Procurement propelled to new heights

9 November 2011

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9 November 2011 | Adam Leach

The urgent need for companies in all sectors across the globe to cut costs has propelled procurement to new heights.

According to the AT Kearney 2011 Assessment of Excellence in Procurement Study, published this week, 90 per cent of the 185 global companies surveyed believe the procurement function has taken on a more strategic role, actively participating in developing business strategy. The report said: “It’s not just business as usual, it's business as unbelievable.”

The report found that competitive supplier selection, technology and developing longer term category management strategies are key for procurement departments. Assessing the quality of the procurement function within the surveyed companies with annual revenues of around $12 billion (£7.5 billion), the report identified 13 leading businesses that share seven characteristics.

Leading businesses also realize the importance of making sure that purchasing strategy is closely related to the overall business strategy. The report found that leading procurement functions are 85 per cent aligned with the wider business in which they operate, while the rest are just 37 per cent aligned.

As a result of being deeply embedded within the wider group, leaders influence less common areas of spend such as research and development, marketing and legal. Another key aspect setting the leaders apart is their approach to category management.

According to the report, the leaders are looking to increase collaboration with suppliers, working together on innovation and product development and implementing strategic partnerships.

John Blascovich, AT Kearney partner and leader of the study, said: “A key finding from the 2011 AEP Study is that supply management organisations that once focused on cost reduction and adversarial relationships with suppliers are now developing long-term category management strategies where collaboration with suppliers on joint process improvement, innovation and new products is delivering top-line value to corporations.”

Three quarters of the leaders reported being involved early on in projects such as being consulted during product development on how to control costs. The companies also led the way in risk management, SRM, and using technology effectively. In addition, they were building a skilled workforce by forming relationships with universities that ran supply chain courses and by offering summer internships.


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