Scratch an industry leader and you’ll find an iron-clad procurement operation. What companies such as Apple and Walmart have learned on the way to the top of their industries is that procurement leaders are cost leaders with a clear edge over rivals. Cost leaders can out-invest in innovation, capture share through price flexibility and quickly capitalise on new opportunities, all the while retaining margins.
But in recent Bain & Co interviews with 60 business heads and chief procurement officers throughout Asia-Pacific, we found no company executives who would describe their capabilities as world class. Compare that with an earlier survey of North American executives: the 15% of respondents who felt their companies had world-class procurement also were those with the industry-leading costs.
Procurement represents the lion’s share — as much as 80% — of overall costs in some industries such as automobiles, textiles and electronics. Yet the vast majority of executives readily admit their companies rely on procurement capabilities that are no better than those of their competitors or are worse.
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