CPO survey

Senior executives report increased focus on procurement to boost growth and competitiveness

24 Jun 2005 | (Survey)

SENIOR EXECUTIVES REPORT INCREASED FOCUS ON PROCUREMENT TO BOOST GROWTH AND COMPETITIVENESS

Reports suggest new demands upon procurement – indicating skills crisis

ARMONK, NY, June 24, 2005 An IBM procurement study of over 300 executives responsible for purchasing decisions has found that over 75 percent 1,2 of senior executives want to increase the focus on procurement to generate savings, indicating that procurement will be an important factor in driving future growth and competitiveness. The IBM Business Consulting Services 2005 Chief Purchasing Officer report drew upon data from interviews and a survey in co-operation with the Economist Intelligence Unit.

The survey concludes that procurement organizations are now being asked to go above and beyond the function of negotiating the best price of a particular product.  Rather, the boards and CEOs of companies want procurement to have the ability to purchase ‘capabilities’ – such as an entire supply chain – to improve a company's responsiveness and remain competitive in tough global markets. 

The demands on the procurement function are at odds with what senior executives responsible for purchasing decisions report they can actually deliver, indicating an impending skills crisis.

Over 75 percent 1,2 of executives responsible for purchasing decisions surveyed reported that their teams were not experienced in outsourcing their sourcing function, and for example, less than 25 percent 1,2  of these executives stated that their teams were experienced in procuring capabilities such as payment processes as outsourced services.

“As CEOs look to transform their business processes to boost competitiveness, procurement is in the spotlight and CPOs need to become more responsive and focused around equipping their staff with the required skills,” said XXX of IBM BCS.  “Procurement has developed rapidly over the last 2 decades, considerably faster in prominence than many other functions. The emphasis has and is changing from buyers as negotiators and transactional order placers to strategic business managers, in this shift the skills development process has fallen behind and hence we have a skills shortage.”  XXX continued

CEO plans for procurement reflect how the fundamental structure of the corporation is changing. Companies are spending more with third parties and, at the same time, are outsourcing many more functions that were historically performed in-house to focus on core competencies to remain competitive and reduce costs.

Other key findings in the report include:

· Procurement staff need skills upgrade – the combined data indicated 65 percent 1,2  of senior executives responsible for purchasing surveyed ranked a fundamental need for the upgrading of their staffs capabilities through new skills acquisition as their highest or second highest priority if they were to improve the procurement performance for their organization over the next 3 years.

· Focus on people to improve performance – The top three procurement performance improvement strategies cited by senior executives responsible for purchasing are all people focused – management and retention of talent, upgrading of people capabilities and skills and training staff to improve core procurement skills

· China rated as the number one destination for finding better value suppliers – said over 60 percent 1,2 of senior executives responsible for purchasing .  However a similar number believe their organizations do not have the skills to conduct sourcing from China. With product sourcing moving to countries where manufacturing is cheaper, the demand for procurement professionals to purchase capabilities increases. These demands again highlight a significant procurement skills shortfall. 

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· Procurement not justifying performance –  the combined data indicated only 16 percent 1,2 of survey respondents claimed systematic measurement of internal procurement service performance

· Strategic supplier management is not strategic. The two surveys indicated only 38 percent 1,2 of senior executives responsible for purchasing surveyed were actively managing less than half of their direct materials supplier base. 

Study methodology

IBM Business Consulting Services consultants spoke, at length, with 45 Chief Procurement Officers from 14 different industries and 8 countries across Europe.  Working with the Economic Intelligence Unit, IBM also conducted an online survey to compare the European perspective with that of the rest of the world – 300 other senior executives responsible for purchasing from 64 different countries and a wide variety of industries were surveyed.

1 derived from data collected from interviews conducted by IBM.
2 derived from data collected through a global online survey in co-operation with the Economist Intelligence Unit that generated responses from over 300 executives responsible for purchasing decisions

For an online copy of the report visit:
http://www-1.ibm.com/services/us/index.wss/ibvstudy/imc/a1011088?cntxt=a1005268

Note to editors

 - Purchasing capabilities or ‘Capability sourcing’ requires procurement personnel to understand the capability in question e.g. a HR administrative processes and have the ability to assess a broader variety of factors, other than just price.  This includes a focus on overall business outcomes and total cost of ownership, as well as the potential for long-term value creation. 

About IBM Business Consulting Services  

With consultants and professional staff in more than 160 countries globally, IBM Business Consulting Services is the world's largest consulting services organization. IBM Business Consulting Services provides clients with business transformation and industry expertise, and the ability to translate that expertise into integrated, responsive, on-demand business solutions and services that deliver bottom-line business value. Over the past several years, IBM Business Consulting Services has developed industry-leading transformation consulting skills and delivery capabilities in key areas, including Human Resources and Learning Solutions, Financial Management, Customer Relationship Management and Procurement. For more information, visit www.ibm.com.

FINAL CONTACT: Chris Steel, 917 940 9029, steel@us.ibm.com

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