German supply focus poses trade threat to UK business

28 February 2002
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28 February 2002 | Robin Parker

UK firms should pay more attention to their supply strategies or they could lose business to German companies.

A study of 180 purchasing heads in the UK, Germany and France, each handling around 900 suppliers a year, found that an average of 48 per cent report directly to the board.

But German firms were the most progressive, with 71 per cent reporting to the board, compared with 52 per cent in the UK and only 23 per cent in France.

Graham Opie, director of research group Vanson Bourne, which compiled the study with the London Business School and e-commerce group Ariba, said German firms could stand a better chance of reducing costs and becoming more competitive.

"There is a chasm in how purchasing is corporately perceived, and the role is more strategically linked in German companies," he said.

"The nearer you are to the board, the more likely you are to sell yourself."

Although procurement efficiency was a common goal, 57 per cent had no defined target for improvement, except to save "as much as possible". More than half of the companies polled have either cut spending or plan to begin cuts in this quarter.

The economic downturn is forcing more than half to demand an additional 10 per cent cut in the unit cost of goods and services.

But the study said buyers still have to persuade boards of the need for coherent procurement strategies to achieve savings.

Sourcing and negotiation was identified by 48 per cent as the area where the greatest savings could be made, but purchasers said it was one of the hardest parts of their job.

John Watton, marketing director at Ariba, said many purchasers do not have a clear "road map" to produce the savings.

"Cost management is their priority, but it still seems to be done mostly through haggling."

SMfeb2002

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