Does the “Best” Procurement Organization in the World Exist? Pierre Mitchell - April 29, 2015 6:49 AM | Categories: Industry Analysts, Procurement Commentary, Procurement Strategy & Planning | Tags: L1, Process & Best Practice One of the questions I repeatedly hear from practitioners is, “What are the best procurement organizations in the world?” Companies understandably don't want to reinvent the wheel, and they want to benchmark themselves against the best procurement groups out there. They especially want to do it in their industry to help arm them with not just competitive information, but something they can use to help create a case for change internally. FREE Research Download: Why a CPO Needs to Constantly Adapt and Adopt Analytics The problem, though, is that there is no single best procurement organization, just as there is no single best supply chain organization. And, as a side note, the best ones honestly don’t really want to talk to you unless you have something to make them better/smarter. Yet even then, they often still wont talk because their corporate communications folks won’t let them and they don’t want to risk their jobs, or because they truly have some capabilities that provide them competitive advantage. For example, is Apple really the best supply chain? Well, it all depends how you define supply chain performance! Apple is certainly top-notch in product innovation and ramping up the supply chain to support massive product releases, but Amazon and P&G are the pacesetters in areas like supply chain distribution, and Starbucks is a leader in “omni-channel” retail. ExxonMobil, too, is the leader in operational efficiency (from, ahem, what I hear). So, since direct procurement is an integrated part of supply chain (mostly), the same principle generally applies. The best inbound supply chains will tend to be supported by those organizations with the best direct procurement capabilities, or put another way, those with the best direct procurement services. In other words, procurement performance is derived from (and leads to) supply performance, and procurement performance management must be derived from supply performance management. As such, your results will inherently be tied to your procurement service mix, and really, you should be benchmarking against other organizations specifically tied to your chosen procurement services and the related capabilities. Of course, benchmarking can be done for more than just identifying improvement areas. It is also simply a way to check your performance and capabilities against others to just make sure that you are “keeping up with the Jones’” and that you can keep your job and not get outsourced (yes, this does actually happen as a systematic process that many firms go through – especially those running shared services). Procurement benchmarking is a topic that we cover deeply, but let's return to the discussion at hand. If you rightly do want to benchmark a little bit more granular early then at the function level, but are not sophisticated enough to do it at a process (or “service” if you like) level or a capability level, then there is also a spend category dimension to consider – even at the highest levels. For example, if you want to benchmark your indirect procurement capabilities, you don't need to be stuck within an existing industry comparison, nor should you be looking to benchmark yourself against something like the “top 25 supply chain” list or equivalent. Even if you look at the old Purchasing Magazine (RIP) “Medal of Excellence” winners (which I’ll include at the end of the post below), so many of them are world-class in direct procurement, but are, to put it delicately, not quite as advanced on the indirect side. There are exceptions though. For example, Intel is a terrific procurement organization on the indirect side of the procurement house as well. Anyway, the good news is that there are plenty of information sources you can use to benchmark against other companies based on a certain process, spend category, capability and/or business problem. You can use blogs like this, membership-based organizations, technology/services providers, conferences and the open web if you know how to use it. In fact, you don't even have to spend money on conferences and membership organizations to find out many of the good case studies, because many such procurement awards are given to practitioners nominated by the providers that pay to access these groups. It doesn’t matter, however, if you ultimately gain some insights that move you forward. But if you do want to take a more methodical approach, you can work with a few firms that do best practices-based benchmarking that can help you assess your granular capabilities in detail and then based on how you prioritize your gaps, you can find a list of potential peer networking firms that you can talk to. So, just like you should never look for the proverbial purple squirrel in a potential procurement hire, you should also not seek the perfect procurement organization to benchmark against. People are awesome in their own particular ways, and the same goes with procurement organizations (and procurement providers, too, for that matter). Previous Winners of Purchasing Magazine’s Medal of Excellence Award: General Electric Xerox Alcoa Chrysler Black & Decker NCR Ford Motorola Hewlett Packard Intel Tennant Honda Sun AlliedSignal AMR IBM Lucent John Deere Cessna UTC Rockwell Collins Eaton P&G Tyco Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.