Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Chief Procurement Officer — Definition and Job Description
What is a chief procurement officer (CPO)?
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The Chief Procurement Officer (CPO) is a procurement professional who leads strategic decisions in the procurement department.
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Becoming a Chief Procurement Officer (CPO) requires leadership, financial judgment, negotiation, strategic procurement skills, and relevant experience.
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Chief Procurement Officers (CPOs) are common in larger companies where the high volume of purchases requires an executive to manage procurement.
What is a Chief Procurement Officer?
A Chief Procurement Officer (CPO) is someone who leads the entire procurement department in buying critical goods and services from another organization. A lot of companies hire procurement specialists and procurement managers, but they’re going to need someone with enough experience and management skills in order to come up with good procurement strategies.
Before you continue, I want to share that I created a free-to-download PDF file about everything you need to learn about a chief procurement officer.
The role of the chief procurement officer is a strategic one. This means they act as the brains of the entire procurement department, always creating strategies and holding meetings in order to decide the best course of action for every procurement. They always makes sure that the procurement process must be followed in line with the organization’s standards.
Chief Procurement Officer Job Description Template
Job Title: Chief Procurement Officer
Location: [Insert location]
Reports to: [Insert name and title of supervisor]
A chief procurement officer is the highest possible position when it comes to procurement. They report directly to the CEO of the organization and handle all aspects of procurement and supply chain management processes while leading and managing all other procurement professionals.
Key Responsibilities:
- Cost reduction and cost management in procurement processes and procedures.
- Create and implement strategic sourcing plans and strategies that align with the organization’s goals and objectives.
- Identify procurement risks and mitigate them as needed.
- Managing and maintaining strong relationships with suppliers.
- Makes sure that the procurement process complies with legal and ethical standards by establishing and enforcing procurement policies and practices that prevent fraud, corruption, and unethical behavior.
- Identify ways to streamline and optimize the procurement process.
- Maintain a working knowledge of market trends and any changes in the supply chain landscape to make informed decisions.
- Encourage and foster an environment of innovation in procurement processes and sourcing strategies.
- Making sure that procurement activities align with the organization’s budget and balancing cost savings with meeting the organization’s operational needs.
- Find ways to make the supply chain more resilient like investing in supplier diversity, creating backup plans, and addressing potential disruptions.
- Find ways to be sustainable and socially responsible for company branding, supply chain sustainability, and ethical requirements.
- CPOs are involved in the strategic planning of the organization. They contribute to the development of overall business strategies by procurement and supply chain management with organizational goals.
KPIs for this role
- Procurement ROI: Measures the return on investment for procurement initiatives which shows the reliability of procurement activities to deliver more profit than their cost.
- Cost Savings: Amount of money saved by the procurement department due to strategic initiatives.
- Payment Terms: Average time it takes to pay suppliers after receiving an invoice.
- Supplier Performance: Quality of supplier goods and services and the constant management of these.
- Inventory Turnover: Rate at which the inventory is sold and replaced and how this is efficiently managed.
- Order Fill Rate: Customer orders that are fulfilled on time and in full.
- Spend Under Management: Total spend which is actively managed and controlled by procurement.
- Cost of Goods Sold (COGS): Direct costs of producing and delivering goods or services.
Key Skills and Qualifications:
- Bachelor’s or Master’s Degree in a relevant field.
- Certified Professional in Supply Management (CPSM) or Certified Procurement Professional (CPP) certification.
- 8-10 years of relevant work experience in procurement.
- Strong leadership skills that are capable of leading and training a procurement team.
- Excellent financial acumen for effective management of the company’s annual procurement budget.
- Strategic procurement skills while ensuring compliance with company objectives.
- Proficiency in financial analysis for budgetary procurement decision-making.
- Strong negotiation skills to secure advantageous terms from suppliers at the lowest possible cost.
- Ability to manage and develop a procurement team.
- Can draft and negotiate contracts well.
- Excellent verbal and written communication skills.
- Ability to identify and mitigate risks in the procurement process.
- Capability to think creatively and innovatively to find procurement solutions.
Chief Procurement Officer Responsibilities & Tasks
- Cost reduction and cost management in procurement processes and procedures.
- Create and implement strategic sourcing plans and strategies that align with the organization’s goals and objectives.
- Identify procurement risks and mitigate them as needed.
- Managing and maintaining strong relationships with suppliers.
- Makes sure that the procurement process complies with legal and ethical standards by establishing and enforcing procurement policies and practices that prevent fraud, corruption, and unethical behavior.
- Identify ways to streamline and optimize the procurement process.
- Maintain a working knowledge of market trends and any changes in the supply chain landscape to make informed decisions.
- Encourage and foster an environment of innovation in procurement processes and sourcing strategies.
- Making sure that procurement activities align with the organization’s budget and balancing cost savings with meeting the organization’s operational needs.
