Procurement Seen Gaining More Strategic Role in Fortune 1000

Enterprises elevating procurement to level of strategic component of competitiveness, study suggests

Enterprises elevating procurement to level of strategic component of competitiveness, study suggests

Stamford, CT — June 28, 2004 — Many Fortune 1000 corporations are rethinking procurement's role as it pertains to global sourcing, business outsourcing and contract management, with an eye toward elevating purchasing to the level of a strategic component of the enterprise's competitiveness, according to a new study from business consultancy Archstone Consulting.

The companies surveyed spanned multiple industries, including manufacturing, financial services, consumer package goods and retail, and the study identified four major trends that Archstone believes will universally impact every procurement organization over the next three years.

Elevating Procurement's Role and the Need for a Strategic Plan

Nearly 90 percent of participants agreed that procurement plays a strategic role in the competitiveness of their organization but needs to be further elevated in the organizational hierarchy to be truly effective. Meanwhile, there was clear consensus of the need for a formal strategic plan/strategy for procurement, yet only 58 percent have one in place.

Procurement's Role in Strategic Outsourcing Execution

Companies will increasingly use their strategic procurement groups as critical participants in the outsourcing process. (Procurement is major driver in close to 90 percent of outsourcing deals).

Global Sourcing as Part of the Procurement Function

Nearly 75 percent companies who responded indicated that they will be increasing their global sourcing activities over the next three years.

Procurement's Role in Contract Management and Optimization

Sixty-six percent of respondents indicated they have a dedicated contract management team in place, yet only 25 percent indicated there was a standard process for managing contracts.

"Over the last five years, the role of procurement has changed more than ever with the economic climate and has become increasingly more strategic," said Robert Derocher, Archstone Consulting principal and co-author of the study. "Companies are realizing that a strategic procurement capability is critical to both cost competitiveness and the ability to drive major organizational change, such as business process outsourcing."

Archstone carried out the survey from November 2003 through March 2004. The survey was titled, "Positioning Strategic Procurement for the Future: Opportunities, Trends and Best Practices for Extending the Value of Procurement," and the findings are based on a combination of nearly 50 Web-based and written responses from a focused survey.

The majority of respondents were leaders in their respective organizations, with 70 percent holding the titles of director, senior director, vice president, senior vice president, chief procurement officer or president.