Suppliers' profits hit by failings in procurement

3 September 2003
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04 September 2003 | Robin Parker

Purchasing remains an "organisational backwater" among automotive suppliers because they are not adopting the leading-edge processes of their customers, according to a major report.

Only by following the example of leading manufacturers can suppliers hope to increase their profits, the report from global consultancy McKinsey says.

While 78 per cent of firms acknowledge that senior management sees purchasing as strategic, only one in four calls the profession a "magnet for top talent".

And suppliers' desire to collaborate with their suppliers is further crippled by not involving purchasers early enough in the development of new products.

More than half of the 50 global suppliers surveyed have integrated sourcing strategies across their business units and use cross-functional teams to buy direct goods.

But only a third take similar measures for indirect supplies.

Three out of four don't benchmark costs against competitors, and 88 per cent do not calculate the exact cost of products, although both practices are common among their customers.

The report also slams the suppliers for having "misplaced faith" in e-procurement.

Although only a third claim to be satisfied with e-procurement technology, half plan to spend more on it in the next three years.

The findings echo recent research by the Society of Motor Manufacturers and Traders (SMMT), in which four out of five car parts manufacturers said both customers and suppliers lacked the skills needed to make supply chains competitive.

Christopher Macgowan, chief executive of the SMMT, said the combined studies prove that purchasing needs a clearer path to achieve its full impact.

"While the world gears up to make best use of e-commerce, this research shows that basic human skills must be developed first of all," he said.

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