In Take advantage of the sourceBCG authors issue wake-up call to CEOs who marginalize their suppliers and procurement function, warning: ‘You are taking an existential risk with the future of your business’
BOSTON, June 27, 2022 /PRNewswire/ — Suppliers are key to business success not only today, amid a global supply chain crisis, runaway inflation and energy shortages, but also in the ‘coming. However, if CEOs want to maximize the value of these external suppliers of goods and services, they must undertake a radical transformation of their business by placing suppliers at the heart of their business and empowering their procurement function, which owns the relationship. business with suppliers. .
This is the point of view of four Boston Consulting Group (BCG) partners, including the new book that explodes conventions, Benefit at the source: transform your business by putting suppliers at the heartoffers CEOs a blueprint for how they can transform their business by extracting extraordinary value from their suppliers.
In their book, published by Harvard Business Review Press, Christian SchuhWolfgang Schnellbacher, Alenka Triplatand Daniel Weise seek to subvert the traditional view of business leaders that suppliers are peripheral contributors to business success and that procurement is largely an administrative capability that focuses narrowly on achieving cost savings.
To make the case for radical change, the BCG authors point to research Harvard Business School, which shows that before the current global supply chain crisis, CEOs spent on average only 1% of their time with suppliers. According to the authors, this lack of attention makes no sense: “Given that spending on suppliers – the work of procurement – represents more than half of the total budget of a typical company, this means that CEOs spend virtually no time thinking about or being actively involved in how their companies spend more than half of their budgets.This is a mismatch with potentially existential consequences for business.
Additionally, the authors argue that the limited time CEOs spend with vendors means their companies risk missing out on the huge potential opportunities these vendors present to achieve profitable growth. They note that suppliers are not only a source of cost savings, but also a source of resilience through their supply of critical components, parts and raw materials, as well as vital services such as manufacturing. Additionally, suppliers are an evolving source of competitive advantage, helping companies deliver superior, innovative, sustainable, and quick-to-market products.
Companies That Prioritize Suppliers and Sourcing Outperform Rivals That Don’t
In Enjoy the Source, the authors present a BCG analysis showing that only 35% of the top 150 companies in the S&P 500 place the chief purchasing officer (or equivalent) on the management team. Yet these companies outperformed the market by 134% from 2000 to 2020, a turbulent 20-year period that saw the rise and fall of technology, the global financial crisis, the trade war between the United States and China and the start of the global pandemic.
As the authors put it, “This clearly demonstrates that CEOs can truly steer their companies through tough times and extract tremendous value from their suppliers if they give their CPO a seat at the table and strengthen their CPO role. ‘supply.”
They note that it is no coincidence that Apple, the first public company to reach a market capitalization that exceeds $3 trillionis led by a CEO who was previously senior vice president of global operations in charge of purchasing: Tim Cook.
A plan for radical change: how to put suppliers at the heart of the business
In Enjoy the Source, the authors lay out a blueprint for radical change that includes proven practical ways for business leaders to get the full potential benefits from their suppliers. In doing so, the authors draw on BCG’s proprietary research, as well as their and their colleagues’ direct experience with some of the world’s largest companies.
The plan includes three building blocks:
The authors claim that if CEOs follow this blueprint, they will be able to build stronger, more competitive, and more sustainable companies, ready for the next generation.
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SOURCEBoston Consulting Group (BCG)