Asia Pacific Is The World’s Procurement Weak Link

Earlier this year, EU officials praised the Philippines for its ability to successfully implement a digital procurement strategy. The Asian nation’s Budget Secretary Florencio Abad spearheaded the initiative known as PhilGEPS, or the Philippines Government Electronic Procurement System, as a way to encourage foreign investment in the country and improve transparency and efficiency through e-invoicing.

Unfortunately, the Philippines’ headway in sophisticated procurement procedures has not spread out across the region. New research from AT Kearney released this week found that companies across Asia are lagging behind the rest of the world when it comes to implementing best practices in their procurement strategies.

A survey of supply chain executives at nearly 200 companies across the globe revealed that there is a pattern among Asia Pacific companies when it comes to their perception of the importance of procurement.

The data, summarized in the report “Achieving World-Class Procurement in Asia Pacific,” found that 65 percent of companies in the Asia Pacific region consider procurement to guide their spending practices – 14 percent lower than the average for so-called “leader” organizations, and 7 percent lower than “follower” organizations.

Leader organizations were found to focus on building a high-performance procurement team that priorities cost reduction and supports supplier capabilities. These businesses also invest more in their procurement teams, authors Keat Yap (Vice President, AT Kearney) and Yon Yee Chua (Consultant, AT Kearney) concluded.

Asia Pacific companies also experience fewer benefits from their procurement endeavors, the analysis found. The region’s businesses achieved an average of 2.9 procurement benefits, a figure that compares to the average 4.3 benefits for businesses, and an average of 6.1 benefits for procurement leaders.

AT Kearney found that Asia Pacific organizations are slowly shifting toward a more strategic view of their procurement practices, but are not doing so as fast as their counterparts in other areas of the world. Companies in the Asia Pacific have also failed to adopt “leadership” practices in their procurement behavior the way other businesses across the globe have, too.

The findings could be related to patterns among Asia Pacific companies that suggest procurement is viewed more as a back-end process. Businesses in the region, the researchers said, focus their procurement efforts on compliance and administration, rather than cost efficiency or strategic planning for their corporations.

What’s more, AT Kearney discovered that because procurement efforts do not have the influence over a company that they have in other regions, many businesses in the Asia Pacific will not be able to improve their procurement performances.

In the wake of the economic recession, businesses began to focus their energy on improving procurement behavior. The trend yielded some positive results. According to AT Kearney’s 2011 Assessment of Excellence in Procurement research, analysts found the largest increase in businesses’ prioritization of procurement in more than 20 years. Today, however, as the importance of procurement procedures continues to rise across the rest of the world, Asia Pacific companies remain stuck in their old ways.

“If there is one thread that unites excellence in procurement around the world, it is that no procurement organization can afford to sit still,” the authors concluded, adding that while companies across the Americas, Europe, Asia and the Middle East are seen to continue their improvement in procurement practices, “those in Asia Pacific have some catching up to do.”