'Businesses compete at supply chain level'

Will Green is news editor of Supply Management
7 February 2020

A quarter of firms believe more transparent finance and procurement processes would lead to cost reductions of up to 20%, according to a survey.

A report by Harvard Business Review Analytics, commissioned by software firm Basware, found 60% of survey respondents said a lack of visibility into suppliers’ practices was a “significant” risk management issue and nearly a quarter (24%) said their organisation was “not accurately” evaluating suppliers’ business practices.

The survey, of 779 executives across the globe, found 26% said more transparency in finance and procurement processes would lead to a 11-20% cost reduction. A tenth (10%) said it would cut costs by more than 20%, while a fifth (21%) said costs would drop by 6-10%.

Three fifths (59%) of respondents said their organisation expected procurement and finance teams to drive a culture of transparency.

Guillaume Roels, Timken chaired professor of global technology and innovation at the INSEAD business school, who contributed to the report, said: “Businesses really compete at the supply chain level. You need to find ways to capture the savings and to share the benefits with your supply chain partners.”

The most common reasons for evaluating suppliers were value for money (60%) and cost savings (54%).

The biggest barriers to greater transparency were manual processes, lack of tools and technology, and no way to properly analyse data.

The survey found companies that identified as “very transparent” said they were more successful than their competition (65%), compared with 47% of those who were less transparent.

Klaus Andersen, chief executive of Basware, said: “Chief executives are right to be worried about the reputational and commercial implications of blind spots across their supply chain.

“This report finds that visibility of the flow of money, goods and services is a defining characteristic of successful businesses. This means taking responsibility for not only the quality of goods and services, but also the manner in which they are produced.”

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