SRM Barometer 2012: A World in Transformation
VALUE CREATION AS A TOP PRIORITY
Despite the crisis, procurement departments are moving away from cost reduction strategies and relying on new approaches aimed at improving their contribution to value creation . The objective: reinforce collaboration to enhance innovation and anticipate events likely to disrupt the smooth running of the company .
Like businesses in general, procurement departments are living in an era of globalisation. They no longer hesitate to cross borders and collaborate with an increasing number of international service providers to achieve the best possible results. As a result, sourcing channels have become more complex (often involving chains of 6 or 7 suppliers), and relationships with suppliers are becoming more prominent and strategic.
Procurement currently represents 65 to 80 percent of companies' revenues, compared to 40 percent in the 1980s. This is increasingly important during a time of economic turbulence in which significant efforts are being made to reduce costs and in which the majority of buyers consider that the crisis is an opportunity to renegotiate contracts.
A quest for value...
However, procurement departments are no longer solely fixated on achieving cost savings and improving procurement coverage ratios (professional purchases, i.e. those fully managed by the procurement department, from the statement of need to the steering of supplier relationships). 86 percent of the companies interviewed state that their procurement coverage ratio already exceeds 50 percent, and 94 percent of them consider this rate satisfactory or very satisfactory. They are now setting their sights on other value creation objectives. Thus, 75 percent of the procurement directors interviewed rely on innovation to achieve their objectives. And 80 percent of executive committees expect procurement departments to improve their contribution to value creation.
With this in mind, procurement departments place emphasis on the search for innovations likely to boost business activity, relying in particular on their suppliers' expertise. They also strive to enhance the skills of their teams, implement innovation indicators and develop their links with the R&D and sales departments.
Conversely, the use of labour from low cost countries is no longer unanimously advocated, notably in view of the costs and constraints in terms of supplier qualification, risk control or logistics. Many companies prefer to look for procurement savings in value analysis or "redesign-to-cost" - a method which consists of optimising the manufacturing of products by analysing the cost of the most expensive or new components and looking for less costly solutions for the company.
Download the full SRM Barometer 2012 report for access to the exclusive survey of 284 Procurement Directors / Managers in Europe and North America.
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