Professional Documents
Culture Documents
Percent of survey respondents that extended various procurement risk management practices due to the downturn.
81%
77%
76%
62%
56%
Figure 1: Chief procurement officers from automotive, industrial equipment and consumer goods
companies were the most prevalent respondents.
6%
13%
29%
16%
Figure 2: Survey recipients were asked, For each procurement risk, indicate the extent to which your company faces that risk.
Depicted is the percentage of respondents who indicated a moderate-to-high extent of risk.
65%
63%
55%
53%
48%
Supplier bankruptcy
44%
Legal/Regulatory
30%
29%
Figure 3: Exposure to raw materials price volatility by industry. The X axis measures the percentage of cost of goods sold
that is typically exposed to price volatility. The Y axis charts the average percentage of price changes that cannot be passed
on to final customers.
More than
70%
Communication
Pharmaceuticals and
Medical Products
Media and Entertainment
50% to 70%
Utilities (distribution of
electricity, gas, water)
Automotive
Transportation
Industrial Equipment
Manufacturing
Chemicals
Retail
Construction
Food
Consumer Goods
Less than
50%
Less than 3%
3% to 8%
More than 8%
7
Figure 4: Survey recipients were asked, For each procurement risk, indicate the departments or
functional areas involved in identifying and monitoring that risk.
Supplier bankruptcy
0%
20%
40%
60%
80%
100%
Procurement
Manufacturing
Finance
Product Design
Supply Chain
Other
10
High
Chemicals
Construction
Food
Mining and Metals
Perceived
exposure
to price
fluctuations
Manufacturing
Medium
Pharmaceutical and
Medical Products
Automotive
Consumer Goods
Utilities (distribution of
electricity, gas, water)
Mono-source situations
Media and
Entertainment
Communication
Low
Industrial Equipment
Retail
Low
Transportation
Oil, Gas and other
Natural Resources
Medium
High
11
Low Performer
18%
ROI<3
Mid-range Performer
60%
Master
22%
ROI> 8
Masters
Mid-range Performers
25
Low Performers
20
Procurement ROI
15
10
0
0
Figure 7: Level of realized risks compared to investment levels in supplier risk management capabilities.
Average yearly
number of incidents
by critical supplier
0
15
20
25
30
35
40
45
50
14
55
60
65
Figure 8: Procurement performance and level of investment in price risk monitoring capabilities.
30
25
20
Procurement ROI
15
10
0
-10
Masters
10
30
50
70
90
Mid-range Performers
Low Performers
15
16
1. Procurement Strategy
The research team observed that
procurement masters are significantly
more likely to address supplier and
price volatility risks when developing
their procurement strategies (as
opposed to later on). Masters also were
found to be two-to-three times more
likely than low performers to integrate
risk management into their category
strategies, develop innovative ways to
monitor risk, and implement practices
and tools to mitigate risk.
A good example is that masters are
significantly more likely than low
performers to apply dual-sourcing and
risk-sharing initiatives to anticipate
supplier quality risks (Figure 10). To
anticipate supplier bankruptcy risks,
procurement masters were found to be
leaders in dual sourcing and supplier
negotiations. In addition, the most
Procurement masters
are significantly more
likely to address
supplier and price
volatility risks when
developing their
procurement strategies
(as opposed to later on).
Risk Mitigation
Risk Monitoring
Procurement Strategy
High Performance
in Procurement
Requisition to Pay
Figure 10: Percentage of companies using various practices or tools to anticipate supplier quality issues.
Dual sourcing
59%
50%
44%
45%
44%
18%
41%
Insurance
19%
32%
18%
Index-based contracts
7%
4%
Hedging/financial tools
9%
9%
0%
5%
Masters
Low Performers
17
Figure 11: Frequency and context with which companies use supplier market analysis to address risk
issues.
37%
To monitor risk of supply chain
disruption
18%
67%
To monitor supplier bankruptcy risk
41%
14%
To monitor supplier quality risk
15%
0%
10%
Masters
Low Performers
11%
Risk-management KPIs
15%
Historical pricing
41%
78%
56%
18
20%
30%
40%
50%
60%
70%
80%
Figure 13: Percentage of surveyed companies that document risk management to a high
extent in their category strategy documents.
Masters
70%
Low Performers
60%
50%
40%
30%
20%
10%
0%
Defining the critical level
that makes the risk an
incident/alert
Developing mitigation
plans in case of incident/
alert
3. Supplier Relationship
Management
When it comes to procurement, risk
management masters also tend to be
supplier relationship masters. Not only
do they form deeper, more symbiotic
connections, they also collaborate with
suppliers to rapidly detect risk (e.g.,
through early warning systems) and
neutralize risk-related issues before
those issues become incidents. As risk
Measuring impact of
incident/alert
19
Figure 14: Percentage of responding companies that leverage external data, applications and sources.
74%
59%
Market analysis
63%
41%
48%
59%
Supplier performance
41%
9%
33%
14%
7%
9%
67%
55%
Research companies
52%
32%
Industry associations
30%
23%
Consulting companies
30%
9%
4. Workforce &
Organization
Research findings show that most
companies do not assign procurement
professionals to full-time riskmanagement work. However, there are
distinct differences among masters,
mid-range performers and low
performers when it comes to centrally
led coordination across regions:
Procurement masters are far more
20
5. Technology
The range of risk management tools
available to procurement organizations
is vasttoo broad for any organization
to not be discriminating about what
applications provide the greatest
value. In fact, the ability to make
smart decisions about what tools and
technologies best support their riskmanagement efforts could be what
best distinguishes high performers
from the rest of the survey pack.
Perhaps compensating for their more
prudent technology-investment
approaches, masters were shown to
Masters
Low Performers
Key Conclusions
So what conclusions can we draw
from the facts gleaned by the survey
effort? With regard to the current
procurement-risk environment, the
research team determined that:
Figure 15: High performers in procurement risk management often organize their capabilities in terms of
risk anticipation, risk monitoring and risk mitigation.
Anticipation Capabilities
Monitoring Capabilities
Mitigation Capabilities
22
23
About Accenture
Footnotes
1Managing
performance through
procurement: Accenture research and
insights into procurement performance
mastery, 2007 by Accenture