Sourcing/Procurement Trends
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Supply Chain Risk Becomes Strategic Imperative as Need for Cost Cutting Continues
Global study identifies cost control and reduction as "the new normal"; CFOs seen at odds with CPOs, preventing necessary levels of spend visibility, report suggests
Procurement and supply management expert Patricia Moser, co-author of 1 Piece of Advice, discusses how the recession offers an opportunity to make positive and profitable changes in supply chain. In this online interview, posted October 20, 2009, Moser-Stern speaks about how important it is to have supply chain's voice at the corporate strategy table now and in the future.
Stamford, CT — November 18, 2009 — The relationship between businesses and suppliers is hanging in the balance as cost-cutting options narrow, and chief financial officers (CFOs) and chief procurement officers (CPOs) of large organizations continue to struggle, despite reports of the economy beginning to lift out of the recession, according to a new research report released this week.
According to the report, from procure-to-pay solution provider Basware and leading academic Mark Frohlich, associate professor of operations management at the Kelley School of Business, CFOs and CPOs continue to apply existing approaches in cost control to tackle the ongoing demands of a tough economic climate.
Following a study of CFOs conducted in June 2009 that showed only 28 percent of businesses associate financial risk with procurement, the latest report provides more insight into how large organizations are struggling with risk evaluation and cost control. Cost control and reduction has become "the new normal" going into 2010, with the urgency for reactive cost-cutting measures continuing to supersede longer-term investment-driven directives, the report suggests.
The report, called "The Cost of Control: The Real Price of Cost Cutting," also identifies a growing trend of increased levels of finance and procurement collaboration, as well as transparency among businesses seeking to overcome finance and purchasing challenges.
Key findings from the research include:
Risk not reward — The majority of respondents are aware of the instability caused by constant cost-cutting efforts in the supply chain, and they are struggling to find another way to meet their business goals. Organizations also are focusing on the discrete risk of a major disruption while failing to address the more likely and potentially disastrous scenario of the sequential risk of incremental, smaller problems that arise in the supply chain.
CFO/CPO tensions — Departmental tensions between finance and procurement are common, though the absence of good relations is regretted by both CFO and CPO respondents. The lack of collaboration between these groups poses clear risks as spend visibility is vital. However, both finance and procurement professionals see benefits in improving relations. There is a clear emerging trend toward using technology as a way of overcoming operational challenges and harmonizing "buyers" and "payers" within the business.
Automation needs — The need for urgent tangible cost savings place automation of finance processes at the forefront of business IT needs. The report suggests that procurement is more likely to make an impact on commercial goals if high levels of automation and integration are applied in tandem.
According to the report, from procure-to-pay solution provider Basware and leading academic Mark Frohlich, associate professor of operations management at the Kelley School of Business, CFOs and CPOs continue to apply existing approaches in cost control to tackle the ongoing demands of a tough economic climate.
Following a study of CFOs conducted in June 2009 that showed only 28 percent of businesses associate financial risk with procurement, the latest report provides more insight into how large organizations are struggling with risk evaluation and cost control. Cost control and reduction has become "the new normal" going into 2010, with the urgency for reactive cost-cutting measures continuing to supersede longer-term investment-driven directives, the report suggests.
The report, called "The Cost of Control: The Real Price of Cost Cutting," also identifies a growing trend of increased levels of finance and procurement collaboration, as well as transparency among businesses seeking to overcome finance and purchasing challenges.
Key findings from the research include:
Risk not reward — The majority of respondents are aware of the instability caused by constant cost-cutting efforts in the supply chain, and they are struggling to find another way to meet their business goals. Organizations also are focusing on the discrete risk of a major disruption while failing to address the more likely and potentially disastrous scenario of the sequential risk of incremental, smaller problems that arise in the supply chain.
CFO/CPO tensions — Departmental tensions between finance and procurement are common, though the absence of good relations is regretted by both CFO and CPO respondents. The lack of collaboration between these groups poses clear risks as spend visibility is vital. However, both finance and procurement professionals see benefits in improving relations. There is a clear emerging trend toward using technology as a way of overcoming operational challenges and harmonizing "buyers" and "payers" within the business.
Automation needs — The need for urgent tangible cost savings place automation of finance processes at the forefront of business IT needs. The report suggests that procurement is more likely to make an impact on commercial goals if high levels of automation and integration are applied in tandem.
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