Procurement in Asia Pacific 'has catching up to do', says report

12 August 2015

The importance of procurement has continued to grow globally, but its status has lagged in Asia Pacific, according to research.

A study by AT Kearney examines best practice in procurement and concludes that organisations in the region have “some catching up to do”, while those in Europe, Africa, the Middle East and the Americas must continue to use best practice to make sure the procurement function remains a vital part of the corporate structure.

The study, Achieving World-Class Procurement in Asia Pacific, includes input from procurement and supply chain executives in more than 185 companies across the world, working in various sectors. It concludes that one barrier to procurement in Asia Pacific is the perception that it is a back-end organisation with an administrative and compliance focus.

Lower procurement benefits and limited adoption of leadership practices mean the stature of procurement in Asia Pacific organisations is less than in other regions.

At Asia Pacific organisations, 65 per cent of spend was influenced by procurement, compared to 79 per cent of “leader” organisations and 72 per cent of “follower” organisations, according to the study. Asia Pacific companies achieved an average of 2.9 per cent procurement benefits compared to 4.3 per cent for typical companies and 6.1 per cent for leaders.

The study concluded there was a shift towards a more strategic role for procurement in Asia Pacific companies, albeit at a slower pace than in other regions. But it also said that globally, the use of leadership practices had not increased substantially, and procurement lacked the influence to reach the next level of performance at many companies.

On the other hand, “leader” companies have achieved higher performance by building a high-performance team, reducing costs through category excellence, creating competitive advantage through supplier capabilities, and investing in the procurement team, the study said. It concluded these best practices demonstrated the economic benefits of developing procurement status and Asia Pacific companies had significant opportunities to improve procurement practices.

It suggested procurement organisations could either maintain the status quo, leading to a weakening of procurement’s impact of company performance, or strive to achieve the full potential of the procurement function.

The study said: “Continuous effort to build on the existing procurement brand is lauded: adopt value management principles, engage stakeholders (especially the chief financial officer), publish performance measurement, and celebrate success.”

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