Spend management takes spotlight

PURCHASING     STRATEGY    SPEND MANAGEMENT

Global - The procurement profession is gaining traction, as companies are realising that ROI associated with spend management initiatives are both real and near term, and have pushed strategies to manage cash high on their agenda, says an Ariba study.

"As the global financial crisis wears on, leading organisations are elevating the strategic role of spend management and investing in the resources and processes needed to identify and realise savings now," says Hari Candadai, director of solutions marketing at Ariba and author of the Ariba report The return to profitability: Spend management priorities to accelerate savings and drive long-term growth.

"Companies are realising that the very real and near-term return on investment associated with spend management initiatives makes a compelling business case for action now, even in an environment where budgets are tight or frozen in most areas, as it is a question of survival to many," he adds.

In a poll of 225 procurement, finance and business executives across 1,000 companies, Ariba found that most companies are adopting new approaches to maximise savings and profits, including cutting costs, managing cash, mitigating supply risk and targeting new spend categories for reductions.

Companies are also bringing more spend areas under procurement's control to combat the downturn. These include legal, marketing, professional services, employee benefits and IT.

"Several quarters of declining economic growth have made it possible for procurement organisations to target these formerly elusive categories and bring them under management," Candadai says. "By applying consistent and best-practice market diligence, costing, negotiation and compliance methods across categories, companies can maximise their spend leverage and drive greater value for their organisations."

An increasing number of companies are also beginning to recognise that by automating time-intensive and costly paper-based processes, they can increase compliance with their spend management initiatives and accelerate the savings they deliver, the study finds.

Concern over the ability to meet customer demand is also becoming a top priority, Ariba says. In this respect, supplier performance management is now a top priority for all companies surveyed, and the best companies are leveraging market intelligence and developing next-level supplier relations to effectively mitigate supply risk.

Procurement professionals across the board are under pressure to reduce costs as well as balance savings against the long-term stability of their supply chain.

"At the end of the day, the companies we polled realise that spend management is the fastest, most efficient way to accelerate bottom-line results while continuing to deliver for customers and create value for their organisations, and they are using it to transform procurement into a key competitive advantage so that they can emerge stronger from the downturn," Candadai says.

________________________________________________________

Managing people? For HR and leadership strategy, Human Resources has it covered.

Get your marketing department up to speed with Asia's most read marketing site
marketing-interactive.com