In a recent piece of frenzied hype, online energy specialist supplierswitch.com has stoked business fears with a prediction that the average rate of increase in energy prices for corporate users could be between 60% and 100% year-on-year.

Whilst this might be a little alarmist, there’s no denying the impact of energy price rises on even the largest operators, with Tesco recently revealing that the financial gains provided by its 8 year programme of green energy initiatives have been wiped out by soaring gas and electricity prices.

And considering that energy and telecommunications costs can make up as much as 25 percent of an organisation's overall operating budget, it’s well worth paying close attention to utility costs. The good news – a commodity in somewhat short supply these days – is that energy remains one of the most responsive spend categories to effective sourcing.

CSR, or corporate social responsibility, programmes play a key part in the supplier qualification work we do with our clients, either as part of our consultancy offering or through use of our electronic sourcing tools for the delivery of pre-qualification questionnaires that automatically rank and score supplier repsonses on elements including CSR metrics.

And if suppliers didn't think large organisations really took this stuff seriously, then the last couple of weeks will have disabused them of that notion, with two of the biggest brands on the high street getting into a pickle and causing a stir respectively.

“Even during this time of change for our company, one thing that will never change is our long-standing commitment to conducting business in a responsible and ethical manner,” Starbucks’ chairman, president and CEO, Howard Schultz, said in a letter to stakeholders.

SAP has finally disclosed the date of its next eSourcing release cycle as Q3 2009, when it intends to deliver better usability (shouldn’t be too hard!), support for complex pricing structures and finally to release dutch auction capability. 

After this, don’t expect any major improvements until well into 2010 – always assuming that SAP sticks to its own roadmap – when a further release will focus on coupling process integration between eSourcing and the overall Business Suite. 

For the next general release, SAP users out there will have to wait until at least 2011 when SAP, with more functional enhancements including the tight integration of SAP PLM and SAP SCM as well as industry specific business processes.  

The big issue for purchasing teams looking to (or saddled with) SAP isn’t really addressed by any of this however. Namely, whether the various SAP modules that compete in this space – such as SAP eSourcing and SAP sourcing within the SRM module – are ever going to be truly integrated and free of overlapping functionality. How SAP eSourcing users (and data) will interact with the sourcing capabilities resident in SAP SRM, especially the complex operational sourcing and bidding capabilities SAP SRM 7.0 remains an unanswered question. 

Could be time to look elsewhere?

Everywhere you turn at the minute, forecasts for the world economy in the next 12-24 months keep on getting progressively worse.

And while there is always a danger of the world simply talking itself into recession, what can’t be denied is that the effect of a downturn, perceived or otherwise, is significantly compounded by rapidly rising commodity prices.

The Times today reports that petrol prices are expected to reach more than £1.12 per litre next month as service stations feel the effects of the latest surge in global crude prices – in truth it’s a price point I’ve already experienced on the high road.

Manufacturers, particularly in the USA, are talking of a ‘perfect storm’ where the credit markets, tax calls, oil and raw material prices have all hit costs at one end of the business and driven down consumer spending power at the other end.

As a result we have already seen organisations focusing even more closely on procurement practices and the supply chain, as cost reduction becomes a seriously pressing issue across all direct and indirect spend categories.

There has been a noticeable upswing in what are effectively hedging events, with businesses running electronic sourcing events – typically eAuctions – with a view not necessarily to make big short-term savings, but to secure a price point for the kind of goods and services most affected by commodity price rises.

Recent examples include carrier bags and courier services, both highly sensitive to fluctuations in oil prices, as well as events that run straight to the heart of the matter to secure a price for the supply of millions of litres of diesel.

The key win here (on top of the real savings that were realised in every case) is a period of certainty in uncertain times. And that’s simply priceless.

Despite cost estimates for the Olympic aquatics venue for London 2012 currently bobbing near the £250 million mark, in comparison to the original price of £75 million, the Olympic Delivery Authority (ODA) remains confident that it will stay within its procurement budget.

Given the ODA’s total budget of £6.09 billion announced by the Department for Culture, Media and Sport in December, there is definitely some wriggle room, but the team’s purchasing practices will have to get and stay very keen to stay this side of some serious financial and political fallout if things don’t go to plan.

The aquatics venue was designed by Zaha Hadid (whose dreadful website can be found here) and is being put together by Balfour Beatty, who fell into the contract after French firm Eiffel and German construction company Hochtief controversially withdrew from the process.

A recent survey by Supply Management magazine suggests that nearly three quarters of buyers are looking to make cuts to their vendor list and use fewer suppliers.

77 of the 100 buyers surveyed said consolidation would make the supply base more manageable and cost-effective, and while there is no doubt this is true it beholds organisations to make sure they don’t simply take a knife to the vendor list without careful analysis of the risks involved. Supplier rationalization efforts can increase supply risk as well by limiting a company's options and back-up plans if a disruption, quality issue or supplier bankruptcy occurs.

A clear and accurate picture across the supply chain is an essential pre-requisite, which is of course where purchase to pay systems play a significant part, but category expertise can be equally important and companies considering supplier rationalisation should draw heavily on the experience of their eProcurement vendors or advisers.  

The rise and rise of raw material costs around the world are creating waves even among European companies whose purchasing power is bolstered by a strong Euro. Henkel KGaG, the German maker of Persil detergent, is blaming commodity price rises for plans to shed up to 3,000 jobs, or nearly 6% of its total workforce.

In the UK, with less in the way of currency protection, making savings across organisations is becoming the only conversation business wants to have – nobody wants job cuts, which puts the spotlight on purchasing practices and driving efficiencies in the supply chain.