Procurement organisations are paying insufficient attention to the issue of supplier risk despite the threat of key partners going out of business, a global study suggests.
A survey of purchasing functions in large organisations from the UK, US, Italy, Spain and France, commissioned by BravoSolution, a supply management technology provider, found that just 31 per cent had evaluated financial and fulfilment risk inthe past six months.
This failure was common across the countries surveyed, ranging from 35 per cent of US businesses to 27 per cent of UK and French companies.
“Perhaps distracted by the need for immediate cost savings, resources are being diverted elsewhere,” the report said.
“Analysing risk without sufficient spend visibility or supplier transparency is a very difficult and often inaccurate exercise. However, these challenges should not excuse this absence of risk evaluation and accountability.”
Of those organisations that have evaluated the threats they face, 72 per cent had either introduced changes as a result or were intending to do so in the near future.
“With such a high level of change resulting from risk evaluation, the implication is that those businesses yet to undertake risk evaluation are moving further away from an appropriate response to supplier and process instability,” the report said.
Separate data released this month by the Hackett Group, a benchmarking and advisory firm, found that two-thirds of world-class performers managed supply risk as a consistent, enterprise-wide process. The figure for other companies was just 13 per cent, and almost half had not implemented it at all.
The most important objective cited in the BravoSolution research over the next 12 months was identifying new areas of cost savings, with 77 per cent of all organisations saying this was the priority. Those in the US and Spain (both 87 per cent) gave this the most emphasis, while 65 per cent of French organisations agreed.
The research also suggested the economic recession is enabling procurement departments to strengthen their internal standing.
Forty-four per cent of those surveyed reported a wider mandate to control costs than they had 12 months ago, with 38 per cent experiencing a greater strategic input.
Purchasing now enjoys a closer working relationship with other business units in 37 per cent of cases, the survey found, while 28 per cent reported greater board exposure.
“Undoubtedly, purchasing professionals are enjoying greater responsibility, control and visibility than before but with this also comes significant risk,” the report said. “Purchasing objectives are becoming more extensive and challenging while pressure from the organisation to find new areas of cost saving show no signs of abating.”
UK organisations have been the main beneficiaries of the greater status, the research suggested, with 55 per cent seeing a greater input on company strategy and experiencing a closer working relationship with other functions and 37 per cent gaining greater board exposure.
This compared to 39 per cent, 32 per cent and 28 per cent respectively for US companies.
