PurchasingB2B

Procurement emerges stronger from the recession


December 15, 2010
Franca Romano

Amajority of global CPOs confirm that the procurement function emerged from the global downturn a winner, with an improved image within their organizations.

Capgemini Consulting’s recently released 2010 Global Chief Procurement Officer (CPO) Survey was based on over 150 responses from the CPOs and senior supply chain leaders of over 150 global companies from around the world, in a cross section of sectors including manufacturing, financial services, energy, utilities, retail, public sector and communications.

Cost reduction continues to be a major focus, with savings targets increasing as they did in 2009 (over 40 percent of respondents have savings targets of nearly 10 percent for 2010). Strategies procurement executives are employing to achieve these targets include contract re-negotiation, tighter contract compliance, global sourcing, hedging and moving to outsourced procurement services. However, almost 80 percent of survey participants said that top management expected them to improve the overall value contribution of procurement.

There is a clear and emerging focus on strategic initiatives that can enhance the value delivered by procurement. These strategies include proactive value creation through innovation; contribution to corporate sustainability objectives; developing reciprocity agreements with suppliers; increasing speed to market and a focus on total cost of ownership.

Nearly 70 percent of the respondents indicated that procurement reports into the board room and another 25 percent report directly into the CEO. This clearly shows the improved position and importance of the procurement function within the organization. There is a continued trend towards centralized procurement operating models with over 40 percent of the surveyed companies favouring the centralized model and another 50 percent favouring a centre-led/hybrid model.

The amount of organization spend controlled by procurement has increased slightly compared to last year. For over 70 percent of the companies surveyed, “spend under control” of procurement is well above 60 percent. This trend is attributable to the increasing influence of procurement on sourcing various non-traditional categories including, for instance, legal or other professional services.