Detecon Study on Strategic Sourcing in the Telecommunications Industry
Telecommunications Companies Underrate the Strategic Role of Procurement
Bonn/Eschborn, 28/04/2011. The procurement departments at many telco operators lack the necessary structures for them to play a major role in achieving company goals. This is the result of a recent study prepared by the ICT management consultancy Detecon International. While it finds that most companies have a comprehensive procurement strategy, 75% of them do not pursue the strategy in all parts of the corporate group and subsidiaries.
The study, entitled “Strategic Sourcing in the Telecommunications Industry”, has prepared a number of recommendations for action for top managers in purchasing. The conclusions are based on a survey of 48 specialists from the procurement departments of telco operators active on an international scale. The evaluation reveals that while telco operators see the necessity and potential of optimized and global purchasing processes in terms of cost reductions, encouragement of innovations, and risk management, they have not yet succeeded in implementing them permanently.
“This delay is more than just disadvantageous; it can lead to the development of very real business threats,” warns Michael Hanke, Managing Partner at Detecon International and initiator of the study. “Purchasers should not stop with simple cost reductions; they should work together with suppliers to develop innovative products and services while at the same time building a stable early warning system for supply risks of all kinds. Ideally, the chief procurement officer will also act as an advisor for corporate strategy.”
At the moment, for example, 75% of the respondents do not realize their comprehensive and detailed procurement strategies in other group companies. 40% must confess that their staff members are unable to put the strategic guidelines into effect because of a lack of required professional knowledge. There is a particularly striking lack of qualified procurement engineers who are able to reconcile technical and business interests. Moreover, only 40% of the respondents confirm that strategic procurement makes a significant contribution to the achievement of their own company’s goals.
In addition, the purchasing department in most companies has a weak position; only rarely does the chief procurement officer (CPO) belong to the management board, 50% of the CPOs are accountable to the CFO, and 20% report to the COO and CEO. Only 50% of the respondents have a program for individual personnel development in their departments. Finally, the structures of the organizations are less than ideal: a strict separation of strategic and operative procurement tasks as well as global category management have been implemented by only about half of the telco operators.
The authors’ recommendations for action include the improvement of risk management, often neglected, in the increasingly complex supply chains: purchasing can create a mature risk management system involving a five-stage process cycle ranging from the recognition of potential risks for quality, supply, sustainability, and financial position to the monitoring of the effect of the initiated measures for the minimization of risk.
“Traditional procurement methods have often reached their limits. So CPOs must look beyond the goal of cutting cost,” emphasizes Hanke. “Purchasing can offer even more added value in the form of a mature risk management and the systematic support of innovations. By doing so, the business unit can strengthen its position and contribute substantially more to the achievement of corporate goals.” Orientation can be found in the manufacturing industry and at some of the leading network operators. They have already carried out the development and establishment of high-performance purchasing organizations operating successfully on a global scale.
Detecon International GmbH Detecon is one of the world’s leading consulting companies for ICT management consulting. Our services focus on consulting and implementation solutions which are derived from the use of information and communications technology (ICT). They encompass classic strategy and organization consulting as well as the planning and implementation of complex, technological ICT architectures and applications. Detecon’s expertise bundles the knowledge from the successful conclusion of management and ICT consulting projects in more than 160 countries. Detecon is a subsidiary of T-Systems International, the key account brand of Deutsche Telekom.
