Horses for Sources report confirms: constant focus on savings counter-productive for success

CHICAGO - Dec. 9, 2013 - PRLog -- CHICAGO, IL - December 9, 2013 - A new research report released last week from global business analyst firm Horses for Sources (HfS) endorses findings from a recent Proxima report into the trend of Corporate Virtualization, affirming that organizations continue to direct more spend outside the organization, relying on external suppliers instead of investing in labor.

The report further agrees with Proxima’s views on the need to reform the procurement function so that less emphasis is focused on savings and more on improving efficiency and collaboration with suppliers. Proxima’s recently published study on Corporate Virtualization (http://insight.proximagroup.com/corporate-virtualization) is cited in the report.

“Horses for Sources research quite convincingly affirms many of the conclusions drawn from our own research, specifically that focusing exclusively on extracting savings from suppliers and keeping vendors at bay is a shortsighted approach to driving long-term profitability and growth,” said Matthew Eatough, CEO of Proxima. “Today’s corporation is comprised of a complex web of specialist suppliers located around the world. We are pleased that HfS agrees with our contention that improved relations and management of that web is the best way forward for lifting shareholder value over time”

HfS’s report also looks at the changing role of the procurement department within the organization. It underscores the need for procurement to behave less “like robots” and think more strategically about value and business objectives, going so far as to outline the measures needed to transform procurement.

Likewise, Proxima believes quite strongly that procurement has been, and remains, broken and is more of an obstacle to success than the driver that it needs to become. The company maintains that procurement executives need to adopt new skill sets and develop additional expertise, or look outside the organization to third-party sourcing partners in the absence of those capabilities.

“We have long maintained procurement’s thinking, approach and even the way in which the department is rewarded is in need of a massive paradigm shift,” Eatough continued. “Instead of wrestling with suppliers over price and seeking accolades for near-term savings achieved through cuts and ruthless negotiation, procurement needs to embrace suppliers.  They need to recognize the supplier’s role as a driver of innovation and growth as well as the contributions they can make to achieving shared success. Only then can procurement offer a genuine, lasting contribution to the bottom line.”

Proxima’s Corporate Virtualization research, which examines the financial results of nearly 2,000 global companies to examine the respective impact of labor and non-labor costs on profitability, can be found at (http://insight.proximagroup.com/corporate-virtualization)