Budgeting, Planning & Forecasting

Budgeting, Planning & Forecasting

May 02, 2011

Detecon's key Study on Strategic Sourcing in the Telecommunications Industry

A recent study by Detecon, a leading consulting firm, asserts that the procurement departments at many telecommunication operators lack the necessary structures for them to play a major role in achieving company goals. It finds that most companies have a comprehensive procurement strategy, but 75% of them do not pursue the strategy in all parts of the corporate group and subsidiaries.

For more than three decades, Detecon has been investigating and analyzing international telecommunication markets as one of the world’s leading management and technology consultancies. The recent study, entitled "Strategic Sourcing in the Telecommunications Industry," has prepared a number of recommendations for top purchasing managers. 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.

Detecon interviewed 48 procurement professionals from telco carriers operating in all continents about their procurement strategies with regard to global operations and integrated risk management. The majority of participants stated that their companies have developed an overall procurement strategy as well as category-specific procurement strategies and that those strategies are aligned with internal clients. On the other hand, three fourths of the participants admitted that those strategies are not applied to their affiliates globally and 40% stated that their procurement employees do not have the necessary skills and methods to execute them. Accordingly, only 40% think that procurement strategies fully contribute to the company and procurement targets.

The results demonstrate that strategic sourcing is perceived as a core strategy for the realization of savings and management of supply risks. But the implementation of strategic sourcing only works if a globally integrated and high performance procurement function is in place. While leaders in the manufacturing industry have already implemented high performance global procurement organizations, many telecommunication carriers are lagging behind to a greater or lesser extent. Now the pressure is on their executives to transform their procurement organizations into globally performing business functions.

"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."

“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.

Neelam Malkani is a TMCnet contributor. To read more of her articles, please visit her columnist page.

Edited by Rich Steeves

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