CPOs forced to focus on cost cuts

13 October 2010

13 October 2010 | Lindsay Clark

Despite CPOs wanting to concentrate on achieving value for money, cost cutting remains the priority, research from the Aberdeen Group has found.

The survey of 416 procurement professionals found that, when asked to pick from a list the top two pressures driving procurement focus, 69 per cent selected “a top-down directive to cut costs”.

Twenty-seven per cent chose “increasing supply risk”, while 21 per cent cited a lack of visibility into enterprise spending.

Of the top fifth of organisations in procurement performance, which Aberdeen deems “best-in-class”, 91 per cent were able to achieve savings of 10 per cent or more.

In the bottom 30 per cent of organisations, only six per cent made savings of 10 per cent or more, said the report From Preservation to Prosperity: The CPO’s Agenda for the New Decade.

Although there was awareness that collaboration among business functions could improve savings, 74 per cent of organisations do not work in this way.

“Whether the chosen metaphor is working in a silo, or living in a bubble, a lack of collaboration translates into operating with incomplete information – and the ramifications of that are well understood,” said the report, which was based on responses from five continents.

Inter-departmental collaboration scored highest in the survey’s assessment of the area in which organisations would like performance to improve.

The next decade will start with CPOs seeking closer alignment with the business strategy, the report said.

“Responding companies see improved alignment between procurement and overall corporate business objectives as their top strategy moving into 2011,” it said, “and this action must be communicated across functional areas and throughout the executive ranks.”

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