CAPs Cross Industry Report — What's Changed? (2006-2008)

Of all of the organizations producing procurement research, I've probably paid less attention than I should to CAPs over the years (even though when I was at FreeMarkets, I gave them a grant to underwrite a study which ended up producing some useful findings at the time). There's really no excuse for this -- CAPs has produced some invaluable material in the past few years, including a report that validated the role and benefits of e-sourcing and reverse auctions. It's just that since CAPs follows more of an academic publishing model, it takes far longer for them to crank out research than analyst firms, consultants and others who provide research and benchmarking capabilities. Because of delay in publishing timely material, I haven't pounced on their latest and greatest reports as quickly as I should.

But one can always change. And I do plan to pay closer attention to CAPs going forward on these virtual pages. Looking at a recent CAPs Cross-Industry Report of Standard Benchmarks (free registration required), it's easy to see why. This chart explores a number of benchmarks across industries (e.g., total spend as a percent of sales dollars, procurement operating expense as a percent of sales dollars, percent of total spend management by procurement, etc.), showing companies how they stack up relative to their peers.

What I find most interesting is contrasting the 2008 report to the last benchmark published in 2006. The industry changes and evolution can be telling. For example, if we consider the factor of total spend as a percent of sales dollars, we can see some fascinating trends. In certain industries, despite aggressive sourcing efforts, spend is actually up. In A&D, it's up 3.14% over the past two years. And in petroleum it's up 5.09% (and that despite rising revenues). But in engineering and construction it's up over 15%. Some industries are down (e.g., diversified beverage and food), but in general, the numbers suggest to me that overall, spend is increasing as companies continue to buy more and make (or employ) less.

What are some other useful findings? Between 2006 and 2008, A&D offshore purchases were up over 50%. And offshore purchases in construction increased more than doubled. In both cases, I suspect location of projects (or customers) and material availability rather than just low cost were the reasons for moving spend offshore. What else is telling? The average training costs per employee are down roughly 30% from 2008 to 2006. One wonders whether or not this is due to the fact e-learning is making training easier or whether in fact companies are cutting back on the amount of training. I'm guessing in most cases that it's the former. I'll leave you with two final findings to think about. First, the percentage of companies reporting "outsourcing some of their procurement activities" is down, in fact, from 2008 to 2006. Surprising! But perhaps more settling is the fact that the "percentage of active suppliers who are eProcurement enabled" increased to 19.60% from 11.16% in 2006. Let's hope this number climbs closer to 50% by the 2010 study.

- Jason Busch

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