case for procurement and finance, which often coexist as separate entities with dysfunctional integration points despite playing critical roles in the procure-to-pay (P2P) process. Leading enterprises are aligning their procurement and finance activities to deliver the business impact that extends far beyond cost reduction with a fully integrated procure-to-pay process.
This may mean making sure the procurement process is compliant with auditing and GAAP standards, and also making sure that reporting and data analytics feed into both functions so that both Finance and Procurement can make more strategic decisions.
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