Sourcing/Procurement Trends
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Procurement's Conundrum - Cut Costs While Keeping Long-term Perspective
Financial crisis seen exponentially increasing pressure on Procurement to deliver cost reductions, but winners must adjust rapidly and agilely to challenges, reports Capgemini in 2009 CPO survey
New York — August 24, 2009 — The global financial crisis has "exponentially" increased pressure on Procurement to deliver cost reductions as businesses struggle to sustain profitability, or even survival, in the face of a turbulent economy, according to the latest survey of chief procurement officers from consulting firm Capgemini.
In its third Global Chief Procurement Officer (CPO) Survey, Capgemini reports that the key to successfully navigating the economy's rapids will be reacting quickly but also attacking the "right" problems. "Winners in the current climate will be those procurement professionals who are able to focus on the real issues and demonstrate an agile approach to adjusting rapidly to the unprecedented challenges facing them," the consultancy writes.
The intent of the Global CPO Survey is to provide executives with insight into both macro issues and focus areas so they may be better informed concerning the challenges they face and the decisions they make. The survey is based around responses from more than 150 organizations spanning Europe, North America and Asia Pacific, mainly represented by senior procurement executives.
The latest survey provides a "temperature check" on the world of buying in 2009 and gives a comparison of findings from previous Surveys conducted in 2007 and 2008. The survey also represents a diversity of industries ranging from Energy to Pharmaceuticals and Manufacturing to the Public Sector. "What is common to all respondent organizations is the continuing theme of having to manage and drive value out of third party expenditure," according to Capgemini.
This year's survey provides insight into the impact of the global recession on procurement executives, with nearly seven in 10 participants acknowledging that the current economic recession was having a significant impact on them: increasing targets, altering focus areas and shortening planning time horizons. For many, savings targets have doubled from those that prevailed when the consultants last conducted the Global CPO Survey, and in some cases these savings are a clear requirement for survival.
"Clearly as revenue performance diminishes, companies are seeking to reduce operating costs to support the balance sheet, and as a major lever of cost control procurement is clearly in the spotlight," Capgemini reports. "The response to this focus appears to comprise short-term objectives in the main: top of the list of current initiatives for procurement is the tactical renegotiation of existing contracts in an attempt to slash spend and reflect reduced demand."
The other main activities being pursued target enhanced supplier management and raising the profile of procurement across the organization. Even these can be tracked directly to short-term goals as opposed to more strategic, longer term objectives, the consultants note.
In its third Global Chief Procurement Officer (CPO) Survey, Capgemini reports that the key to successfully navigating the economy's rapids will be reacting quickly but also attacking the "right" problems. "Winners in the current climate will be those procurement professionals who are able to focus on the real issues and demonstrate an agile approach to adjusting rapidly to the unprecedented challenges facing them," the consultancy writes.
The intent of the Global CPO Survey is to provide executives with insight into both macro issues and focus areas so they may be better informed concerning the challenges they face and the decisions they make. The survey is based around responses from more than 150 organizations spanning Europe, North America and Asia Pacific, mainly represented by senior procurement executives.
The latest survey provides a "temperature check" on the world of buying in 2009 and gives a comparison of findings from previous Surveys conducted in 2007 and 2008. The survey also represents a diversity of industries ranging from Energy to Pharmaceuticals and Manufacturing to the Public Sector. "What is common to all respondent organizations is the continuing theme of having to manage and drive value out of third party expenditure," according to Capgemini.
This year's survey provides insight into the impact of the global recession on procurement executives, with nearly seven in 10 participants acknowledging that the current economic recession was having a significant impact on them: increasing targets, altering focus areas and shortening planning time horizons. For many, savings targets have doubled from those that prevailed when the consultants last conducted the Global CPO Survey, and in some cases these savings are a clear requirement for survival.
"Clearly as revenue performance diminishes, companies are seeking to reduce operating costs to support the balance sheet, and as a major lever of cost control procurement is clearly in the spotlight," Capgemini reports. "The response to this focus appears to comprise short-term objectives in the main: top of the list of current initiatives for procurement is the tactical renegotiation of existing contracts in an attempt to slash spend and reflect reduced demand."
The other main activities being pursued target enhanced supplier management and raising the profile of procurement across the organization. Even these can be tracked directly to short-term goals as opposed to more strategic, longer term objectives, the consultants note.
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