SECTION ONE Procurement Governance 1 HIGHLIGHTS SECTION SUMMARY
During our post-survey workshops, participants pointed out that the economic downturn has increased their profile as organisations start to look at their supply chain for delivering bottom-line results and gaining competitive advantage. A key ingredient for leveraging the increased attention that procurement and supply chain experiences is well-structured Procurement Governance. Overall, we see a lack of central accountability for procurement as only half of the organisations have a central procurement function to manage all spend on third-party products and services. Formal objectives are primarily linked to cost savings and a set of agreed key performance indicators (KPIs). However, about one in three organisations cannot effectively measure the performance of their procurement and supply chain functions. The majority of the organisations do not seek feedback from internal stakeholders and even fewer organisations (6.7%) are formally assessed by their suppliers. We recommend that organisations start capturing the “voice of the supplier” and adopt a more joined-up approach with their suppliers in delivering results. Contrary to the current volatile environment, organisations appeared not to address risk management in their formal objectives and processes. If cost savings are definitely the top priority of procurement professionals, then risk management should climb up an organisation’s agenda too. We believe this will distinguish the leaders from the followers in the long term. The adoption of procurement processes is high mainly for the operational areas of procurement such as spend authorisation and procurement-to-pay, and less for the adding-value processes such as category management, contracts management and risk management. It has been interesting to note that organisations recognise that business results come through people’s capabilities and consider this a key area to improve in the next two years. We would also argue that procurement should become a good salesman of its services internally and with suppliers in order to revive its positioning in the organisation and exploit its true potential.
• 44.3% of the organisations do not have a central procurement and supply chain function that manages all third-party spend. • Cost savings is by far the most popular objective, followed by efficient sourcing and improvement of procurement processes. • Only 28.4% of the organisations have an objective to mitigate the risks in their supply chains. • One in three organisations has difficulties in measuring the benefits delivered by procurement.
• Performance of procurement is primarily based on the achievement
of cost-saving targets and assessment against KPIs.
• Only 6.7% of the organisations seek feedback from their suppliers regarding the performance of the procurement function.
• The biggest challenge is low (or cuts to) procurement budgets.
• Improving people’s capabilities is the key improvement area for most organisations. Market and commodity knowledge is considered in most need of improvement. • The majority of organisations have put in place basic operational procurement processes such as spend authorisation, procurement- to-pay and procurement policy. • Less than half of respondents work regularly with functions other than finance and warehouse / logistics.
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