C-Suite Spending Remains Cautious

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PHILADELPHIA, July 29, 2013 (GLOBE NEWSWIRE) -- An analysis released today of Fortune 1,000 spending trends shows that while overall spending is up, continued caution in the executive suite is driving a more aggressive focus to ensure the most value for every dollar spent.

The report was compiled by Procurian utilizing insights gained in the first half of 2013 from billions of dollars in spend reduction projects with the company's 100+ clients. Procurian helps the Fortune 1,000 optimize spend habits and save dollars that can be reinvested in innovation, growth, and people. Specifically, the report revealed the top areas of focus for cost savings and the global trends that are driving these discussions.

"Although the economy is starting to show signs of improvement, our clients are proving to be as aggressive and innovative as ever in driving savings, from overhauling logistics strategies to energy hedging and risk management programs," said Carl Guarino, CEO of Procurian. "While C-suite caution remains, companies are making optimized spending decisions that support growth and reinvestment for their businesses."

Across the board, companies are focusing on attacking all major cost areas, and the Spend Trends Report reveals particular focus in 2013 on high-value areas including logistics, energy, healthcare and capital expenditures. Procurian's top 10 spending and spend management trends for the first half of 2013:

  • The Lease vs. Own Debate: A cost-effective middle ground has emerged between fleet ownership and using common carriers for freight and shipping. Regulatory burdens on items like hours of service, fuel cost volatility (particularly high diesel costs) and supply chain complexities have increased so dramatically for common carriers that for many businesses, dedicated third-party logistics operators (3PLs) are now an effective hedge against rising costs.
  • Healthcare Reform Creates Uncertainty and Opportunity: The impact of healthcare regulation on corporate spending confidence cannot be understated. A recent survey by IndustryWeek and the National Association of Manufacturers found that 82 percent of manufacturers cited the rising cost of healthcare and insurance as their top challenge. To blunt the impact of rising health benefits costs, some organizations are looking to leverage healthcare exchanges and other progressive techniques to better manage active and retiree benefits liability and surgical costs.
  • Corporate Construction Begins to Rebound: Spending is up as firms build capacity in emerging markets and begin to add domestic capacity as excess from the 1990's construction boom is finally absorbed. Low interest rates/cost of capital and signs of a manufacturing rebound make capacity investments slightly lower risk than in recent years, but caution still reigns. Firms are looking to holistically manage global capital expenditures by focusing on procurement strategies that support growth and expansion, while examining total life cycle costs to enable better decisions.
  • Mobile Employees Impact Real Estate Decisions: The combination of mergers and acquisitions, increased telecommuting, and reconfiguration of workspaces for better collaboration has decreased the square footage required per worker. As a result, the average firm now has 30–50 percent more real estate than it needs and 40 percent of real estate spend goes to operating it. The result is a significant drag on corporate performance that is left unchecked.
  • The Shale Revolution: The explosion in North American shale gas (and oil) production has dramatically altered global energy and manufacturing costs. The low cost of natural gas also has implications for many supply markets from chemical feedstocks to polypropylene (a popular thermoplastic used in packaging and labeling). As a result, clients are reconsidering global supply chain strategy to take advantage of local price/cost opportunities.
  • The Decline in Fixed Energy Contracts: With natural gas prices at historical lows in early 2012, most of Procurian's clients locked in long-term contracts. However, natural gas prices have rebounded substantially in 2013, up more than 50 percent in the first five months of 2013 vs. 2012 (based on average Henry Hub spot prices). In deregulated markets, Procurian recommends that clients adopt a more actively-managed energy hedging strategy, locking in a portion of consumption needs at forward prices, leaving more exposure to spot rates. It is critical to actively monitor the market to lock in supply when short-term opportunities arise using sophisticated hedging strategies that both manage volatility risk and take advantage of opportunities that price volatility provides.
  • Utilities Charge More for Peak Time: More regulated utilities are introducing time-of-use rates for commercial customers. In some cases, these new rates are mandatory. This is particularly bad news for most companies without flexibility to alter operations during peak energy periods. Energy efficiency incentives and active energy management including continuous monitoring are positioning Procurian's clients to identify actual consumption patterns so that behaviors and/or operations can be altered.
  • Margin Pressure by Air and by Land: Airline mergers and acquisitions have put the squeeze on customers by reducing competition in key city-pairs and markets. Fewer airlines mean fewer seats and when flights are full, discounts are hard to come by. The rental car market has also seen its share of M&A activity with 98 percent of the airport car rental market now controlled by the top three brands. Corporate buyers looking for travel savings should focus their attention on other areas such as corporate meetings and travel management companies for the remainder of 2013.
  • Digital Remains Dominant: The shift of dollars to digital media continues to accelerate. Procurian's analysis of client data shows that spending for digital projects completed and in progress in 2013 represents an almost three-fold increase over 2012. Overall marketing budgets, however, are shrinking, causing increased scrutiny on ROI and auditing the performance of both traditional and online media campaigns to validate dollars spent and future investments.
  • Computers Rule Legal Departments: The Big Data explosion has hit the legal services realm. Electronically Stored Information is growing exponentially (60 percent annually) and regulations require longer document retention periods. As these massive data stores continue to grow, the need to query the data for litigation becomes daunting. New technologies have emerged like Technology Assisted Review (TAR) and Predicative Coding that reduce manual discovery, and prove machines are far superior to humans in pouring over thousands of documents. These advancements create better results and lower costs in legal services.

About Procurian Inc.

Procurian is the leading specialist in comprehensive procurement solutions. Forward-thinking business leaders partner with Procurian to transform procurement and drive sustainable changes to their cost structures. Global industry leaders, including Kimberly-Clark, Hertz, Symantec, Timken, and Whirlpool have chosen Procurian to accelerate this transformation. Procurian's built-out Specialized Procurement Infrastructure™ integrates with businesses to optimize spending and deliver real savings that equal a margin point or more. Procurian is an ICG (Nasdaq:ICGE) company. For more information, visit www.procurian.com.

CONTACT: Josh Merkin rbb Public Relations (305) 967-6667 / Josh.Merkin@rbbpr.com

Source:Procurian Inc