Looking back: A year of challenges for purchasing

Date: 01/21/2016

Last year the U.S. economy continued its healthy rebound – the silver lining in an otherwise cloudy year for many buyers.

Among the hardest hit then and now are those in the oil sector.

“The industry is dealing with a lot of volatility right now,” says Christopher Sawchuck, Principal and Global Procurement Advisory Practice Leader, The Hackett Group. “It’s a difficult space to be in. I can tell you procurement’s priorities in that industry are different than many others.” Overall, buyers in most sectors found themselves in a “very cautious environment bent on delivering more savings,” Mr. Sawchuck adds. To meet those challenges, many purchasing organizations are showing heightened interest in increasing their spend influence, tapping into supplier innovation, improving agility, and enhancing procurement’s role as trusted advisors.

As another procurement consultant pointed out to us, the drop in commodity prices (some of which plunged more than 50%) and downturn in manufacturing continued applying pressure on purchasing professionals to apply their skill in finding increased value from suppliers. Many manufacturers passed on customers’ pressures to cut prices by more than 10% to their suppliers. With little “low hanging fruit” left for cost reductions, value engineering took on added importance.

Indeed. Value creation was a 2015 buzzword in purchasing. In its annual key issues report is 2015, Hackett Group learned that reducing and avoiding purchase costs was purchasing professionals’ highest priority. “[Purchasing] organizations continue to look at how to deliver more and do it in a way where they’re not spending more to get that value,” Sawchuck says. “Many companies were starting to build organizations like global service entities to get more out of procurement, to get more leverage while reducing the costs. These kinds of models continue to be refined.”

Meanwhile, the oil sector’s loss was logistics gain in 2015, says Thomas L. Tanel, President and CEO, CATTAN Services Group, Inc., who witnesses “lower fuel costs helping the economy as well as shippers.” Tanel also noted that disruptive technologies such as cloud computing, drones, and Google glasses “continued shaking the foundations on which traditional businesses are built, and hence, their supply chains.”

People like Charles W. (Chuck) Clowdis, Jr., Managing Director, Transportation for IHS Economics & Country Risk, were singing the praises of XPO Logistics’ founder, Bradley Jacobs, who orchestrated a year-end deal to acquire trucking giant Conway Freight. “This was a huge phenomenon in the logistics arena in 2015,” Clowdis tells us, further noting that the emergence of XPO Logistics’ growth to nearly $16 billion in annual revenues “has awakened the likes of UPS and others to the fact that growth and scale are key to serving the global supply chain.”

Finally, 2015 could go down as the year computer hacking went truly global, with headline-grabbing information thefts at Sony and the Department of Defense. As the Wall Street Journal recently reported, corporate-level information systems have been a prime target of Chinese-based hackers for several years now. The threat isn’t lost on people like Viet Ho, chief procurement officer at Russell Investments, a global financial services firm. “The hacking issues from China made a significant presence in 2015,” Mr. Ho tells us, adding, “I’ve spoken to a few of my peers and it is top of mind for most of them.”

 

Please login to comment