SECTION TWO Category Management 2 HIGHLIGHTS SECTION SUMMARY
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Through our survey and subsequent workshops, we see that procurement and supply chain professionals are very focused on spend management and they recognise that they are put on the spot for improving the bottom line by reducing costs. Visibility and analysis of spend is a prerequisite of any cost-saving initiative and this appears to be addressed in the vast majority of the organisations that took part in the survey. The results show that most organisations look to their procurement and supply chain function to deliver cost savings. This externally focused approach includes negotiating pricing with existing suppliers and looking for new suppliers that can deliver products and services more cost-effectively. We argue that the cost-savings journey has to start at an earlier stage, since in many cases the best way to save money is to not spend it in the first place. Internally focused practices such as challenging internal demand, improving the team’s capabilities in eSourcing or strategic sourcing are used by less than a third of organisations. Similarly low is the percentage of organisations that focus their efforts on categories that have not been efficiently managed in the past – a potentially rich source of cost-saving opportunities. We noted an overall positive view of contracts management processes in Greek organisations, which appear to be a lot better than the average of our global clients. We believe that the level of efficiency in contracts management may be overstated in the survey – a perception that we discussed and validated during our post-survey workshops. We recommend that organisations regard their supplier contracts not as a “tick the box” exercise, but as an opportunity to reduce spend and risk, improve performance and even increase revenues. Finally, despite to the highly uncertain environment, we found that there is a relatively low level of proactivity in managing supply chain risks and that a lot more work needs to be done in this area. Although it appears that risk management is high on people’s agendas, we do not see much evidence that risk management has become integral to most organisations’ DNA.
• The majority of organisations (91.8%) conduct a spend analysis at least once in a year. • Three in four organisations do not use risk considerations to assess the importance of a category. • Categories are mainly assessed based on their profit margins and level of spend, rather than on the underlying risks and complexity. • The majority of organisations implement cost-saving programmes that include price negotiations, working with new suppliers and other strategic sourcing initiatives. • One in three organisations challenges internal demand and uses this lever to introduce cost savings. • Only one in four organisations focuses on their worst-managed categories for identifying cost savings. • Eight out of 10 organisations have a contract repository and good visibility of their third-party contracts. • One in four organisations have not conducted contract due diligence in the past 2-3 years. • 84.1% of organisations believe that there are inherent risks in their supply chains; financial health of suppliers is the top reported risk. • Greek organisations are consistently less proactive in managing supply chain risk than other global organisations. • Only 15.9% of organisations communicate their risk management expectations to their suppliers.
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