Continual cost cutting threatens supply stability

The relationship between businesses and suppliers is hanging in the balance as cost-cutting options narrow, and chief financial officers (CFOs) and chief procurement officers (CPOs) of large organizations continue to struggle, despite reports of the economy beginning to lift out of the recession, according to a new research report released this week.

According to the report, from procure-to-pay solution provider Basware and leading academic Mark Frohlich, associate professor of operations management at the Kelley School of Business, CFOs and CPOs 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 percent of businesses associate financial risk with procurement, the latest report provides more insight into how large organizations 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 suggests.

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