- Find ways to make the supply chain more resilient like investing in supplier diversity, creating backup plans, and addressing potential disruptions.
- Find ways to be sustainable and socially responsible for company branding, supply chain sustainability, and ethical requirements.
- CPOs are involved in the strategic planning of the organization. They contribute to the development of overall business strategies by procurement and supply chain management with organizational goals.
Chief Procurement Officer Skills Description
- Be able to anticipate: Quickly able to anticipate what can happen next in things like negotiation or market trends, among other things, and be able to take appropriate action in response.
- Analytical capability: Ability to think critically and have all the necessary help and backup of technology to gain the needed insight for the betterment of the company.
- Responsiveness: Taking action efficiently and effectively when action needs to be taken.-
- Collaboration: Knowing how to coordinate with various persons and groups and knowing how to get them to coordinate with each other to work towards a common goal.
- Transformational leadership skills: Continuous success in leadership while transforming functions within the organization to be more efficient due to procurement initiatives.
- Technology: Well-informed in new technological advances when it come to procurement.
- Financial Acumen: Excellent understanding of finances and budget management which ensures the cost-effectiveness of procurement activities.
- Strategic Procurement Skills: Create and implement procurement strategies.
- Negotiation: Ability to secure favorable terms in agreements in a cost-efficient manner.
- People Management: Management and development of teams and persons.
- Contracting Skills: Can draft, review, and negotiate contracts to legal and organizational requirements.
- Communication: Excellent verbal and written communication skills.
- Risk Management: Identify and mitigate risks in procurement processes and activities.
Chief Procurement Officer KPIs
- Procurement ROI: Measures the return on investment for procurement initiatives which shows the reliability of procurement activities to deliver more profit than their cost.
- Cost Savings: Amount of money saved by the procurement department due to strategic initiatives.
- Payment Terms: Average time it takes to pay suppliers after receiving an invoice.
- Supplier Performance: Quality of supplier goods and services and the constant management of these.
- Inventory Turnover: Rate at which the inventory is sold and replaced and how this is efficiently managed.
- Order Fill Rate: Customer orders that are fulfilled on time and in full.
- Spend Under Management: Total spend which is actively managed and controlled by procurement.
- Cost of Goods Sold (COGS): Direct costs of producing and delivering goods or services.
Salary of Chief Procurement Officer
Because the Chief Procurement Officer is considered an executive level position in a company, it should not be surprising that the salary range for the said position is set at a higher level compared to procurement managers and specialists.
In the United States alone, the average base salary of Chief Procurement Officers is 279,000. The range goes anywhere from $209,000 to $381,000.
Despite the economic issues and the pandemic, procurement remains a strong industry. Therefore, the rate for Chief Procurement Officers should remain stable, at least for this year and the next.
What Type of Companies Employ a CPO?
As we said earlier, a Chief Procurement Officer (CPO) is someone who leads the entire procurement department in purchasing critical goods and services from another organization.
Additionally, the CPO usually reports to the chief executive officer (CEO) of the company. However, at some companies, the CPO reports to the chief financial officer (CFO) or to another executive position.
The companies that usually employ a CPO are common in larger companies, where the volume of purchases justifies the necessity of an executive position that handles the procurement of a company.
The CPO also has an alternative title to other companies which include the vice president of sourcing and vice president of procurement. Smaller companies may sometimes employ a CPO which also has a new title for it such as contract manager or procurement director.
What are the Skills and Qualifications Needed to Become a Chief Procurement Officer?
To become a Chief Procurement Officer, a candidate must have strong leadership skills, a creative mindset, and a strong financial acumen. In order to build these skills, any procurement specialist must have a financial or business background in terms of education.
Because being a Chief Procurement Officer is an Executive level position, it means that one must have enough experience, background, and knowledge to prove his/her efficiency in leading a department. If necessary, there must be proof that they have led key victories in procurement negotiations and strategies whether in the company where they are working or in a previous company.
Other skills necessary to become a Chief Procurement Officer are as follows:
- Strategic procurement skills
- Financial analysis
- Negotiation
- People management
- Leadership
- Contracting skills
- Communication skills
- Writing skills
Procurement Expert’s Advice on Becoming a Chief Procurement Officer
For this article, we asked a seasoned procurement professional to share his insights regarding the qualities of a chief procurement officer.
Sjoerd Goedhart
Owner, Goedhart Interim Management & Consultancy
LinkedIn Profile: https://www.linkedin.com/in/sjoerdgoedhart/
1. Can you share a personal example of becoming a chief procurement officer? What can readers learn from this?
“To become a CPO, it is essential to have a solid plan in place. You need to carefully consider the steps you need to take from your current position to reach your goal. This includes identifying the positions you should hold, the knowledge you need to acquire, and the experience you should gain.
