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29 August 2014

Managing and understanding risk "key to procurement best practice"

Content team

Being able to understand and manage contractual and supplier risk is key to achieving best practice in procurement.

This is according to ProcureCon, which has released the results of its 2014 Benchmarking Survey.

It found 58.6 per cent of procurement professionals see a good grasp of risk as vital for successful contract management.

Also considered important is developing a programme for managing and developing supplier relationships (55.2 per cent) and making sure the right people are in place to carry out contract management activities (51.7 per cent).

The same number of respondents said they think ensuring services are provided in line with their contract is significant for delivering best practice.

ProcureCon also found total costs savings is the main metric used to measure the value of procurement.

It revealed 84.5 per cent of procurement professionals use total cost savings as a means of measuring the effectiveness of their department. Other common metrics include cost avoidance (77.6 per cent) and quality (60.3 per cent).

Commenting on this, Roger Davies, group head of procurement at Marks and Spencer, stated: "The procurement function is still a little bit in self-justification mode, hence the continued attempts to push savings as the sole and major measure.

"Clearly measures are needed, but it is a shame we aren't reaching the status of legal or financial teams, where there is clear acceptance of the role and need for it."

Some 60.3 per cent of the procurement professionals surveyed said they think better metrics are available than those currently in use and the majority of these people claimed they want to move away from such a heavy focus on cost.

Respondents were also asked for their opinions on the state of their organisation's contract compliance. More than two-thirds (69 per cent) claimed this is acceptable, while 8.6 per cent said it is excellent. Some 20.7 per cent revealed they see their company as poor on this front.

Content team, Bureau van Dijk

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