Sourcing and Procurement Measurement: Metrics That Fail To Deliver

The trip out to Chicago O'Hare hotels or the airport for morning breakfasts or meetings always reminds me about the importance of timing and data in making decisions – procurement and sourcing decisions, to be exact. From my apartment, it takes about 20-25 minute to get to Rosemont if I leave at 5:45 AM on most mornings. If I leave at 5:55, add another 30 minutes (at least). So when I can, I've learned to leave early and camp out at Starbucks before the airport sessions begin.

Aside from my travel learnings, we've all heard that procurement needs to become more data-driven in making decisions. But how can a function make better decisions leveraging data and analytics in sourcing and risk management when it can't even accurately measure its impact to the bottom line? Last week, at a joint BravoSolution and Corporate United, Mickey North Rizza presented some Hackett data on procurement metrics that took me by surprise.

In explaining how procurement all too often fails to measure its value contribution to the business, she quoted a Hackett statistic suggesting that 55% of companies do not bother to track "revenue/profit uplift from internal efforts (procurement, cross-functional teams, trading units, etc.)" Further, 66% do not track revenue/profit (uplift from suppliers) based on procurement-led or enabled efforts. One may read these facts and dismiss them as a simple lack of coordination between procurement and finance. But often the challenges run deeper in failing to define and agree on spending and savings baselines because we lack underlying internal and external data visibility.

I know that when I leave at 5:45 am to go to an event out by the airport that I'll arrive at my favorite O'Hare Starbucks within a 2-3 minute window. I also know that if my time is pushed back even just by a few minutes that I'll be sitting in traffic for way longer. It's a shame that procurement and finance lack even the basics ability to agree on when and what journeys to embark on together in the majority of organizations – let alone measure and manage working off of the same time and savings clock.

- Jason Busch

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