Executive Briefings

Global Survey of Indirect Procurement Indicates that Companies Are Slow to Adopt New Practices

The Indirect Procurement Study (IPS), just released by global management consulting firm A.T. Kearney, shows 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. The study identifies how leading organizations are managing the procurement of indirect goods and services. Respondents to the study include procurement executives from 94 multinational companies with a combined indirect spend of $134bn.

"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," says Jan Fokke van den Bosch, A.T. Kearney vice president and study co-leader. "The 2010 study shows that the adoption of these advanced techniques has taken place at a much slower rate than anticipated. 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.

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The Indirect Procurement Study (IPS), just released by global management consulting firm A.T. Kearney, shows 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. The study identifies how leading organizations are managing the procurement of indirect goods and services. Respondents to the study include procurement executives from 94 multinational companies with a combined indirect spend of $134bn.

"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," says Jan Fokke van den Bosch, A.T. Kearney vice president and study co-leader. "The 2010 study shows that the adoption of these advanced techniques has taken place at a much slower rate than anticipated. 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.

Read Full Article