October 21, 2008

Hackett's New Capabilities Model Helps Procurement Deliver New Levels of Business Value and Strategic Support

Detailed Maturity Model Enables Companies To Compare and Build Relative Capabilities Across 12 Key Dimensions

ATLANTA & LONDON, October 21, 2008 - What capabilities do procurement organizations need to develop in order to extend their value proposition from simply assuring supply to truly harnessing the power of supply markets and influencing business strategy and tactics?

A new Procurement Capabilities Model from The Hackett Group, Inc. (NASDAQ: HCKT) details the specific changes companies need to make as they mature. The model is detailed in Hackett's latest Book of Numbers™ volume "2020 Vision: Delivering on the Evolving Value Proposition of Procurement."

The Hackett Procurement Capability Model expands on proven Hackett best practices that are correlated with world-class performance and organizes these practices by capability rather than tying them strictly to business processes. It also supports practical solutions by helping companies identify weaknesses, predict future staffing needs, prioritize investments in tools and technology, and establish better strategic alignment among all parts of the enterprise.

Hackett's 2008 Book of Numbers research also reports that world-class organizations now spend 22% less than typical companies on procurement operations (.64% of spend for world-class companies versus .82% for typical), and operate with 37% fewer staff (48.4 per billion US$ of spend for world-class companies versus 76.4 for typical). They also generate 129% higher spend cost savings, including reduction and avoidance while also delivering great stakeholder satisfaction and support for initiatives in sustainability, innovation, working capital improvement, and other areas.

At a typical Global 1,000 company (with annual revenue of $22 billion and annual sourceable procurement spending of $8.9 billion) this represents more than $16 million in annual savings on procurement operations, 249 fewer procurement staff, and over $263 million in additional annual spend cost savings.

In addition, Hackett announced that it has launched a new Procurement Capabilities Performance Study that enables companies to assess on a broader evolutionary scale both the value proposition of their procurement service offerings and also the capabilities needed to support them. Respondents will receive a customized report discussing the study results, and an analysis of significant shortfalls and insights from Hackett on how to close performance gaps.

"As we developed our Procurement Capabilities Model, we began by considering how the typical procurement executive would respond when their CEO knocks on their door, asking about procurement's current mission, what's needed to support it, the vision for five years out, and what resources are required to get there," said Hackett Procurement Practice Leader Chris Sawchuk.

"The Model is designed to help procurement leaders answer these questions," said Mr. Sawchuk. "It shows how to broaden and clarify procurement's vision and strategy, while articulating the operating model and resources that need to be in place. For example, a procurement organization focused on reducing purchased costs will have different operating and resourcing models than those of an organization focused on supporting rapid growth. Additionally, if the operating model and resources are not moving in lockstep with the strategy, short-term execution and long-term transformations are doomed to fail. The correct approach and sequence for improving these capabilities will be different for each organization."

According to Hackett Senior Business Advisor Pierre Mitchell, "We've created a framework in which procurement leaders can consider a broad range of questions about how to evolve their organization and what the upsides and also the obstacles are at each stage of evolution. Hackett's Procurement Capability Model helps procurement leaders stimulate organizational improvement by framing the problem, defining its scope and dimensions, and enabling communication using common terms."

The new Procurement Capability Model builds on Hackett's Procurement Value Proposition Model, which was launched in Q4 of 2007. It details capabilities across 12 dimensions of procurement within three major categories. For each dimension, specific capabilities at each of four maturity levels (reactive, planned, aligned, and strategic) are offered. The categories and dimensions are:

  • Operating Model, including organization and governance, strategy and alignment, performance measurement, and continuous improvement;
  • Core Process Management, including innovation and product support, customer/stakeholder management, strategic sourcing, supplier management and development, and purchase-to-pay;
  • Resource Management, including business process sourcing, information technology management, and talent management.

Hackett's new Book of Numbers research will be one of several topics discussed at Hackett's Procurement Advisory Leadership Forum in Atlanta on October 30. The summit is an annual event exclusively for members of Hackett's Procurement Executive Advisory Program, where they can exchange ideas on creative, innovative and proven solutions for mastering the challenges of doing business in current economic conditions, hear insights from client member presentations, and gain insights into metrics and trends from Hackett research studies.


About The Hackett Group

The Hackett Group, Inc. (NASDAQ: HCKT), a global strategic advisory firm, is a leader in best practice advisory, benchmarking, and transformation consulting services, including shared services, offshoring and outsourcing advice. Utilizing best practices and implementation insights from more than 4,000 benchmarking engagements, executives use Hackett's empirically based approach to quickly define and prioritize initiatives to enable world-class performance. Through its REL brand, Hackett offers working capital solutions focused on delivering significant cash flow improvements. Through its Hackett Technology Solutions group, Hackett offers business application consulting services that helps maximize returns on IT investments. Hackett has worked with 2,700 major corporations and government agencies, including 97% of the Dow Jones Industrials, 73% of the Fortune 100, 73% of the DAX 30 and 45% of the FTSE 100.

Founded in 1991, The Hackett Group was acquired by Answerthink, which was renamed The Hackett Group in 2008. The Hackett Group has global offices in the United States, Europe and India.