Pierre Mitchell's Chicago Fly By (Part 1)

A couple weeks back, I got a somewhat frantic call from my old friend, Pierre Mitchell, soliciting thoughts for what he should talk about at his Conference Board Procurement Technologies presentation the next day as he raced to the airport. I gave him a few ideas, but knowing Pierre, I was certain that he was already thinking of dozens things that had not even entered my head yet. And I was right.

The next morning, I stumbled down to Michigan Avenue to crash the Conference Board's event just as it was starting (fortunately, despite my lack of a formal press pass, they still let me in). I got there just as Pierre was set to go on stage. And it's a good thing I arrived when I did. Pierre's slide-packed presentation was brimming with new ideas -- enough for many fact-filled posts on the subject. On a somewhat related note, I've always found Conference Board events to be hit or miss. This one was a big hit, though. The content and size of the crowd was great compared with similar events in the past. I reckon that Global eProcure -- the only sponsor of the event -- got their money out many times over.

Today, I'll begin by posting a few of the highlights from Pierre's presentation at the event (including Hackett's current research as well as recent Book of Numbers findings). Tomorrow, I'll talk about some of Pierre's prognostications (I should be in better shape by then to add a bit more of my trademark commentary. I just can't do it today. It's 7:02 AM right now and I can barely keep my eyes open, as my two young boys decided to have a play party @ 1:00 AM in their room, the older one pissed through his sheets @ 2:00, and both decided to regroup for a final ho-down @ 5:00 before the sun came up. And my better half is travelling. Ahhh ... the joys of fatherhood.)

But enough kvetching. I'm a wussy, I know it. Back to the subject at hand: Pierre's presentation. He began by talking about Hackett's top ten recommendations / areas of examination this year in procurement and sourcing. These are, in no particular order: driving higher levels of spend cost reduction and spend cost avoidance, gaining better business alignment and evolving procurement's value proposition, improving spend under management, getting more value from the supply base, driving process excellence (e.g., lean, six sigma, any type of best practice), coping with and harnessing the power of globalization, driving best value from technology deployment, mitigating and managing supply risk, talent management, and innovation.

By now, chances are that you're familiar with Hackett's definition of world class organizations (who are both efficient and effective). Here are a few numbers that highlight some of the areas world class organizations tend to invest in that separates them out from the pack. According to Hackett's latest numbers, world class procurement organizations spend $24,000 per procurement FTE on technology while the average (peer group) organization spends $13,000. In 2006, the percent of world class organizations where procurement was involved in budgeting and planning was 46% (compared to 28% for the peer group).

Here's another fascinating statistic -- 73% of world class procurement organizations conduct formal customer satisfaction surveys (compared with 43% of the peer group). But what's most insightful, at least in my book, are new Hackett findings that show the percentage different between the lowest process wage rates and the highest within procurement. In 2006, the percentage difference for peer group organizations was 139%. For world class organizations, it was 759%. In other words, world class procurement companies are moving the low-paying jobs offshore (e.g., A/P, catalog maintenance, transactional buying) and are paying significantly more for top talent in strategic areas onshore.

Jason Busch

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