In a post from yesterday, I shared a couple of curious facts from Wayne Mincey, Hackett Group's President, about what separates top performing organizations from the rest. While much of Mincey's talk focused on general business functions -- rather than procurement specifically -- he did provide some unique insights specific to Spend Management. In this first post of the morning, I'll share some of these ideas. First, Mincey has become a big believer in the benefits of offshoring even more advanced processes such as financial and statistical analysis. His firm, in fact, is eating its own dog food, using a team of 100 employees in Hyderabad not just for benchmarking analysis -- which requires only a moderate amount of analytical skill -- but also nearly 100% of Hackett's statistical analysis, a significantly more advanced function. According to Mincey, "this symbolizes the type of impact in BPO activity ... it is longer just about lower value transactional areas."
Second, procurement organizations that focus on improving their metrics around Hackett's "efficiency" and "effectiveness" areas would do well to focus specifically around effectiveness if higher returns and savings dollars matter (compliance is another issue). Unlike other areas such as finance, the "real savings in procurement comes from the impact of cost savings and cost avoidance -- not efficiency". This statement points to the need for a different type of BPO provider who can offer up far more than just labor cost savings opportunities, but also process expertise, a direction that Infosys and others are making a point to play up in their procurement outsourcing positioning.
A third point which is worth sharing is how world class companies are focusing on simplification. In this regard, from a procurement perspective, world class companies have over 80% fewer supplier databases (sources of supplier information) on average than the typical organization. And world class organizations are also driving users to self-service applications (e.g., T&E, operational procurement, etc.) And in Mincey's words, Microsoft Excel does not qualify as a self-service application (even with fancy macros and such). No, self-service is about "fully integrated no-touch, self-service".
A last factoid that I'll leave you with from his presentation which I want to reiterate is how effectiveness matters uber alles. As a final example here, world class companies typically free up nearly $3 billion more in working capital -- a material amount via payables -- than the typical Global 1000 organization. In today's economic climate where, to borrow Lord Byron's famous phrase, "cash is virtue," that's a quite a bit of money. And it's further evidence why Spend Matters more today than it ever has before.
- Jason Busch