Research digest

CPO PRIORITIES

Getting more spend under management is the main goal of most CPOs over the next three years, according to research by Aberdeen Group.

An aggregate of 58 per cent of CPOs saw this as their priority, although this was only the main focus for 39 per cent of best-in-class companies (defined as those that already had 70 per cent of spend under management and comprising the top 20 per cent).

These organisations saw improving supplier development (69 per cent) and enhancing people skills and capabilities (44 per cent) as the priorities (see chart, below). The most common strategy to increase spend under management was to utilise spend analysis more effectively (74 per cent), followed by promoting the value proposition to the broader enterprise (49 per cent) and focusing on compliance visibility (49 per cent).

The research also highlighted the main barriers to procurement transformation in both best-in-class and other organisations. Misaligned processes and systems was seen as the biggest obstacle for both sets (65 per cent and 76 per cent respectively), followed by recruiting and retaining skilled people (62 per cent and 50 per cent).

But a lack of executive support was far more of a challenge in companies that were not seen as best-in-class, highlighted by 45 per cent of these compared with 18 per cent of best-in-class organisations.

www.aberdeen.com

FUTURE CHALLENGES

Sixty-eight per cent of global organisations do not have a clear idea of how they will have to change to meet the challenges of the next five years, a study by McKinsey suggests.

Only 19 per cent of executives felt confident their organisation was well placed to manage change and 31 per cent were unclear as to who in their company was accountable for ensuring challenges were met. The trend that executives believed would have the biggest impact on their business was global competition for talent, nominated in the top three choices by 47 per cent of respondents (see chart, below).

The biggest challenges were identified as ensuring knowledge is shared across the business quickly and effectively (by 51 per cent), finding the right cost base and pricing model for products (44 per cent), and managing operations in an environmentally sound manner (41 per cent).

www.mckinseyquarterly.com

OUTSOURCING

Organisations are achieving their outsourcing objective of saving money but failing to achieve longer-term, strategic benefits.

According to research by Deloitte, 83 per cent of companies met their target of getting a return on investment of just over 25 per cent, and 70 per cent were either “satisfied” or “very satisfied” with the arrangement.

But the survey also found that many executives thought they could achieve more from outsourcing deals. Only 34 per cent, for example, felt they had gained important benefits from innovative ideas or business transformation initiatives, while 35 per cent wished their company had spent longer evaluating vendors in the first place.

Asked what they would do differently if they could start again, 49 per cent would define realistic service levels that aligned with business goals (see chart, below).

Yet the overall aim of outsourcing remains efficiency-driven. Sixty-four per cent said a primary driver was to reduce cost, with 56 per cent wanting to leverage technology expertise and 49 per cent seeking cheaper labour costs.

www.deloitte.com

RISK MANAGEMENT

Only 9 per cent of CFOs think they make a full contribution to managing supply chain risk, even though 66 per cent identified enterprise risk management as an important part of their role.

Seventy-two per cent said they made only a partial or ad hoc contribution, and19 per cent did not know how far their department was involved in this activity, according to IBM’s global CFO study.

Supply chain risk ranked last in a list of nine risk elements (see chart, left) managed by CFOs, which was topped by more traditional financial operations.

Yet the study also revealed that 87 per cent of the risks that caused a fall of 30 per cent or more in a company’s market capitalisation were non-financial and only 52 per cent of CFOs had any sort of formalised risk management programme.

This was despite 62 per cent of companies with revenues of over $5 billion being affected by material risks in the last three years and 42 per cent of CFOs admitting they had not been well prepared.

“This inconsistency between the external reality of globalisation and an internal ability to address it should be a moment of concern for many CFOs, if not outright panic for some,” the report said.

www.ibm.com

 PROCUREMENT'S STATUS

There is a growing gap between the demands placed on CPOs and the resources available to them, a study of German CEOs by BrainNet concluded.

Although procurement was increasingly expected to be involved in innovation, risk-profiling and product design, only 30 per cent of CEOs thought the procurement department was adequately networked with other departments, while the CPO sat on the board in only 10 per cent of companies.

It also revealed that while 81 per cent of CEOs were able to quantify the savings generated by the procurement department, only 13 per cent could measure its impact on earnings before interest and tax (Ebit).

www.brainnet.com