Cost of Control 2010: The Good, the Bad and the Ugly
Last week, Basware released ‘Cost of Control 2010’, the second annual global study producing insight into the opinions and priorities of 550 finance executives around the world. In an interview with gtnews, Adrian Done, Professor of Production, Technology and Operations Management at Barcelona’s IESE Business School and one of the authors of the report, explained the main differences between the survey findings in 2009 and 2010.
“In 2009, most companies were in survival mode, but in 2010 we are seeing a move towards revival, with guarded optimism,” Done explains. “Last year, the finance directors and CFOs [chief financial officers] were stunned by the amount of risk in the supply chain. This year they have realised important gains that comes with a good relationship with procurement, which are seen as the gatekeepers to the supply chain.
“In 2010, there are the good, the bad and the ugly in the survey findings. The good is that there is some optimism of recovery and companies are in a positive mood. The bad is that despite 12 months of trying to integrate processes between finance and procurement, we are still a long way off and at the seedling stage of cementing relations between finance and procurement. The ugly part, possibly as a result of the increased knowledge of the whole procurement and supply chain issue, is that CFOs and financial directors are even more aware of their contribution to the financial risk of a company. It is ugly but understandable. Clearly what has to happen is that the procurement and finance departments have to start talking.”
Done makes the point that in order to start the discussion, good quality financial information is needed. “The conclusion is that without excellent information flows, particularly between procurement and financed departments, internal decision making cannot take place and there will always be a lack of confidence on the part of CPOs [chief procurement officers] and CFOs because they don’t feel properly informed. There is a crisis of confidence in the broader economy, but the same thing is happening within companies and supply chains because people are making decisions based on information that they don’t have confidence in. One way to solve this problem is to sit down and put in place processes so that they are sharing good quality information.”
But even though 2010 is experiencing a revival, where many companies are talking about increasing profits and making new investments, cost control remains a key issue.
“Moving forward, finance directors/CFOs are still faced with big challenges: most of the low hanging fruit is gone in terms of cost reduction and supplier stability issues are still there. But the good thing is that people have woken up to the challenges,” he says.