Pricing pressure, talent are top issues for firms - Singapore
E&Y poll identifies factors that impact supply chain, procurement
By CHEW XIANG
(SINGAPORE) Pricing pressures and attracting good staff are the biggest challenges facing businesses’ procurement departments, according to an Ernst & Young survey released yesterday.
The poll of 257 C-level executives at large companies worldwide found that 33 per cent of respondents think downward pressure on prices will have the biggest impact in the next two years on supply chain and sourcing functions. All the executives polled work for businesses that report over US$1 billion in revenue.
Mildred Tan, managing director of Ernst & Young Associates, said: ‘Procurement plays an increasingly significant role in driving corporate performance. Given the current economic climate, it is not surprising that organisations view downward pressure on prices as critical, particularly at a time when there is consistent and accelerating upward pressure on input costs.’
Attracting and retaining talent was the second biggest issue, cited by 30 per cent of respondents. Mrs Tan said: ‘The high demand for skilled procurement experts and the challenges they will face are only likely to increase with the growth of globalisation and cost pressures.’
Adrian Edwards, global head of supply chain and procurement at Ernst & Young, said: ‘The return on investment from the procurement function can be considerable and it can be an opportunity to create real differentiation.’
Other factors cited by senior executives as having an impact on procurement were the need to change their company’s operating model, the growing complexity of global supply chains and the accelerating pace of globalisation.
The need to manage price fluctuations of critical inputs or services, as well as threats from new low-cost centres, were also said to have a large impact.
Not rated as important were issues such as changes in technology and green and sustainable supply chain issues, which were cited by fewer than 20 per cent of respondents.
The survey report also found that organisations do not have the confidence to tackle or manage the challenges.
‘There is clarity on the major issues facing organisations, but the ability to deliver against them is severely constrained,’ the report said. More than half of respondents said they are not very confident they can manage downward pressure on prices or the accelerating pace of globalisation, the report said.
But ‘paradoxically, despite being unsure how procurement can deal with price pressure, ‘controlling and containing costs’ remains the most significant contribution senior executives expect to see from the function in the next two years’, the report said.
About 52 per cent of respondents said this is their most significant business initiative priority, while 37 per cent cited the delivery of bottom-line savings to boost Ebitda (earnings before interest, tax, depreciation and amortisation) contribution.
Source : Business Times - 05 Aug 2008
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