Once you have a clear plan, you can evaluate the opportunities that come your way and decide if they align with your objective. Having a plan makes it easier to say yes or no to certain opportunities because you know what the position should contribute to your overall career goals.
Additionally, you will understand what you need to work on to make your ambition a reality.”
2. What should readers know about a chief procurement officer?
“The role of the Chief Procurement Officer (CPO) in an organization is transforming. Previously, the focus was mainly on procuring goods. However, now it is becoming increasingly crucial for CPOs to manage risks at both regional and international levels.
Additionally, they need to anticipate the growing demand from customers for transparency in the sourcing of raw materials. To comply with the relevant legislation, procurement departments now need to follow certain guidelines.”
Follow-up Question: In light of the evolving role, how do successful CPOs strategize to manage risk both regionally and internationally?
“As a Chief Procurement Officer (CPO), it’s crucial to include risk management in the company’s strategy and KPIs to ensure its success. It’s the responsibility of a CPO to be aware of potential risks and devise a plan to mitigate them.
However, the approach may vary depending on the company and individuals involved. Nonetheless, setting a risk management strategy should be a top priority for every CPO, as this is a fundamental aspect of the role.”
3. What is the biggest misconception about a chief procurement officer? What do most people get wrong about it?
“The role of the Chief Procurement Officer (CPO) is not limited to managing a department of professionals with the sole objective of reducing costs. Instead, the CPO plays a strategic role in developing and implementing effective procurement strategies while managing risks.
These strategies must align with the company’s overall goals and objectives. To be effective, the CPO must possess strategic thinking skills, an understanding of the procurement process, leadership skills, and the ability to create and implement plans that result in cost savings, improved efficiency, better supplier relationships, reduced risks, and compliance with legislation.
It’s a role that requires overseeing a department that has close coordination and impact on all other departments in a company, so the CPO should have the ability to comprehend and manage the impact on these other departments.”
4. What are the key challenges faced by Chief Procurement Officers in today’s business environment?
“In my opinion, the challenges are the increasing risk in the supply chain of goods, how to adapt to new technology like AI, and how to adapt this to the organization and the new CSRD (Corporate Sustainability Reporting Directive) regulations.”
5. How has the role of the Chief Procurement Officer evolved with the rise of digital and sustainable procurement practices?
“The CPO must be aware of developments in digital and sustainability and the skills to adapt and implement this in the company, as well as strategically and operationally (functions and responsibilities).”
6. What were the good CPOs you worked with? Why were they good? can you elaborate on that?
“The best are those who have a vision about the role of leadership within the company and how it should develop given the changes in the world around us and in line with the company’s strategy.”
7. What does it take for a procurement professional to climb to the top and become a chief procurement officer?
“To become a Chief Procurement Officer (CPO), you need to meet specific educational and experiential requirements. Ideally, you should have experience working in purchasing and procurement departments across various businesses.
Additionally, you should possess excellent leadership, communication, and decision-making skills. If you have an ambition to become a CPO, it’s essential to create a clear plan outlining the necessary education and experience required for the role. You should work proactively towards achieving the steps outlined in your plan.
It’s also crucial to communicate your ambition openly and seek guidance from existing managers. They can coach you and assist you in achieving your goal.”
Follow-up Question: For professionals looking to climb to a CPO role, what proactive steps can they take in terms of career development
and skill enhancement?
“For professionals aspiring to climb to a CPO role, it’s crucial to focus on both formal development and showcasing leadership qualities. While gaining experience through various positions is essential, possessing natural leadership abilities is equally vital.
Leadership skills, strategic acumen, analytical capabilities, project management proficiency, and adept stakeholder management are key attributes of a successful CPO.
Additionally, progression through different roles, from sourcing analyst to procurement manager and beyond, provides valuable managerial experience. Leadership is both learned and behavioral, making it imperative to continuously develop and refine these skills.”
Conclusion
The CPO, as the strategic head of the procurement department, carries the weight of leading a robust procurement team, managing the company’s annual budget, and developing the organization’s procurement policy.
The crucial role of managing supplier relationships is highlighted, emphasizing the CPO’s responsibility to foster smooth and mutually beneficial interactions between the company and its suppliers.
Aspiring individuals are encouraged to enroll in this comprehensive training course to equip themselves with the knowledge and expertise necessary for a successful career at the executive level in the dynamic field of procurement.
Frequentlyasked questions
What is a Chief Procurement Officer?
A chief procurement officer is someone who leads a procurement team and develops procurement strategies.
What are the skills needed to become a Chief Procurement Officer?
You need leadership, writing skills, and negotiation skills to become a chief procurement officer.
Is it profitable to become a Chief Procurement Officer?
Yes. With an average of $290,000, working as a Chief Procurement Officer is profitable.
The Secret to Becoming a Chief Procurement Officer is Knowledge
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About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
