Procurement and finance must collaborate to control costs

1 October 2009

02 October 2009 | Allie Anderson

Buyers must work closely with finance departments to minimise damage caused by unstable costs, according to consultancy Accenture.

Its latest report, Taking control in the new era of price volatility, said in times of market instability, risk management in procurement is essential to mitigate currency fluctuations and control the costs of goods and services.

Traditionally, Accenture said, risk management has been the remit of the finance department. By aligning it with the procurement function, buyers are less likely to expose the company to risks that should be avoided.

"Clearly defined and shared responsibilities are needed to ensure that finance and procurement work together to pool risks across the purchasing functions and hedge the company's total position accordingly. This can help individual buyers see the impact their purchasing decisions truly have on the company," said the report.

Accenture also said it is critical to understand demand in the supply chain, from product development, procurement, production and sales.

"Each of these functions must be integrated into procurement planning to determine and manage demand," the report said. Accenture added that up-to-date market information could help planning, prevent panic buying, minimise transport costs and facilitate price negotiations.

SMoct2009

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