Spend Management - Priorities and Challenges 2008 - Strategies for Balancing Cost, Performance and Risk in the New World Economy

Spend Management Priorities and Challenges - 2008 Strategies for Balancing Cost, Performance and Risk in the New World Economy Spend Management Priorities and Challenges - 2008 Executive Summary INTRODUCTION Globalization, rising energy and commodity costs, and tightening supply markets: these are some of the external forces that have been reshaping markets, products, and industries over the last 24 months and will continue to over the course of the next decade. To survive, companies will have to rethink and revamp their business strategies in order to anticipate, react to, and even take advantage of these forces. These are the trends that have thrust spend management into the corporate spotlight. To better understand the implications of these external forces and how it will affect company and spend management strategies, Ariba surveyed more than 160 procurement, supply chain, finance, and other business executives on the challenges they are facing and their prioritized actions this year to reduce costs, combat competition, and mitigate risks. Main themes that emerged based on this market research are: 1. Delivering measurable results is the number one focus – Delivering measurable results that correlate to bottom-line financial metrics was ranked as the most important priority for the third consecutive year. It also ranked as one of the top challenges this year. This shows that companies are continuing to place a significant value on spend management initiatives but are also challenged in translating these cost savings into bottom-line profitability measurements. Most CPOs still have not fully leveraged their relationships with the CFO to drive this bottom-line financial value and procurement teams, in general, need to learn the financial talk. 2. Spend visibility is a critical building block for spend management success – Accessing and analyzing spend data and increasing visibility to upcoming spend in major spend categories were ranked among the five biggest challenges and priorities for the third consecutive year. While companies recognize the importance of understanding what is being purchased and from whom, they continue to struggle with disparate data, inconsistent product information, and limited analytics capabilities to conduct spend analysis. They are also challenged with spend visibility into the majority of spend categories leading to lost spend leverage and savings opportunities. 3. Extending functional and geographical coverage still a major challenge – Most procurement executives today are looking for ways and means to extend the boundaries of spend management functionally and geographically to maximize its impact and reach. Leading companies are beginning to look at expanding their spend management programs beyond procurement to other departments like Finance, Legal, Marketing, and HR. With increased globalization, expanding the spend management footprint to other regions as well is a priority and a challenge many companies face today. Extending coverage without adding resources and supporting multiple business units and geographies rank in the top five challenges for the second consecutive year. 2 Copyright © 2008 Ariba, Inc. All rights reserved.