Research: World-Class Procurement Means Doing More With Less

Jan. 13, 2005
World-class procurement firms drive increased savings while spending less than typical organizations, says new research by business advisory firm The Hackett Group. For example, world-class firms operate at a total cost of 0.72% of expenditures and ...

World-class procurement firms drive increased savings while spending less than typical organizations, says new research by business advisory firm The Hackett Group. For example, world-class firms operate at a total cost of 0.72% of expenditures and have 54 full-time equivalents per billion dollars of spending, while more typical firms operate at a total cost of 1.03% of expenditures and have 104 full-time equivalents per billion dollars of spending, reports the Atlanta-based organization. (Hackett applies its procurement world-class designation to firms that score in the top 25% in its procurement database of best practices and process metrics for both efficiency and effectiveness.) And world-class organizations drive 60% savings returns on their procurement investments, the advisory group says. Key strategies of world-class procurement businesses include increased use of technology compared with their more typical counterparts, more control over indirect spending and a greater likelihood that their procurement strategy aligns with overall business goals and objectives. World-class firms rely on 55% few suppliers than their counterparts, which operate with 7,805 suppliers per billion dollars of spending, according to Hackett. "Procurement organizations that are unable to influence enterprise spending are simply not in the game," says Chris Sawchuk, a Hackett senior business advisor. "They're just hoping for the best. Truly world-class procurement organizations have put systems in place that give them significant control over their company's enterprisewide spending and procurement processes. They're at the table during the planning process, have dramatically reduced the number of suppliers they rely on, and have gained significantly more ability to manage overall spending behavior."

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