In my spring 2010 “predictions” conference presentation (which I’ve now given almost half a dozen times), one of the scenarios I posit for the future of procurement in the next five years is that finance will take a much more active stance and roll within the procurement function. I don’t think I’m alone in this thinking. At Ariba LIVE this week, I saw continued messaging towards finance professionals as well as significant main-stage and track emphasis on both working capital management and the intersection of invoicing, supplier management and procurement. But what might a resurgence of finance involvement in procurement look like? And why will finance take a more active role, if not from a direct reporting perspective, a functional and process one?
For one, if you look at research reports from The Big Five, Hackett, McKinsey and others, it’s pretty clear that managing volatility (e.g., demand, commodity, currency, banking) is a top concern for both CFOs and treasurers. Moreover, the intersection of these areas falls squarely on the supply side of the business as much as the buy-side. Today, far too few procurement organizations have proven themselves to be effective managers of volatility. Given this, I think it’s fairly clear that we’ll see finance get more involved in overall supply risk and volatility management. In addition, finance organizations have begun to realize that they’re better at forecasting sales — that’s right, revenue that they haven’t necessarily already sold or booked — than earnings and mid-term cash flow in their business. Hackett has some great data on this, and I’d suggest you contact them directly if you’re curious for the exact numbers. Regardless, it’s clear that CFOs need procurement to forecast payments and related / potential liabilities that much more effectively…
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