51% of executives don’t think procurement is effective

21 June 2017

More than half (51%) of executives do not think their current procurement model is effective, a survey has found.

The survey of 200 executives, including CEOs, CFOs and CPOs, found that only 17% of respondents thought their business's procurement function was "entirely strategically focused". Fewer than one in five thought the function had driven significant value for their organisation in recent years.

Conducted by consultancy firm Ayming, it also identified a gap between how heads of procurement and CEOs view the function’s performance.

“While [CPOs] are looking to external fixes such as new technology to improve performance, the executive team is more likely to want procurement teams to change their culture and become more proactive in seeking out a central role in business strategy,” the report said.

The survey involved a number of executives from businesses of different seizes and across a range of sectors.

It found that 90% of CPOs thought technology was the answer to improving efficiency, while only a quarter (26%) said it was departmental reorganisation. Answering the same question, 76% of CEOs said technology and 58% reorganisation.

Similar disparities were found in the perceived goals of procurement. Over half (58%) of CPOs said delivering savings was a key concern, but less than half (48%) of CEOs thought so. Nearly half (48%) of CPOs thought value creation or cost savings through procurement would be part of their company’s core strategy, while less than a third (28%) of CEOs felt the same.

Alejandro Alvarez, director of operations performance at Ayming, said procurement needed to makes sure communication with its stakeholders was “as seamless as possible”.

He added that global political uncertainty, including climate change and Brexit, created an opportunity for procurement to “drive value and deliver resilience”, but that this would only happen if its objectives were aligned with those of the wider business.

“Those [CPOs] who help their companies to grow by delivering the services they need at the best possible value will earn their place at the top table,” he said.

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