Best firms make strides

3 February 2009

03 February 2009 | Paul Snell

The gap between the best procurement functions and those following in their wake will widen as they use the economic decline to their advantage.

According to consultancy AT Kearney's sixth Assessment of Excellence in Procurement, which examines the purchasing functions of more than 500 companies globally, market conditions have made it tough for buyers but not for leaders in the profession.

"CPOs do not look at it as a crisis for procurement, but a window of opportunity," said Wolfgang Steck, vice-president procurement at AT Kearney. "They have gone into overdrive. The leading group is taking advantage, while the follower group is doing 'business as usual' and will fall further behind."

But, he added, many firms now have a new determination to improve their purchasing, often driven by a new CPO, and this was paying off. "If you really want it and you have the backing you can go far."

The study found the best companies were able to achieve annual cost savings on direct materials of 4.5 per cent, compared with the 3.6 per cent for followers. There was also a difference in the volume of spend on which these savings were achieved - 70 per cent for leaders, 50 per cent for the followers.

"They often work in categories where there is not a traditional acceptance of procurement - media, marketing and legal. They can very quickly get access to spend. No mandate is any use without access."

Stephen Easton, principal at AT Kearney, added up to 80 per cent of leading organisations have established mechanisms to measure innovation, such as assessing how many ideas are initiated by suppliers and how long they take to implement. This was only the case in 22 per cent of followers.


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