Study Indicates Procurement Function is Increasingly Strategic for Businesses
News Release -- December 14, 2010
Role Has Moved Beyond Cost-Reduction to More Focused on Supplier Relationships and Strategic Initiatives
FALLS CHURCH, Va., Dec. 14 – CSC (NYSE: CSC) announced today the results of the second edition of the Supplier Relationship Management (SRM) “barometer,” a survey which investigates the role and challenges of the procurement function within the supply chain. This research has been conducted in collaboration with TNS-Sofres, the world's largest Custom Market Research specialist. TNS-Sofres was responsible for data collection and the analysis was performed by CSC. The survey examines the trends and outlook for procurement directors in major European and North American businesses. This year’s edition reveals a new dimension of the procurement function: performance has become much more crucial as more procurement tools have become available to enable larger contributions to both corporate strategy and results.
The shift in the procurement function
The Barometer illustrates that the recent financial crisis has broadened the scope of the procurement function. As a result, buyers, who in the past were often considered just negotiators, are playing an increasingly prominent role within the company, acting in the capacity of experts capable of proposing solutions (e.g. Process or product design improvements)to their management and internal customers as well as their suppliers. In practical terms, the more complex and strategic role procurement managers are now playing focus on high value-added tasks, such as the negotiation of strategic contracts, expenditure analysis, procurement marketing or interaction with requisitioners.
Technology breakthroughs via the transformation of the procurement function
The SRM Barometer also shows that procurement departments are making widespread use of new technologies to support the growing importance of their role and the procurement process itself. For example, procurement departments are increasingly acquiring IT tools to optimize workflows and automate the procure-to-pay process. The automation of transactional processes liberates procurement resources to focus on strategic, high value producing tasks. They implement collaborative tools both internally and to communicate with their suppliers — the Internet and local communities are a high priority for 58 percent of companies.
In addition to transactional automation, procurement leaders are employing other technologies to provide information critical to the optimization of their strategic value. Spend analytics, e-Sourcing, supplier quality monitoring (scorecard) and contract lifecycle management are prominent examples of high activity technologies.
In pursuit of best practices
The survey reveals that the financial health and sustainability of suppliers, especially in Europe, has become one of the top priorities of procurement departments, and is monitored by strengthening the partnerships with key suppliers (as indicated by 59 percent of the respondents). The sudden drop in economic activity, combined with the credit crunch, resulted in a record number of bankruptcies in 2008 and 2009. The objective is now to monitor and manage identified risk in order to prevent disruptions in the supply chain resulting from such business failures. Thus, 60 percent of the companies interviewed believe that the relationship with suppliers is evolving.
Nevertheless, cost savings and the retention of previously achieved savings are high on the procurement department’s list of priorities, an objective heavily emphasized as we emerge from the economic crisis. Cost savings are achieved by the sharing of resources, the globalization of procurement, the business expertise of specialized service providers or the outsourcing of low value-added purchases.
Finally, sustainable procurement — incorporating corporate social responsibility into the procurement process — has taken a back seat with regard to procurement department priorities in 2009. The companies interviewed perceive sustainable procurement as a necessity which remains difficult to put into practice: While 90 percent of companies have integrated sustainable development into their priorities, only 7 percent believe they have achieved their objectives in this respect.
“In keeping with the automation of purchasing processes, the current trend is to focus on the core business,” said Stéphane Plovier, vice president of CSC’s Global Business Consulting Division. “Cloud computing, for example, responds to this new requirement and offers a flexible solution that is easy to deploy in complex organizations. To meet these demands, CSC has launched CloudSRM, a Software-as-a-Service offering, based on the Force.com technology. The idea is to provide our customers with a flexible, on-demand solution to increase their procurement performance.”
- The SRM Barometer survey was conducted by telephone (CATI method) in June and July 2010 by the TNS-Sofres polling organization.
- It is based on a sample of 162 procurement directors or managers from private and semi-public companies:
- Located in the USA, France, Germany, Great Britain, Italy, Spain, Portugal, Belgium and Luxembourg
- Employing at least 1,000 staff members
- A summary and the full survey is available on www.csc.com/SRMBarometer2010
CSC is a global leader in providing technology-enabled solutions and services through three primary lines of business. These include Business Solutions and Services, the Managed Services Sector and the North American Public Sector. CSC’s advanced capabilities include system design and integration, information technology and business process outsourcing, applications software development, Web and application hosting, mission support and management consulting. The company has been recognized as a leader in the industry, including being named by FORTUNE Magazine as one of the World’s Most Admired Companies for Information Technology Services (2010). Headquartered in Falls Church, Va., CSC has approximately 94,000 employees and reported revenue of $16.1 billion for the 12 months ended October 1, 2010. For more information, visit the company’s website at www.csc.com.