Supply Chain Management: Analysts see shift in procurement strategies

A.T. Kearney recently released the results of a global study, which suggests that indirect procurement categories like IT, marketing and advertising, facilities management, MRO, Logistics and professional services, have become increasingly important to Chief Procurement Officers and their organizations.

According to the Global management consulting firm, The Indirect Procurement Study (IPS), identifies how leading organizations are managing the procurement of indirect goods and services. Respondents to the study included procurement executives from 94 multinational companies with a combined indirect spend of $134 billion.
"We conducted the first Indirect Procurement Study in 2007 and there were high expectations among the respondents for the adoption of advanced practices like outsourcing of indirect procurement, advanced data analytics and benefits tracking," said Jan Fokke van den Bosch, A.T. Kearney Procurement and Analytic Solutions vice president and study co-leader.

"The 2010 study shows that the adoption of these advanced techniques have taken place at a much slower rate than anticipated," spokesmen added. "The good news is that with the financial crisis and recession, executives managing indirect procurement have gained substantial influence within their organizations."
Key findings in the study include:

• Indirect spending accounts for 60 percent of third-party spend in non-manufacturing companies, more than 90 percent in the financial services industry and sometimes 50 percent of spend in manufacturing organizations.
• Rather than using advanced data analytics techniques such as predictive modeling to deliver highly useful future insights, indirect procurement groups are too often analyzing data to track historical trends.
• The most successful indirect procurement organizational model was a central-led organization with collaboration across business units. Users of this model achieved savings greater than 10 percent over the last two years in 47 percent of categories.
• More than two-thirds of respondents measure such financial and internal key performance indicators such as addressable spend, identified savings and addressable categories. But less than half of the respondents track compliance management metrics such as spend integrity or accuracy and supplier commitments, scorecards and reviews.
• Outsourcing of procurement has shifted focus from business process outsourcing to close collaboration with managed service providers for specific spend categories like facility management, fleet and travel.

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