New ISM Survey: Cost Cutting is Procurement’s Top Priority, but Actual Savings Miss the Mark

Organizations need to move beyond marginal cost reductions in 2014

CHICAGO--()--While delivering savings remains the top procurement priority for most organizations, only 20 percent of companies substantially cut costs in 2013, according to a new survey of 545 procurement executives by the Institute for Supply Management (ISM) and BravoSolution. In fact, most procurement executives are expecting that the total amount they saved in 2013 won’t meet business expectations:

  • 60 percent expect to deliver 10 percent or less in savings.
  • 20 percent estimate 11-20 percent in reductions.

“Delivering marginal savings should be a trigger for procurement teams to take a step back and assess what’s working well, what isn’t and how the function can improve,” said Mickey North Rizza, VP of strategic services at BravoSolution, the strategic sourcing company. “If savings aren’t driving the business forward, procurement needs to find new and more meaningful ways of impacting the business.”

Despite the lackluster results, most procurement executives suffer from severe tunnel vision around cost containment and savings: Only 30 percent of respondents cited growing revenue and profit margins as a top priority, with the rest continuing to ignore key financial metrics including earnings-per-share, return on assets, return on invested capital and operating margin.

“It’s time for organizations to realign their procurement and sourcing priorities, and focus on what matters most to the business: driving revenue and increasing valuation,” said North Rizza.

However, several critical components needed for an organizational re-alignment on financial growth are missing: procurement transformation (23 percent), bringing more spend under management (19 percent) and supplier collaboration and innovation (19 percent) all ranked low on the priority list, according to the survey.

“If procurement teams want to evolve in 2014, they need to understand where they are today. That means asking internal and external stakeholders tough questions and embracing that feedback – even if it isn’t what they want to hear,” said North Rizza. “Businesses that are investing in procurement’s transformation today will feel the positive impact in this year and in 2015.”

The full ISM survey findings are available exclusively from BravoSolution. Get the report today.

About BravoSolution

Supply management executives are now, more than ever, under pressure to deliver more savings, develop and manage strategic supplier relationships, accelerate procurement cycles, and maintain process excellence. Confronted with these diverse yet consistent challenges, CPOs and sourcing professionals must seek tailored solutions that deliver rapid ROI to their business.

BravoSolution offers leading software and services to fit the needs of today’s sophisticated supply management organizations. Our services organization, one of the world’s largest teams of professionals dedicated exclusively to sourcing and procurement consulting, delivers lean, targeted services to support strategic sourcing and procurement initiatives. Our industry leading software toolkit supports the full supply management lifecycle across a myriad of industries, geographies and business models.

As of today, over 50,000 procurement professionals in 60 different countries are benefiting from BravoSolution’s technology and services – unlocking tangible benefits such as increased process efficiency, decision support, cost reduction, improved process governance, greater quality relationships with vendors and the ability to share, understand and act upon the wealth of sourcing-related data held within their organization. Learn more at BravoSolution.com.

Contacts

For BravoSolution
Courtney Porcella, 617-969-9192
Cporcella@corporateink.com

Release Summary

While delivering savings remains the top procurement priority for most organizations, only 20 percent of companies substantially cut costs in 2013.

Contacts

For BravoSolution
Courtney Porcella, 617-969-9192
Cporcella@corporateink.com