Global procurement study explores procurement and sourcing risks The study of procurement practices at 275 international companies, the largest and most comprehensive global procurement study conducted to date, found that as companies chase offshore sourcing savings, they are not effectively evaluating the risks nor cultivating the necessary skills associated with overseas sourcing efforts. The number of companies sourcing from China , Eastern Europe and India has increased significantly in the last five years and will continue to rise in the future. By 2009, 72 percent of companies plan to source from China , a rise from less than 30 percent in 1999. Fifty-nine percent of companies plan to source from Eastern Europe by 2009, an increase from one-in-three five years ago. Half of companies surveyed plan to source from India in 2009, nearly tripling the number sourcing from there in 1999. Yet companies surveyed revealed they are not prepared to manage this increased sourcing from low-cost countries effectively. Only 53 percent have category strategies that indicate a clear understanding of the supply chain and logistics costs associated with emerging market alternatives. Just 41 percent of companies make emerging market skills and language capabilities a high priority for their sourcing organization. And just 39 percent have formal plans in place to increase their supplier base from global sources. "Companies are chasing savings through overseas sourcing, but their internal structures are likely to prevent the full benefits of these savings from occurring," said John Blascovich, an A.T. Kearney vice president and leader of the study. "They need a sharper understanding of these new markets. Waiting too long to develop the right strategy or skill set could mean losing access to scarce, capable resources and the competitive edge they provide." The study finds that North American companies expect to decrease their sourcing from the US , Canada , Mexico and Japan in the next five years, while sourcing from Western Europe will remain constant. North American companies plan to significantly increase their sourcing activity from China , India and Eastern Europe . In fact, the study anticipates that by 2009 more North American companies will source goods and services from China than from Canada , Western Europe or Mexico . Additional findings from the study include: * Two-thirds of companies surveyed said their procurement organisations were actively pursing goals in value creation through approaches such as product and service innovation, advanced cost management, risk management and supply continuity and value chain optimisation. In 1999 this number was only 28 percent. * CEOs see procurement as an increasingly important and strategic capability and are looking to their procurement organisations to create value in their organisations beyond cost-reduction efforts. * Companies using advanced supply management techniques such as collaborative cost reduction, tiered sourcing and design-to-cost generate nearly twice the rate of savings on their procurement of direct and indirect materials and services than companies solely relying on traditional sourcing methods. * Electronic procurement systems continue to fall short of their potential. More than half of respondents reported tools for market analysis, contract management and product lifecycle management are not meeting all of their expectations. Leading companies are focusing on the end-to-end integration of their e-sourcing tools by fitting IT components together into a complete system solution for category management. www.atkearney.com
•Date:
3rd February 2005 • Region: US/World •Type:
Article •Topic:
BC general |
