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Friday, September 03, 2010
Friday, September 03, 2010
Latest Procurement News
Posted: Wednesday, November 18, 2009, 8:54AM
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KNOWLEDGE MANAGEMENT TAGS
"Supplier Relationship Management"
Continued cost cutting threatens supply chain
The relationship between businesses and suppliers is "hanging in the balance" as cost cutting options narrow, according to new research.The study, by Basware and academic Adrian Done of the IESE business school, shows chief financial officers and chief procurement officers of large organisations struggling as they apply existing approaches in cost control to tackle the ongoing demands of a tough economic climate.
Professor Adrian Done, IESE, Barcelona said: "Businesses are looking for 'tsunami' events in the supply chain but failing to keep track of the 'soil erosion' that takes place day-to-day. This mentality is a big disruption as decision makers fail to see the sequential risks of suppliers struggling to meet demands, whilst obsessing about discrete insolvency episodes and their impact on short-term operations."
Cost control and reduction has become 'the new normal' going into 2010, with the urgency for reactive cost cutting measures continuing to supersede longer term investment driven directives, according to the research. It also identifies a growing trend for increased levels of finance and procurement collaboration as well as transparency amongst businesses seeking to overcome finance and purchasing challenges.
While the majority of respondents are aware of the instability caused by constant cost cutting efforts on the supply chain, they are struggling to find another way to meet their business goals. Organisations are also focusing on discrete risk while failing to address the more likely and potentially disastrous scenario of sequential risk in the supply chain.
The research goes on to reveal that tensions between finance and procurement are common, though the absence of good relations is lamented by both CFOs and CPO respondents.
"The lack of collaboration between these groups pose clear risks as spend visibility is vital, however both finance and procurement professions see benefits in improving relations. There is a clear emerging trend towards using technology as a way of overcoming operational challenges and harmonising 'buyers' and 'payers' within the business," the study reported.
Procurement Tags - Basware, Supplier Relationship Management
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