Procurement performance worsens on key indicators

posted by Marino Donati
16 September 2015

Procurement could face greater pressure to control spending as global economic stability increases, according to research.

A global study of more than 400 buyers by Zycus, said while the past four years have seen steadily rising performance benchmarks for procurement, this year’s study shows they have fallen back virtually across the board.

It predicted greater global economic stability and growth will increase pressure on procurement to control spending and defend profitability in an environment of aggressive growth strategies and rising inflationary pressures.

According to the Pulse of Procurement 2015 study, as well as traditional procurement objectives such as cost control, supplier performance, and supply chain risk management, process optimisation and internal relationship building are key areas of CPO focus for the coming year.

Many respondents to the study’s survey said they were planning technology upgrades, as although most rated their current technology as adequate for current needs, roughly one third rated it as behind the curve.

The study also noted having state-of-the-art procurement technology coincided with substantially higher reported performance levels for cost savings, spend under management by procurement, contract compliance, and procurement technology adoption.

However, the study noted a fall in the proportion of procurement professionals citing corporate mandates to take greater control of spending, from a consistent 70 per cent over the last four years, to 64 per cent this year. Zycus said the change was “worrisome” in the context of a strengthening economic recovery, which was bound to encourage growth strategies and increased spending, and the fact that procurement’s specific performance objectives remain primarily defensive and bottom-line focused.

The study also noted backsliding in benchmarks for several procurement key performance indicators including spend under management, cost savings and, to a lesser extent, contract compliance.

“All this begs the question of whether procurement organisations might be standing at an important crossroads, where imperatives, focus areas, and activities must shift if procurement is to continue along its transformation journey,” the study said.

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