Welcome to the first Whitepaper Wednesday of 2009! We’re going to start off the year with a review of a whitepaper entitled “Called to the front: Driving procurement success by leveraging the economic downturn” from Efficio and Procurement Leaders magazine.
This whitepaper is based on the results of a survey of over 200 procurement leaders. Despite the title, the statistics in this whitepaper not only cover topics related to the economic downturn but also predictions of the future of procurement, making for quite an interesting read. In this post, I’ll cover the economic downturn piece. However, I may just dedicate a future Whitepaper Wednesday to the future of procurement piece, as I think that the authors’ findings are rather interesting.
As one would expect, reliance on procurement for cost savings has increased in today’s economic climate. The whitepaper states “The negative macroeconomic factors are already having an impact on procurement. The most direct influence of the economic trend can be seen in increased savings targets, which two thirds of our respondents report.”
The survey responses were collected up to August 2008, which I believe precedes when the economy went from bad to worse. This makes one wish that some findings could be updated with more current data. One example is this excerpt: “Because organisations require procurement contribution more than ever, they are willing to spend more time and resources on this and ensure that procurement efforts can be directly linked to – and accounted for – in the company’s results…The wider organisation is giving more focus and attention to the procurement contribution, relatively sparing procurement departments from the downturn.”
Obviously, there have been hundreds of thousands of layoffs since the survey was concluded and my personal observation is that procurement departments aren’t necessarily being spared to the degree implied in recent months.
In several sections, the whitepaper reports that respondents see the economic downturn increasing their need to go “back to basics” in their strategies: “Although procurement’s strategic role has become increasingly prominent, cost-cutting still appears to be a standard reflex to an economic downturn. Despite the developments outlined above, cost cutting programmes are considered the main area where procurement delivery is expected to support the wider business targets. This perception is not just confined to the boardroom: a surprising 90% of our respondents agree that cost-cutting programmes are the pre-eminent area where procurement can expand its current scope.”
In a hierarchy of focus areas, “innovation” is fifth, which I’m sure would send the doctor from Sourcing Innovation into a tizzy.
The whitepaper includes a graph showing how performance measures are expected to be different three years from now (after the recession) vs. today (during the recession). This reinforces the premise that cost savings is king in bad economic times while good economic times allow more creativity and flexibility to expand the strategic positioning of procurement within the organization.
Another fantastic piece of the whitepaper is the key sourcing levers for use in an economic downturn. There are several areas of overlap with the recent Next Level Purchasing podcast and PurchTips article “Cost Reduction Ideas (Beyond Sourcing).”
The whitepaper concludes with “5 key areas that procurement functions need to have right to ensure they are delivering the best value for their organisation in the current climate.” I’ll list them here, but downloading the whitepaper will give you full explanations:
- Get the basics right
- Prioritize SRM
- Greater focus on value creation and risk management
- Measure with the right KPI’s
- Become an integral part of ongoing business discussions
If you’d like to download your own copy of the whitepaper, go to http://www.procurementleaders.com/network-research/efficio-survey-nov-08/. Registration is required and I believe that the whitepaper is emailed manually.