Digital World Class® Procurement: Latest Benchmark Metrics and Key Findings

What are Digital World Class^® procurement organizations doing differently and better? What type of savings are they achieving and in what areas? How are they harnessing AI for continuous process improvement? In this episode of the Business Excelleration^™ Podcast, The Hackett Group’s Vicky Kavan, Jamila Williams and Kurt Albertson take the listener through some of the most valuable insights from their recent research.

Welcome to The Hackett Group’s “Business Excelleration^™ Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Vicky Kavan, a procurement advisor for The Hackett Group based in the UK. Today’s conversation revolves around Digital World Class^® procurement, the latest Hackett benchmark metrics and some key findings from the data. Vicky is joined by colleagues Jamila Williams, a principal in the Strategy and Business Transformation practice, and Kurt Albertson, a principal in the Procurement Advisory practice.

To begin, Vicky explains Digital World Class^® procurement and how The Hackett Group conducted their research. They plotted all of their benchmark clients on a grid of operational excellence (which is based on efficiency, how quickly something can be done, how cost effective, etc.) against business value (which is based on outputs, the effectiveness of that function, the happiness of stakeholders, etc.). Procurement teams that achieve top quartile in business value and operation excellence are identified as Digital World Class^®. These teams are all real-life companies with real data points.

The first key point is the cost to deliver. Digital World Class^® costs 21% less than the average, which means they are spending less on labor but they don’t spend less on technology. Digital World Class^® companies are investing around 30% more around supporting technology. In addition, Digital World Class^® procurement teams are spending 24% less on teams, and the size of teams are operating 32% fewer human resources. They spend fewer than one-half of the hours on transactions and 10%-15% fewer on sourcing, supply management and functional leadership. They also have an increased amount of time on resource planning and strategic activities.

Next, they discuss the operational excellence differentials between the Digital World Class^® procurement functions and the peer group. Digital World Class^® teams are supported by a higher automation, which has reduced cycle times by 23%. They have also lowered the purchase cost to order by 76%. In addition, Digital World Class^® teams have an 81% labor swap, where there are more indirect spend transactions due to self-service solutions. They also have a 1.5 times higher rating for customer satisfaction. Greater technology creates greater data to work with business partners and changes the perception of procurement. Approximately 59% are seeing less savings loss due to maverick spending related to noncompliance. They are looking at what people are buying and pushing them to the right buying channels. You want to be perceived as a trusted advisor and get involved at the start of processes.

In closing, their advice for listeners getting started on their digital journey is to harness AI, have a plan in place and make your case for change.

Time stamps:

• 0:49 – Welcome to this episode hosted by Vicky Kavan.
• 1:23 – Explanation of the Digital World Class^® procurement key findings.
• 6:19 – The operational excellence differentials between the Digital World Class^® procurement functions and the peer group.
• 8:30 – AI and the trend in technology usage.
• 15:29 – Advice for listeners to get started on their digital journey.