The CFO & CPO are increasingly seen as CEO’s in training.  Yes?

Companies such as Wal-Mart, Chrysler and Merck have had CEO’s who had been CPO. This new prominence places the CPO in direct competition with the CFO and other CXO’s for the corner office position. However, that the CEO still predominantly delegates responsibility for supply to the CFO suggest procurement still has some final hurdles to overcome and places the CPO at a disadvantage to advance to the top position.

Whilst the goals and objectives of the CPO & CFO are increasingly aligned, I argue that the CPO  reporting below the CEO misses the opportunity to maximise supply’s value contribution and that companies in the same industry, competing for the same customers can utilize the CPO reporting directly to the CEO to gain competitive advantage.

The question as to who the CPO (or equivalent) reports, determines supply managements position within the organisation. The CPO reporting line plays an important role in ensuring both the effective contribution of supply management to organisational goals and strategies, and importantly, sends a clear message regarding its importance to the business strategy.

Whilst the CFO and CPO must be close strategic collaborators, in most companies the CPO should not be the CFO’s direct report based upon key business drivers:

1.    Business Drivers pointing towards the CEO include:

• High ratio of spend to revenue i.e >50%
• Increasing reliance on outsourcing in strategy
• Increased complexity in the supply chain i.e global sourcing, offshoring etc
• High industry pace of change and globalization.

2.    Drivers pointing towards the CFO:

• Low ratio of spend to revenue ie <30%
• Low supply chain complexity
• Low industry pace of change

  The executive in the organisation to whom the CPO reports, plays a vital role in breaking down corporate roadblocks, setting priorities and ensuring the appropriate profile for supply within the organisation.

For those businesses who are increasingly less concerned about building up internal functional resources than they are in determining how to manage these functions through a combination of joint ventures, alliances, offshoring and outsourcing, the CEO is the natural choice for the CPO’s reporting line.

Future growth no longer depends upon owning resources, it requires optimising the cost of  internal resources, whilst having access to external resources and managing these as strategic relationships.

Such a business environment requires an “entrepreneurial core” combined with capability in collaboration, innovation, integration and managing complexity. Traits successful CPO’s possess.

It is perhaps this “entrepreneurial core” which places the CPO so well for the corner office role.

Nuff said …