Q4 Procurement Market Update

With Christmas fast approaching it’s time for us to review the current market conditions for procurement professionals and how they’ve evolved in the latter part of the year, particularly with an eye on the traditionally busy period for recruiters in the New Year.

So what have we observed in recent weeks?

The post election lull appears to be over as we have seen much improved market conditions since September.

There has been a significant increase in the number of permanent and interim vacancies in the private sector, particularly in the Banking, Financial Services, FMCG, IT services, Consultancy and Technology sectors.

One of the most noticeable differences is the renewed appetite to make appointments as swiftly as possible. This has replaced the internal delays, additional rounds of interviews and senior management approval that have characterised the previous 18 months.

For example we recently completed a key appointment for one of our clients within two weeks of instruction.  This would have been unheard of last year when recruitment processes were typically taking 8-12 weeks.

The interim market still has pressure on both day rates and margins although some would say it’s a natural correction in what was a particularly buoyant market.  It’s not uncommon for an experienced interim manager to have reduced their day rate from £600-£700 to £400-£500 in the last 18 months.

We anticipate that interim rates will creep up slowly next year but it will be very interesting to see how long it takes day rates to recover to pre recession levels. We believe it will be 2012 before we reach those levels again.

Fixed term contracts are now increasingly common as this is clearly a less expensive way of employing temporary labour than paying day rates. With the pressure on day rates these contracts are now becoming more attractive to contractors and those who have been made redundant from permanent positions.

Not surprisingly given the government spending cuts, experienced public sector candidates are coming to us in large numbers seeking new roles.  We question whether the private sector will be able to “take up the slack” given the volume of people at risk, and the reluctance of many private sector organisations to consider people with long term public sector service. This is obviously a bigger question for the whole economy which goes beyond procurement and we are observing the market trends with some interest.

There has been a noticeable increase in demand for well educated, ambitious junior candidates in procurement and analyst roles recently. We believe this is due partially to the relatively low cost of employing such people, but also reflects the need to develop new talent, particularly in certain categories.

The supply of ambitious dynamic graduates for example remains limited but is significantly improved from as recently as three years ago.  We expect to see some salary increases in this area next year as demand outstrips supply.

Supplier Relationship Management – whilst there has been significant evidence of many leading organisations improving the SRM capability during 2010, this has yet to result in large scale recruitment.  A number of our clients are still focusing on developing robust SRM policies and frameworks before adding to the team, but we anticipate this will be a busy area next year.

The restraint on pay rises and basic salary offers appears to be loosening as salaries and bonuses begin to creep up as many major organisations move to keep their best staff and feel more bullish about future profitability.

Category trends:

We have also observed some interesting trends in terms of category specific roles which may point to some broader improvement in economic activity. For example:

There has been an increase in technology focused category roles in recent weeks and the message from several of our clients is that people are investing in IT again after reduced spending last year.

This has also been noticeable increase in travel focussed roles suggesting that companies are letting their employees travel more again, although there is also evidence that some of this is driven by the need for greater compliance, use of e tools and to control spend more effectively overall.

Direct spend – our clients in FMCG and technology related manufacturing are recruiting more than has been the case for the last 18 months and we believe this is due the general improvement in economic activity.   However there is also evidence that companies are reacting to some challenging situations in various commodity markets by improving their procurement capability in key areas.

Outlook for 2011

Like everyone else we sincerely hope that the improvement in market conditions will continue in the New Year.  The overall trend in 2010 has been positive in comparison to 2009 despite the impact of the election in the early summer and the issues around public sector spending.

A number of factors mentioned above give us cause for optimism and this is shared by some of our Management Consulting clients who are seeing increased activity and a willingness to commit to major projects from their clients.   So in summary there appears to be a greater willingness to commit budgets to effect positive change or strengthen the procurement capability, whether it is through better processes etc or increasing the size of the team.

Our research

As you may be aware we have commissioned the follow up to our research into “The growing importance of SRM” with a new online survey entitled “Procurement Systems & Skills – are we in balance?”

Our observation is that we are seeing an increasing reliance on standardised tools, technology and systems in the sourcing and negotiation process. Any benefits these can bring in the areas of cost effectiveness, consistency, speed, and the creation of audit trails, are obviously good news.

So our question is whether the widespread use of such technology and systems is creating a generation of procurement professionals who lack some of the critical skills that are required for full commercial competency and agility?  This survey explores the link between systems and core skills.

We would be very grateful if you find 10 minutes to contribute here: http://www.edburydaley.com/wp/2010/09/16/procurement-systems-skills-%E2%80%93-are-we-in-balance/

The results will be published in the latter part of Q1 next year so the questions will be available to complete over the Xmas and New Year period.

EdburyDaley

EdburyDaley is an executive recruitment consultancy specialising in Procurement and Supplier Relationship Management appointments on both an interim and permanent basis. If you are seeking a new role please call Chris McGowan on 0161 776 4605.  If you require assistance with identifying the talent you need for your team then please call Andrew Daley (0161 776 4603) to discuss how we can help your business.  Hannah Jackson will be back from maternity leave early in the New Year.