Purchasers struggle to crack budget 'black holes'

18 March 2004
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18 March 2004

Purchasers continue to struggle with tracking and influencing spend in services "black holes" such as marketing, travel and facilities management, consulting and temporary labour, according to a major new survey.

The most difficult aspect in establishing control, according to a third of the 225 procurement directors polled, was understanding the complexity of pricing structures of service agreements.

Only half of respondents to the European Spend Agenda 2004 survey, carried out by Vanson Bourne, said that in these areas they could see where more than 25 per cent of spend had gone, and with which suppliers.

But the survey of purchasing directors from large companies in the UK, France, Italy, Germany, Spain and the Benelux countries, found those reporting directly to the board had the highest levels of visibility of difficult areas, sometimes up to 75 per cent of spend.

Purchasers reporting to the board also said they had greatest control over this spend, said Jamie Anderson, programme director at the Centre for Management Development at the London Business School, which produced the survey in conjunction with software firm Ariba.

But Anderson said those procurement directors reporting to a board member put less emphasis on processes as the reason for control over spend. The ability to communicate with all levels in the company was more important for gaining control where they had no direct authority.

Anderson believed having greater control over spend through improved visibility would get a procurement director noticed by the board. But once at board level, the real issue was not about the technology and visibility, but about the ability to influence people at the highest levels.

"Firms that have board-level procurement representation are better at establishing the mandate for changes to buying across different functions and this translates into better control," he said.

The survey also found that there is still a strong belief, noted by more than half of directors, that better analysis of purchasing data would make them more efficient in areas such as supplier management.

Companies in the survey were in the financial services and manufacturing sectors with a minimum turnover of £250 million.

The report is available from ariba@octopuscomms.net or call 01753 672755.

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