Companies Seen Unprepared to Manage Increased Sourcing from China and India

Greater use of low-cost countries not matched by growing knowledge and understanding of these markets, A.T. Kearney study finds

  • Procurement continues to shed its back-office reputation, with 60 percent of companies now using their procurement expertise to help set, rather than just execute, corporate strategy.

  • Two-thirds of companies surveyed said their procurement organizations were actively pursing goals in value creation through approaches such as product and service innovation, advanced cost management, risk management and supply continuity and value chain optimization. In 1999 this number was only 28 percent.

  • CEOs see procurement as an increasingly important and strategic capability and are looking to their procurement organizations to create value in their organizations beyond cost-reduction efforts. Two-thirds of companies in the study include at least one senior procurement executive on the executive management team, an increase from 40 percent in 1999.

  • Companies using advanced supply management techniques such as collaborative cost reduction, tiered sourcing and design-to-cost generate nearly twice the rate of savings on their procurement of direct and indirect materials and services than companies solely relying on traditional sourcing methods.

  • Electronic procurement systems continue to fall short of their potential. More than half of respondents reported tools for market analysis, contract management and product lifecycle management are not meeting all their expectations. Leading companies are focusing on the end-to-end integration of their e-sourcing tools by fitting IT components together into a complete system solution for category management.

For more information on the challenges and opportunities presented by increasingly global supply chains, see the special in-depth report in the August/September 2004 issue of , which includes the following articles:

For more information on the global supply chain, with a focus on security issues, see "Building the Secure Supply Chain," the Net Best Thing article in the June/July 2003 issue of (now ) magazine.

For a look at how Tyco Fire & Security is tackling trade compliance issues in its global supply chain, see "Turning Global Trade Compliance Into a Competitive Advantage," in the August/September 2004 issue of Supply & Demand Chain Executive.

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