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Procurement ill-equipped for CEO needs

3 January 2008

 

by Nick Martindale

 

Procurement departments may be unable to meet the growing demands of CEOs over the next five years because they are not positioned adequately within their organisations.

 

A survey of 70 CEOs in German companies by supply chain consultancy BrainNet suggested procurement departments would be expected to safeguard innovation, improve the organisation’s risk profile and value chains and boost product design, as well as cutting costs.

 

“CEOs expect their procurement departments to make a significant contribution to the overall performance of the company and also to take on a much wider range of tasks than is currently the case,” said Sven Marlinghaus, BrainNet partner and author of the study.

 

“Issues like the optimisation of circulating assets, the purchase of innovations and risk and supply chain management are coming more to the fore.”

 

But the research also revealed that just 30 per cent of CEOs believed procurement was adequately networked with other departments, while the CPO sat on the board or management team in just one in 10 companies.

 

“The pressure to evolve is enormous but procurement departments lack the resources they need to cope successfully with this change,” added Marlinghaus. “At the moment, procurement is integrated in the research and development process in fewer than one in four companies.”

 

The study also suggested that most CEOs were currently only able to measure procurement’s performance on the traditional measure of cost savings. While 81 per cent were able to quantify the savings generated by procurement, just 13 per cent could measure the impact on the company’s earnings before interest and taxes (Ebit) figure.

 

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