"Purchasing Excellence" study shows global trends in purchasing

• Survey of top managers from over 500 companies worldwide and all key industries, telephone interviews, in-depth focus interviews and extensive secondary research
• Best practice examples for all aspects of purchasing and concrete indicators: 14% of companies achieve "purchasing excellence "
• Top performers cut their number of suppliers significantly, working with just a few strategic partners
• Automotive and retail do best all round worldwide
• Purchasing becomes a fully acknowledged business partner – becomes more accepted by other functions, like development or sales

Roland Berger Strategy Consultants' third global study on trends and indicators in purchasing production and non-production materials and services covered more than 500 companies in 14 countries and 17 industries. It reveals the main trends in purchasing and the main indicators in purchasing and procurement. This year, there was a strong focus on the impact of the financial and economic crisis. Being driven to perform, buyers are concentrating on cost targets and procurement markets are now buyers' markets. In uncertain times, top companies are managing their supplier base risks increasingly actively. Top purchasing departments are also acting on an equal basis with internal customers and suppliers, and are concentrating on strategic partnerships with just a few selected suppliers. Companies that achieve purchasing excellence, that is, that optimize their purchasing organization, use key coordinating mechanisms like the lead buying approach. In this case, lead buyers assume a number of responsibilities per product group and across locations and countries.

"The current financial and economic crisis is affecting purchasing and procurement massively across the globe," says Roland Schwientek, Partner at Roland Berger Strategy Consultants' Competence Center Operations Strategy. "The most obvious trend is that cost targets are quite clearly top priority once again in purchasing. The procurement markets of recent years have turned into buyer's markets." And purchasers are taking full advantage of the situation.

Purchasing Excellence – What the best are doing right

This study shows quite clearly: the most successful purchasing departments are acting on an equal footing with internal customers and suppliers. "Things have changed here, they're now fully accepted business partners – both internally and externally," says Schwientek. What this means is, companies that achieve Purchasing Excellence, that is, which have optimized their purchasing organization, put this function at Board or management level. "The sooner and more effectively purchasing is integrated in the value chain as a whole, the more successful it is for the company." Purchasing departments in automotive and retail turn out to be particularly successful.

The best companies also considerably reduce the number of vendors and focus on strategic partnerships with a few selected suppliers. "The idea here is to sustainably safeguard your own supply chain in uncertain times," says Schwientek. "If just one key supplier fails, that can cripple your whole production."

Success by renegotiations and central coordination

Most companies are still using commercial levers, like renegotiating contracts, which aim mainly at succeeding in the short term. Two-thirds of those surveyed have renegotiated their contracts. Payment deadlines, for example, have been extended on average from 38 days to 56 days. Top companies, on the other hand, are increasingly using other means of optimizing systems, processes and controlling costs by modifying travel guidelines, for example. Purchasing organization strategies have moved on: the study shows a trend towards coordinating things more centrally. "The lead buying approach is the most commonly used strategy here," Schwientek says. With this, companies appoint buyers for each product group with bundled purchasing responsibilities across areas and countries, known as lead buyers.

A further trend, which however has slowed down slightly due to the crisis, is rewarding suppliers that can ensure sustainability. Top performers have integrated green and lean-tech goals (i.e. environmental standards) with their suppliers (using so-called external balance score cards).

Purchasing is being professionalized: this shows, not just in the tools and systems used, but also, increasingly, in how qualified staff are. The number of purchasing staff with higher education and technical backgrounds has risen amongst top performers from 17% to 25%. This means one is four purchasers has a college or university degree and the number with technical backgrounds has rise during the past three years from 14% to 29%.