By Daniel Hunter
A recent report from Source for consulting on professional procurement in mid-sized companies revealed why organisations should be further focusing on procurement, with risk demanding more attention in the boardroom says Tom Woodham, Director at leading end-to-end supply chain consultancy, Crimson & Co.
The report, which looked at the personal experiences of respondents from finance and procurement professionals, asked about the buying of goods and services and the status of procurement in their organisations.
It was found that ‘negotiating with current suppliers to reduce costs’ was the top priority within procurement. Whereas, ‘putting in place processes to minimise the risk of fraud’ and ‘ensuring security of supply’ were barely recognised as concerns.
“Supply chain risk needs to be a top priority for procurement professionals today,” said Woodham, who was one of the experts consulting Source on the analysis of the results.
“The recent horsemeat debacle has helped to further highlight the importance of contingency planning and in terms of the supply chain, the scandal can actually be seen very positively, in that it will result in procurement getting the boardroom attention it needs and deserves.”
The report suggests that only 53 per cent of mid-sized companies employ a procurement manager.
“This figure suggests that nearly half of all mid-sized companies are ignoring the necessity to acknowledge the importance of procurement," Woodham added.
"Not only should all of these companies employ a procurement manger, but they should view the area as a boardroom topic, not an unimportant add-on in which the costs involved need to be reduced.”
The study also found that the benefits of focusing on procurement are clear — companies can typically find anywhere between 2 per cent and 7 per cent of additional profit margin through managing supplier costs more intelligently.
“Even with a procurement manager in place, there ought to be someone on the management team who owns procurement, who understands it and thinks that it’s important," concluded Woodham.
“Organisations should not be looking at procurement and thinking of how to reduce costs in this area — they should be looking at how to improve processes and efficiencies in this area and mitigate against risk. However, until these points are recognised at board level, procurement professionals will be unable to action these due to price pressures from the top."
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