the leaders are saying innovation is going to be more important than cost . And you ’ re only going to get that if you find a way to work with suppliers . You can ’ t compete your way to innovation with the suppliers because you won ’ t have that trust .”
In addition , those companies struggling to provide return on their supply chain spend could become targets for acquisitionallyminded competitors or private equity firms , Hales says .
“ There is a lot of private equity activity and mergers and acquisition ( M & A ) going on ; companies that don ’ t improve that ratio are likely to be on the wrong end of some of those deals ,” he comments .
“ We see the role of procurement soaring in the M & A area because it ’ s a unique opportunity to combine strands of companies and take them to market in a shortened period of time . Part of the playbook of private equity firms is invest in strategic sourcing as soon as they ’ ve bought a company . It ’ s a really quick win for them .”
The best way for CPOs in companies with under-performing procurement operations to drive change is to attempt to prove the returns that can be achieved to their CEOs and CFOs , Hales adds .
“ Companies in that lower quartile are not intentionally hurting themselves , it ’ s just that the leadership is not prioritising procurement enough ,” he says .
“ The path for them [ CPOs ] is to find a way carry out a focused strategic sourcing programme to really demonstrate that they can return more than $ 1 for every $ 1 spent . Once that is proven , they can begin to implement a real step-change .”
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