Keith Hausmann: Why Zero-Based Budgeting Drives Success
In today's complex business landscape, two critical functions often find themselves at odds: procurement and finance.
While both aim to optimise an organisation's financial performance, they frequently speak different languages and operate with misaligned objectives.
This disconnect isn't just a minor organisational friction—it represents a substantial missed opportunity for strategic value creation.
Former head of Accenture’s global procurement operations, and now Chief Customer Officer for Globality, Keith Hausmann identifies the quickest way to reduce costs and free up funds for investment: using AI-driven sourcing technology.
Keith spoke to Procurement Magazine to explore the deep-rooted tension CPOs and CFOs, uncovering the systemic issues that prevent procurement from being recognised as a strategic partner.
From understanding why procurement is often seen as a blocker to discovering how AI-powered autonomous sourcing can revolutionise financial strategies, this discussion provides a roadmap for organisations seeking to unlock the true potential of their procurement functions.
Why is there tension between CPOs and CFOs?
The relationship is often strained because procurement's efforts aren't clearly reflected in the company's financial performance.
Even when procurement helps save millions, departments typically still spend their entire original budget.
Procurement is often seen as a blocker rather than an enabler, frequently brought into decisions at the last minute and asked to finalise deals without proper supplier evaluation.
What's the core problem with current procurement and budgeting processes?
There's a significant disconnect between procurement's cost-saving efforts and the actual financial budgeting process.
When procurement saves money, those savings are rarely translated into meaningful financial improvements.
The connectivity between budgets and procurement remains sub-optimised, meaning departments continue to spend their full allocated budgets regardless of potential savings.
How can companies improve the relationship between procurement and finance?
Companies should move towards zero-based budgeting, which involves building budgets from scratch each year based on actual business needs.
By leveraging AI-powered autonomous sourcing, procurement can become more strategic. This approach allows businesses to reduce budgets while ensuring departments still get everything they need, just more efficiently.
Can you offer real-world examples of successful procurement transformation?
Yes, two notable examples stand out.
At Tesco, a "Spend to Invest" plan helped procurement generate £645m (approx US$883m) in value, which the CFO then reinvested in expanding the business.
At T. Rowe Price, an AI-driven procurement approach helped generate more than US$40m in operational savings and significantly improved the procurement function's visibility and standing within the organisation.
What's the key to making procurement more valuable to an organisation?
The key is demonstrating tangible value and creating a clear link between cost reduction efforts and increased budget or working capital.
By using AI-powered sourcing technologies and adopting a more strategic approach to budgeting, procurement can transform from a transactional function to a critical strategic partner that directly contributes to the organisation's financial health.
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