World-class procurement organizations reduced their labor, outsourcing and technology costs by 1.6%; the peer group, by 3.0%. Over the years, cost-reduction efforts have been successful, but these have come at a price.
Today, these organizations are running extremely lean – perhaps too lean. World-class procurement’s challenges are compounded by their diminishing ability to reduce spend and avoid purchase costs, down sharply in 2014. This represents a 17.3% decline, returning annual savings levels to only slightly above pre-recession benchmarks. World-class ROI (i.e., the ratio of total purchase cost savings to the total cost of procurement) is still strong at 9X payback on investment in procurement processes, but this number is losing ground as cost reductions level out and savings decrease.
Unrivaled insights that drive process improvement and sourcing and procurement transformation
Our sourcing and procurement benchmarking services provide access to the unparalleled benchmarking information and resources that are part of The Hackett Group’s proprietary Best Practice Intelligence Center™ – a repository of processes, benchmark data and business best practices developed from more than 13,000 projects conducted at the world’s leading companies. Our procurement benchmark studies provide a fast and objective way for executives to:
- Understand current capabilities
- Assess performance relative to business value and strategy
- Identify and prioritize improvement opportunities that offer the greatest potential return
- Highlight and address areas of risk
- Plan, manage and accelerate your journey to world-class performance
This performance insight covers more than 1,500 procurement metrics.
What makes the difference?
Two characteristics distinguish The Hackett Group’s procurement benchmark studies: the world’s largest repository of empirically proven best practices, and our proven approach for assessing performance and value. Our business benchmarking services focus on three drivers of world-class procurement performance:
- Factors that drive demand for procurement function services, such as complexity (geographies, legal entities, regulatory environment) and volatility (rate of change, M&A activity)
- Structural factors such as business practices, strategies, service delivery model, staffing levels, skill sets, and technologies used
- Execution/realization of value, including performance as measured by costs, productivity, resource allocation and value
Then, we use proprietary best practices benchmarking methodology to quantify your gap to world class – comparing your sourcing and procurement function’s ability to execute efficiently (cost and productivity) and effectively (quality and value). We examine comparable organizations so you can see how the best do it and define business process reengineering steps relevant to your own sourcing and procurement function.
Our analysts use sourcing and procurements metrics such as these to calculate world-class performance
- Functional and process costs and staffing levels
- Overall cost as a percent of spend
- Transaction costs and productivities
- Cycle time
- Cost savings
- Return on investment
- Access to information
- Percent of staff dedicated to decision-support activities
- Percent of purchase order transactions requiring re-work
- Leverage of technology
- Supplier leverage
Impact beyond sourcing and procurement function borders
Business processes and systems inextricably link your sourcing and procurement function with other enterprise functions. Continuous process improvement in one area may have a ripple effect on others; for example, improved IT controls may result in more reliable data for decision-making in sourcing and procurement.
Our business benchmarking approach examines efficiency and effectiveness not just within the sourcing and procurement function, but also with a view toward the impact across your enterprise.
Quantum Leap®, our digital benchmarking and continuous process improvement platform, helps ensure your organization captures quantifiable benefits from benchmarking. Quantum Leap streamlines the benchmarking process, enabling you to cut your efforts by half while extending the power of benchmarking into a continuous improvement capability. Its ability to simplify data collection, intelligently assess performance gaps, and generate world-class solutions can enable and accelerate your improvement.