SAP recently asked more than 200 procurement executives about what strategies are working today in this uncertain time of economic free fall.
The survey, Succeeding with New Procurement Strategies, was conducted with the help of the Procurement Leaders Network and found that procurement departments are going back to basics, trying to reduce costs and better manage spend.
Now at first, this might not seem like groundbreaking news that procurement departments are seeking cost reductions and trying to control spend, sort of like Captain Renault saying “round up the usual suspects” in Casablanca.
But it’s how they are seeking to reduce costs and manage spend that makes this survey worth reading.
Cost Cutting is a Long-Term Trend
Even though the recession has forced many companies to reduce costs, most procurement professionals in the survey admitted that they have been prioritizing cost cutting and savings targets for years and intend to maintain those priorities well after the recession.
Here are some other findings of interest:
- Teamwork is critical. Almost 60% of respondents claimed the cross-functional collaboration was an area of increased focus. Improved cross functional relationships and activities were named by a whopping 93% of respondents as being very important or important as process put in place to battle the recession. Almost 70% said they plan to expand that scope beyond the current economic crisis.
- There is no place for complacency among suppliers. More than 95% of respondents rated contract review as being very important or important. Almost 70% mentioned they are in the process of renegotiating contracts as a way of mitigating risk in their sourcing strategies.
- Suppliers who wish to keep their contracts will have to prove their worth. Almost 20% of respondents have already implemented supplier performance programs and another 62% are in the process of doing so. Almost 70% see this trend as important in the future.
- Focus on technology is growing, especially when it comes to supplier management tools. Back in 20007, less than 15% rated this technology as important. In 2009, that number has grown to almost 50%.
- Almost 76% rated investment in technology very important or important in terms of processes. Not only is functionality being discussed but deployment. Almost 40% of respondents reported they are either have increased or are planning to increase the use of on-demand solutions.
Since the economic downturn there has been a shift in deciding which technology provide the most value. Two years ago, it was an even split among spend analysis, e-procurement and e-sourcing. Today, however, more than half of the respondents pointed to spend analysis technology solutions as providing the best value. By 2011, almost half believe that supplier portals and contract life-cycle management software will be the primary focus.
Focus Shouldn’t Be On Just Cost Cutting
Perhaps the most important message to come out of this survey was that while cost cutting is important, it shouldn’t be the obsession. Consider this quote from a CPO:
“By focusing on the continuation of our procurement strategy, we are already ahead of our competition by having world-class procurement leaders driving and focusing on the right things,” he said. “It is important to see the major benefit and expertise of a long-term strategy and not always focus on cost. Value is the key.”
Tags: contract life-cycle management, e-procurement, e-sourcing, spend analysis