Cost-cutting drops as a priority - Supply Management

Cost-cutting drops as a priority

30 July 2018

The number of procurement professionals prioritising cost-cutting has halved over the last three years, a survey has found.

The Advanced Procurement Trends Report found just 40% of respondents said cost-cutting was their main objective, compared to 80% three years ago. The report said the emphasis has moved to becoming more strategic, improving contract management and effective spend analysis.

Mark Dewell, managing director of public, private and third sector at Advanced, said: “It’s extremely positive to see the historically tactical perception of procurement starting to fade in favour of a much more strategic and business critical function.

“Our research shows how procurement is adapting to new challenges and playing a more valuable and vital role in today’s increasingly agile and competitive organisations.”

The report, now in its seventh year, surveyed 175 business professionals globally in February 2018.

It found the levels of savings procurement departments have been achieving has changed little from last year, with 40% of organisations delivering up to 5% savings. A further 28% are delivering 6-10% savings.

Nearly two thirds (61%) of respondents said they had a procurement strategy that was either closely or completely aligned with their organisation’s needs, and the public sector was “leading the way” in aligning strategy with organisational objectives. The report suggests this could be because governments are “driving behaviour within this sector towards free and open competition as well as value for money”.

Savings targets were also higher in the public sector than the private sector, the report found. Nearly 20% of public sector respondents said their savings target was greater than 15%, compared to just 14% of organisations overall.

The report also said the move towards more strategic procurement was accompanied by an increase in the importance of data and technology. It found 96% of organisations planned to maintain or increase their investment in technology.

Dewell said there was excitement in the industry around emerging technologies including AI, robotics and blockchain, but added: “It’s clear the current focus remains on more established technologies, such as supplier networks and the cloud, which are essential components in streamlining processes and boosting productivity.”

The report did find some hurdles to procurement. More than a quarter (27%) of respondents said being seen as a barrier not an enabler was procurement’s biggest challenge, while nearly a quarter (24%) said it was a lack of resources or investment. Moving from a tactical to a strategic function was still seen as the main barrier by 22% of respondents.

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