European companies are haggling with vendors for the best deals in order to ride out the recession, according to a new study from Ariba. Surveying 180 purchasing heads across Europe‚s largest organisations, the results uncover a trend for bargain hunting in the business arena becoming a boardroom priority.
Some 55 per cent of businesses surveyed have either cut spending, or plan to cut spending in Q1 2002, while those with
targets on procurement efficiencies are aiming for an average reduction of 10 cent on enterprise spend, which has implications for suppliers. Only 18 per cent of respondents believe redundancy to be the best way to improve short term profits
With around 50 per cent of respondents reporting directly to the board, there still appears to be no clear strategy on how to achieve procurement efficiencies. The broad consensus is simply to reduce volumes or haggle over the unit cost of goods and services. Some 98 per cent of respondents say it is an objective to make procurement more efficient, but 57 per cent do not have a target to achieve this.
The research report, entitled The Corporate Spend Agenda, finds the potential average cost saving among participants on purchases to be 9.25 per cent, which could equate to savings of 13-16 million Euros per year for the average size of company surveyed (between 400 million and 1.6 billion Euros turnover per year). Yet, 35 per cent of business spend is made with non-approved suppliers and 65 per cent of respondents also expressed a need to manage approved supplier spend more effectively.
Some 48 per cent of procurement heads considered Strategic Sourcing - finding and negotiating with suppliers - to be the area where the greatest savings could be made, with 52 per cent believing it to be the easiest area to achieve cost savings. The biggest challenge for reducing business spend amongst respondents is compliance, or controlling rogue spending, with a 42 per cent consensus.