Risk a low priority in strategic sourcing

14 April 2011

14 April 2011 | Lindsay Clark

Only 35 per cent of organisations assess supply risk as part of their strategic sourcing efforts, a research firm has found.

The Aberdeen Group surveyed 315 business managers from across the globe, 72 per cent of whom were in sourcing, supply chain or procurement, to find that risk analysis was one of sourcing’s “weak links”.  

“With a seemingly uncertain economic outlook and an increase in geopolitical challenges today, major suppliers could face bankruptcy or supply chain disruption issues, causing not only an increase in cost, but also adverse effects for organisations relying on raw/direct materials for product development,” The State of Strategic Sourcing report said.

It found 57 per cent of organisations perceive strategic sourcing as high value, while 60 per cent have top down directives to encourage it to increase costs savings. Overall, the Aberdeen Group found the more corporate spending is managed by the sourcing team, the greater potential value supplier contracts can provide.

However, the research showed technology was sometimes underused. Only 28 per cent are relying on data analytics for future sourcing projects, for example.

The report compares “best-in-class” sourcing teams with the remainder of organisations. Relative to the rest of the field, those considered best in class have 72 per cent higher contract compliance, a 37 per cent higher rate of spend under their control, and a 52 per cent higher rate of implemented cost savings.

Organisations lagging behind in strategic sourcing should implement spend analysis programmes, ensure procurement, sourcing, finance and other business units collaborate, and standardise strategic sourcing processes across the organisation, the group said.

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