CPO Survey Shows Rising Pressure for Cost Savings

Sept. 11, 2009
Spend visibility remains a key problem and has been the top issue facing CPOs for two years running.

With companies focused on cost reduction to sustain profitability and even survival, it's not surprising that Capgemini's third annual Global Chief Procurement Officer (CPO) Survey finds nearly seven in 10 procurement executives reporting the recession is having a significant impact on them. Last year, 70% of CPOs said their companies were targeting procurement savings of 5% or less. This year, that figure dropped to 47% but those tasked with finding savings of 6% to 10% doubled from 19% to 39% and those charged with finding savings of 10% or more also doubled from 7% to 14%.

The CPO survey found a widespread shortening of the planning time horizon and a greater focus on tactical objectives. For example, 20% of the procurement CPOs reported they are being called on to renegotiate existing contracts "in an attempt to slash spend and reflect reduced demand." The survey also revealed more attention to supplier management as companies attempt to cope with the threat of supply disruption caused by supplier bankruptcies. CPOs also reported more consideration of raising the profile of procurement across organizations. Capgemini says this could be "traced back to a need to work better with stakeholders, internal customers, suppliers and end-user groups to drive lower cost fit-for-purpose specifications."

Other key issues revealed in the survey:

  • More than 60% of procurement executives reported less than 20% of their spend was channeled through technologies that support source-to-contract activities such as eRFI, eRFQ and auctioning together with transactional eProcurement tools.
  • Spend visibility remains a key problem and has been the top issue facing CPOs for two years running. "The all-too-common problem is that what information is available is poor, too high level and poorly aligned to meet these needs," notes Capgemini.
  • Attracting and retaining talent is a key concern, particularly as procurement departments struggle to execute effective strategies. With the development of talent a slow process, companies are faced with either recruiting what procurement talent is available or using interims/contractors.
  • "Lasting solutions seem to be evading companies in the main," Capgemini concludes. "While this continues it will serve only to denude organizations of the effective deployment of tools, capabilities and operating models to address the long-term agenda. For those who can break out of this detrimental cycle, there is a clear opportunity to drive competitive advantage for their respective organizations."

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An award-winning editor, Executive Editor Steve Minter covers leadership, global economic and trade issues and energy, tackling subject matter ranging from CEO profiles and leadership theories to economic trends and energy policy. As well, he supervises content development for editorial products including the magazine, IndustryWeek.com, research and information products, and conferences.

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Steve received his B.A. in English from Oberlin College. He is married and has two adult children.

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