It's amazing how little some CEOs know—or even seem to care very much about corporate buying. After all, purchased products represent up to 80% of the cost of goods sold for many industrial companies. Many in the Fortune 500 may be leaving scores, evens hundreds, of millions of dollars on the table. Even the legendary Jack Welch was blindsided by poor purchasing practice soon after he took the top post at GE in the early 1980s. Profits at the business giant tumbled because price hikes for products it bought were rising at double the rate of the products it sold. Welch sacked his buyers.

If I were running a major investment fund, I would develop an index of purchasing performance—particularly in today's economic climate. When the barons of business came to pitch their stock, I'd make them provide certain data on purchasing. Components of my index would cover the "Six Best Practices in Cost Management" shown on page 26 in this issue. Characteristics include:

• A center-led, authoritative supply management structure directly supported by the CEO. Without strong directives and support from the company's leader, the index is zero.
• Formal sourcing systems that allow collaboration among cross-functional teams that create maximum leverage for a company's spend. If you have to go to your suppliers to find out how much you buy from them, you fail.
• Recruitment of top-tier talent for purchasing. This is a significant point made by the participants in this year's CEO report. Purchasing management should be part of the career path for the best and brightest, and never a dead-end job. Make sure purchasing has plenty of visibility in your company.
• Documentation and tracking of savings in a system that correlates with the company's financial system. Too many buyers use funny numbers that can't be defended and tear credibility away from other purchasing organizations.
• Bonuses for buyers tied to trackable cost savings.
• Investment in the newest technology to support purchasing.

For more details, and sound advice from your best peers, check out this issue's CEO report. And by the way, send a copy to your CEO as well.