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By Hendrik Snyman, Chief Procurement Officer, Beach Energy Ltd [ASX: BPT]
Contracting and Procurement has changed forever, the old way is no longer adequate, the expectation from the business, its stakeholder and shareholders are vastly different than the past.
I am currently with Beach Energy, brought in to establish C&P to its rightful place, and establishing C&P in Beach Energy as the reference case in Oil and Gas within 2 years.
During this brief overview I want take you through how the requirements on the CPO is changing and how the CPO and its function will have to change in order to stay relevant.
Then we will explore three aspects that in my view is enablers and should enjoy laser like focus, for the CPO and its function, to deliver the changing requirements.The changing role of the CPO Cost out to Value in Once often viewed as a "cost out" role expected to deliver goods on time and at a low price, the function has now evolved and in many organizations is a strategic leader and advocate for greater operational effectiveness in everything from inventory to manufacturing, product design, cash flow, outsourcing, workflow quality and customer satisfaction decisions. CPO Traditional roles were: • Pure cost orientation and focus on cutting costs • Spend all their time on tendering activities • Process forms and worry about pennies • Shorten delivery times • Minimize supply chain risk • Drive suppliers into the ground with constant price reductions And more organizations are becoming wise to just how big of a competitive advantage strategic procurement can provide. The fluctuating market conditions has been a great catalyst for this. Today a CPO is not evaluated by cost savings and performance efficiency, that’s a given, it’s about the kind of value the CPO brings to the table. Purchaser to Influencer It’s less and less about being a master of the purchasing technique today, It’s far more about the ability to persuade, to influence, to see the bigger picture and have credibility with the business and how to become a trusted advisor to the business. CPO’s note that building these strong collaborative relationships with internal clients is critical to gain a seat at the table in early-stage discussions where procurement can have the most impact. Risk Avoider to Risk Balancer How can you make each risk translate into a workable option? Pay attention to those that will make or break the strategy around the initiative and ensure you have a clear, articulated option for each one. Third party risk transparency is crucial in this balancing act. Balance the risk and controls, assure appropriateness of the controls and the influence a CPO can inject into the organisation. Constraint to Gap Opener The best CPOs open gaps. It’s not about doing one standard deviation, it’s about going after two. It’s about stretching, about causing the organization to be uncomfortable and then executing. They talk business all the time and they are entirely familiar with the overall company strategy. 3rd Party Squeezer to 3rd Party Partner In the past, we’ve been able to create a true win- “win” by shaking cost out of the supply chain. Rather than always trying to squeeze supplier margins, CPO’s today need to create partnerships with our suppliers/ providers and work together to optimize, digitalize& create lean end to end supply chains. We need to unlock the value that’s locked up in the interface of how Owners and Contractors work together, they assist the contractors to become leaner and explore how technology through the contractors can be utilized. Focus towards sustainability Guardians of sustainability business practices, unlocking transparency to sustainability in the supply chain, assurance on modern day slavery requirements, Anti Bribery and Corruption up and down the supply chain is part of being sustainable business execution. We explored the spheres of how the CPO role is changing, now we are going to look at the four things, that C&P function and CPO’s need, to lead the business. In the past C&P got involved late in the day, the requirements from the business where C&P need to be leading value creation demand early involvement. Involvement when there is options and enormous value on the table. What does it take from C&P to be involved early, in my view it takes 4 ingredients that all work together to create a value feast.
People in the Business Look at Procurement and Say, 'That’s A Place I Might Want to Work Because I’m Not Going to Get Stuck There Forever, And Some Really Good People Have Come out Of There and Done Really Interesting Things in the Company