06 January 2000 | Elizabeth Bellamy
Top companies will cut their procurement teams by a quarter within the next two years, according to a survey by management consultancy AT Kearney.
Even though external spending by procurement departments will rise to 48.4 per cent of turnover in 2001, 6 percentage points above 1995 levels, the average number of staff will continue its fall from a high of 8.4 five years ago to 5.6 employees next year, the survey said.
Sectors most at risk of losing people by 2001 include the project industries, such as construction and heavy equipment manufacture, where average numbers are falling from 28.2 in 1995 to a projected 12.3. In asset-intensive services, the numbers are expected to fall to 7.7, down from 15.2 in 1995.
"These industries have lagged behind in terms of keeping up with procurement best practice," said Mike Jacobs, vice-president of AT Kearney's strategic sourcing division. "But procurement as we know it is dying, and soon the traditional function will cease to exist."
But industry experts have disputed the findings. Jerry Smith, director of recruitment consultancy Purcon, said: "I don't see any evidence of jobs dropping by 25 per cent."
Mark Williams, operations director at recruitment agency Supply Chain Personnel, was "sceptical" of the figure. But he added that purchasers in smaller firms, where roles tended to be less skilled, were most likely to be affected.
The survey also found that companies were planning to cut supplier numbers by 25 per cent by 2001 as part of the trend towards outsourcing.
The number of companies outsourcing traditional third-party functions, such as maintenance, repairs and operations (MRO), logistics and IT would continue to rise from 29 per cent, 23 per cent and 16 per cent respectively in 1995 to 66 per cent, 59 per cent and 54 per cent in 2001, the survey said. But more firms were looking at contracting out engineering and design and manufacturing and primary operations services, with these rising from 16 per cent to 52 per cent and 40 per cent.
Outsourcing meant that companies could deal with fewer contractors, and so it appealed to companies wanting to focus on their core skills, said Jacobs.
The 1999 Assessment of Excellence in Procurement surveyed 162 companies - including IBM, Honda and Glaxo Wellcome - across Europe, North and South America and Asia.