Finance executives are still focusing on cutting costs and managing cash flow, despite the danger that the recession could wreak havoc on their companies' supply chains, according to a recent survey from procurement software vendor Basware. Almost 65% of the 550 North American and European CFOs and finance directors polled say cutting direct costs is their top priority, while 60% cite reducing indirect costs and 55% say cash flow.
"Obviously the global economy right now is very much in survival mode," says Mark Frohlich, associate professor of operations management at the Kelley School of Business in Indianapolis, who consulted on the survey.
Finance executives put even less emphasis on other areas, he notes. Just 39% say risk analysis is a top priority, and the same portion cite improving margins. The environmental practices category garners 24% of the respondents, while investor relations draws 15%. These two areas would have topped the list had the survey been done two years ago, Frohlich says.
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However, 52% of the executives recognize procurement is becoming more strategic, although just 30% say finance is tightly integrated with the procurement department. And just 27% say procurement is a significant factor in the company's profitability, which may be shortsighted. Frohlich argues that procurement has a direct connection with corporate cash flows and profits. "Procurement puts the company in a position where it has to pay bills," he says. "CFOs must have visibility over that."
The GM and Chrysler bankruptcies and their effect on auto suppliers are awakening executives to the importance of the supply chain, says Ari Salonen, the general manager for Basware's U.S. operations. The survey suggests that finance departments' insight into their supply chain could be better. For example, just 42% of the companies have control over indirect spending, and 50% say their procurement processes are automated. Executives at companies that have automated purchasing processes in place have greater visibility and evidence higher levels of satisfaction according to the survey, Salonen notes.
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
