AT Kearney Releases its 2014 ROSMA Benchmark Report – Context and Approach

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The Context

AT Kearney recently released a report titled “Building the Brand of Procurement and Supply,” which summarizes and analyzes its 2014 Return on Supply Management Assets (ROSMA) benchmark metric that it collects on its own (e.g., it has been part of Kearney’s AEP study since 2010) and through a partnership with ISM and CIPS. Members of ISM and CIPS (of any size) can participate in the benchmark study (and get a results readout. We’d highly recommend procurement practitioners to at least read this report and familiarize themselves with the concepts and the structure of the ROSMA metric.

FREE Research: The 4 Faces of Procurement

We’ve covered ROSMA in fairly gory detail in previous posts like this one (see related research at the bottom of this post). But, to summarize, ROSMA is an AT Kearney branded term and associated “composite” KPI that is basically a version of the popular “Procurement ROI” metric that divides the hard cost savings earned in a year by the cost of the procurement function driving those savings during the same year. ROSMA adds some additional drill-downs on the “R” portion of the ROI to also analyze spend influence, the % of influenced spend that is touched, and the “yield” of hard cost savings from those “touches” (e.g., sourcing projects).

A “Procurement ROI” metric like ROSMA is popular because it is simple and reflects the key value proposition of procurement-led spend cost reductions (i.e., “procurement effectiveness”) and also the basic efficiency side of the equation in terms of the cost of (or “investment” in) procurement.

The Approach

The report analyzes the ROSMA scores from the 2014 database, which includes the 2013 calendar year performance of over 170 firms. The cumulative database, however, has well over 400 firms because ROSMA has been around since 2010. Actually, 750 firms have started the benchmark, but it’s a non-trivial level of data collection for many firms, and since many of the questions were also a bit confusing, there has been a fair amount of data cleanup and validation – never a fun task speaking from experience. The report also has some very interesting insights regarding finance’s view of procurement – a big theme of ROSMA that we’ll return to later.

The analysis segments the study data into quartiles based on the ROSMA score (with the middle 2 quartiles combined) and then analyzes the differences in the drivers and the general “story” between the top quartile, the bottom quartile and the “middle 50%” group (i.e., combined Q2 and Q3 groups). As you’d expect, the top quartile group outperforms the others on the lower-level drivers, but the report also shows a nice head map that correlates driver performance to various capabilities from the 450+ practices in AT Kearney’s AEP database and its “chessboard.” The firm also ties it to its Procurement Performance Management (PPM) solution, which basically offers online measurement of a procurement professional’s individual ROSMA score and related other metrics and capabilities (which in turn are part of the skills/knowledge from a talent standpoint) that are tracked in the online projects and supporting workflows modeled in the tool.

In the next installment of this series, we’ll investigate the results and some additional analysis I did on the data.

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