Supply Chain Risk Becomes Strategic Imperative as the Need for Cost Cutting Continues

By Basware Corporation, PRNE
Monday, November 16, 2009

Global Study Identifies Cost Control and Reduction as 'the New Normal'

GUILDFORD, England, November 17 - The relationship between businesses and suppliers is hanging in the
balance as cost cutting options narrow, according to a new piece of research
released today by Basware and leading academic Adrian Done of the IESE
business school. The analysis shows Chief Financial Officers and Chief
Procurement Officers of large organisations struggling despite reports of
economies beginning to lift out of recession as they continue to apply
existing approaches in cost control to tackle the ongoing demands of a tough
economic climate.

Following a study of CFOs conducted in June 2009 that showed only 28% of
businesses associate financial risk with procurement, today's published
report[1] provides compelling insight into how large organisations are
struggling with risk evaluation and cost control. Cost control and reduction
has become 'the new normal' going into 2010, with the urgency for reactive
cost cutting measures continuing to supersede longer term investment driven
directives. The report also identifies a growing trend for increased levels
of finance and procurement collaboration as well as transparency amongst
businesses seeking to overcome finance and purchasing challenges. Key
findings include:

    - Risk not reward - While the majority of respondents are aware of the
      instability caused by constant cost cutting efforts on the supply
      chain, they are struggling to find another way to meet their business
      goals. Organisations are also focusing on discrete risk while failing
      to address the more likely and potentially disastrous scenario of
      sequential risk in the supply chain.

    - CFO / CPO tensions - Departmental tensions between finance and
      procurement are common, though the absence of good relations is
      lamented by both CFOs and CPO respondents. The lack of collaboration
      between these groups pose clear risks as spend visibility is vital,
      however both finance and procurement professions see benefits in
      improving relations. There is a clear emerging trend towards using
      technology as a way of overcoming operational challenges and
      harmonising 'buyers' and 'payers' within the business.

    - Automation needs - The need for urgent tangible cost savings place
      automation of finance processes at the forefront of business IT needs.
      The report shows that procurement is more likely to make an impact on
      commercial goals if high levels of automation and integration are
      applied in tandem.

    - Neutral outlook, open future - Views taken on the state of the economy
      show there is little confidence moving into 2010. Organisations less
      impacted by the downturn treat the climate as 'business as usual',
      while those companies that have been more challenged say they see no
      green shoots. The study also shows that a tight and embattled
      commercial environment is driving large businesses to seek support
      from peers and the wider market in order to resolve the challenges of
      supplier stability, cost control and future environmental and
      financial legislation pressures.

Commenting on the report, Professor Adrian Done, IESE, Barcelona said:
"Businesses are looking for 'tsunami' events in the supply chain but failing
to keep track of the 'soil erosion' that takes place day-to-day. This
mentality is a big disruption as decision makers fail to see the sequential
risks of suppliers struggling to meet demands, whilst obsessing about
discrete insolvency episodes and their impact on short-term operations."

Basware's Paul Cowley said: "As cost reduction and control becomes the
'new normal', automation will continue to be a key component of realising
cost savings via operational changes. However, when headcount reductions and
unit cost savings are harder to realise, businesses must turn their attention
to address more systemic inefficiencies. Organisations that will thrive going
forward will be those that lift themselves out of purely reactive cost
cutting directives and begin to think more strategically, adding a more
systemic approach to address supply chain risk."

To help tackle the challenges identified in The Cost of Control: The Real
Price of Cost Cutting, Basware recommends a three point plan for CFOs and
CPOs alike:

    - As cost cutting options narrow, Finance and Procurement must utilise
      each department's expertise to find a way forward. CFOs need the
      knowledge residing in the realm of the CPO to fully grasp the issues
      involved, and likewise, CPOs will need to take a more active part in
      formulating corporate strategy and be more innovative in its execution
      across the supply chain.

    - It is imperative that organisations push levels of spend visibility,
      cost transparency and general openness to unprecedented levels in order
      to unleash significant new areas of cost savings. Only once an
      organisation has 100% spend visibility - both direct and indirect -
      can they make informed and effective financial decisions.

    - Develop integrated and collaborative relationships with 1st and 2nd
      tier suppliers to better evaluate and control risk in the supply chain.
      Fostering closer relationships with preferred suppliers will enable an
      organisation to tap into supplier expertise to identify the source of
      potential threats.

For a full copy of the Cost of Control insight study, please
contact or visit


    [1] The Cost of Control: The Real Price of Cost Cutting study features
        insight from CFO, CPO and equivalent level roles in large
        organisations with 20 surveyed in-depth across the USA, UK, Germany
        and Scandinavia.

About Basware

Basware is the global leader in purchase-to-pay solutions with more than
1,500 customers and 850,000 users in over 50 countries around the world. With
Basware, organisations can reduce the cost of buying and paying for goods and
services and gain visibility and control of their entire spending process by
automating manual processes, from sourcing, contract management, purchasing
and supplier collaboration to invoice automation. Basware solutions and
services enable substantial cost reductions across businesses and deliver
value by providing compliance and control, as well as fast return on
investment. The solutions are distributed and implemented, either on site or
as a service, in Europe, the US, and Asia-Pacific through an extensive
network of Basware offices and business partners.

About the research:

The Cost of Control: The Real Price of Cost Cutting study was
conducted for Basware by independent research company Loudhouse during
October 2009. Results came from a range of large businesses across the globe,
with all respondents occupying CFO, CPO or equivalent level roles. The size
of the organisations at which those surveyed are employed ranged from 1,000
to 50,000 employees.

Interviews were conducted to present a proportional picture from across
the globe, with 20 respondents surveyed in-depth across the USA, UK,
Scandinavia and Germany.

About the Professor Done and the IESE:

Adrian Done is assistant professor in IESE's department of production,
technology and operations management and research associate with the Advanced
Institute of Management (AIM) in the UK. He earned his Ph.D. from the London
Business School
, University of London and his MBA from IESE. He also holds a
Postgraduate Certificate of Education from the Open University and a
Bachelors Degree in Mechanical Engineering from the Loughborough University
of Technology.

IESE Business School is widely recognized as one of Europe's top
international business schools. Founded in 1958 in Barcelona as the graduate
business school of the University of Navarra. IESE has facilities in Munich,
New York and Sao Paulo. It offers the MBA, Global Executive MBA, Executive
MBA and PhD in Management degrees, as well as a wide range of executive
education programs for global senior executives and Continuing Education
programs for alumni.

Press contact: Karen Airey, Basware, karen.airey at; Octopus Communications: baswareuk at or +44(0)845-700-655

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