Procurement: more value to be added

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What’s the point of procurement? Is it to get the lowest price, build strong business partnerships with suppliers, or a mixture of the two?

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

That there is clearly some confusion over what the priorities should be among C–suite executives is clearly demonstrated by a study from consultants Ayming.

It found that fewer than one-in-five executives felt their organisation has driven significant value from procurement in recent years.

And fewer than half consider their company’s procurement models effective.

Some 58 per cent of CPOs believe that delivering savings is a key concern for their teams over the next two-to-three years, but only 42 per cent of CEOs agree.

Alejandro Alvarez, director of operations performance at Ayming, argues that it’s not enough for firms to focus on merely cutting costs.

“Those companies that have seen the value from good procurement now list it as a strategic priority, and this is no coincidence.”

And he argues that there is an opportunity for future CPOs to take centre stage in driving value and delivering resilience.

These themes are echoed in another piece of research, this time from 1st Executive, the procurement and supply chain recruitment consultancy. This research looked at levels of external spend by subtracting headcount from a range of businesses’ total costs over the last three years.

It found that around half of their overall expenditure is on external products and services. However, many of these organisations do not give the procurement function an overall mandate for both ensuring that external spend achieves value for money and that the business partners with suppliers that are financially sustainable.

The procurement function is critical, particularly in large organisations, but there are clearly opportunities to use it more effectively to add value.

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