At IACCM a couple of weeks back, I had the chance to attend Pierre Mitchell's packed break-out session on contracting and procurement trends. Pierre was in usual form, wrapping up the slides for his presentation sometime earlier that morning. He once described this tactic as "just in time" PowerPoint. I suppose if you're Pierre, you can get away with missing presentation deadlines, but personally, I could never pull off such a feat at the last minute every time. But the fast peddling Bostonian somehow manages to get away with it.
I took some five pages of notes during Pierre's presentation and I thought that I'd share a few of the highlights with Spend Matters readers. In the spirit of not giving away too much benchmarking data -- even though it was shared in a public forum -- I'd suggest reaching out to Pierre directly (drop me a line for his details) if you'd like some more information. I'll only share a small minority of the information from the presentation in this blog entry.
Enough set up. Let's get right into it. Pierre began his chat by talking about an oft-quoted Hackett statistic showing that a 23% delta exists between the costs of procurement for world-class organizations versus average performing ones. Part of this delta comes from staffing level differences. Simply put, top performers do more with less (and spend more on strategic talent -- and less on tactical resources -- and technology to do so). To wit, world class organizations have, on average, 49 procurement team members for every $1 billion in indirect spend. This compares with 84 for organizations in the middle of the pack.
Skipping around a bit in my notes, another statistic that jumped out at me is the gap between how procurement organizations view themselves versus how their company views them. In this regard, in Hackett's latest research, only 9% of company executives and managers view procurement as a "valued partner" -- the lowest percentage among four choices in their recent study. The largest percentage of executives still views procurement as an "administrator". And sandwiched in between these two labels from a percentages standpoint are "negotiation/sourcing expert" and "gatekeeper". Hmmm ... not necessarily the type of results we were looking for. But perhaps the fact that only 20% of average performing organizations view procurement as "exceeding expectations" ratings from internal customers is contributing to this bureaucratic, non-value adding perception.
In the second part of this post, I'll share with you some of Pierre's insights on why procurement organizations are facing the perfect STORM of internal and external challenges at the moment.
- Jason Busch