Senior execs unclear on procurement's role

13 March 2012

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13 March 2012 | Adam Leach

More than a fifth of senior executives “are not at all sure” of procurement’s role in their business.

A survey of 304 C-level bosses, vice presidents and senior managers at Fortune 1000 companies found 22 per cent were unclear on the specifics of purchasing’s position in the organisation.

In addition, just 8 per cent believed procurement is a “highly strategic” function, with a further 18 per cent saying it provides “a lot of strategic value”. But 31 per cent said it delivers “some strategic sourcing” and 21 per cent reported it primarily performs a tactical role.

The poll, published by Procurian, also found 52 per cent of those questioned saw cutting costs as one of their main three objectives. Half of respondents identified indirect and non-product input costs as the number one area where they will look to drive savings. Just a quarter of respondents said they would be looking to save money through layoffs.

“With the slow growth that we’ve seen globally, it’s no surprise that companies remain focused on managing costs in 2012,” said Procurian CEO Carl Guarino. “What’s unique about this data is that the majority of companies are focusing on their indirect costs, which is an area that has been largely unmanaged in the past.”

While the results suggested a heightened appetite to bring indirect costs under control, they also highlighted a number of challenges that could prove a barrier to getting control of indirect spend.

Asked what makes managing indirect spend a challenge, 44 per cent said resources are limited or already focused on direct spend, 28 per cent said purchasing decisions were made by thousands of people and therefore difficult to control and 15 per cent said budget holders resisted rigorous, fact-based sourcing processes.

And although 12 per cent said their procurement teams did not have recent pricing benchmarks, 27 per cent said managing indirect spend doesn’t present a challenge.

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