Procurious Big Ideas Dispatch: McKinsey’s Theano Liakopoulou on Separating Leaders From Laggards

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Immediately following lunch yesterday at the Procurious Big Ideas Summit, McKinsey’s Theano Liakopoulou, a partner and procurement and operations expert at the consultancy, woke everyone up by delivering a presentation on measuring and exploring procurement value.

The talk was rich with examples and metrics from McKinsey’s research. I’ll quickly share a few below:

  • Procurement leaders, based on savings metrics through “procurement value creation,” deliver 2.1X the returns over procurement laggards
  • The EBITDA performance of top performance in procurement, on average across industry, is 1.9X that of procurement laggards. In addition, procurement leaders also realize value from “non-financial measurements based on quality, risk management” and other benefits as well (which are often “industry dependent”)
  • The value generated when robust supplier collaboration occurs between buyers and vendors is “15X higher” than the average supplier contract

Further, Liakopoulou notes, top procurement performers:

  • “Drive superior value through sharp make vs. buy decisions and outsourcing management”
  • “Maximize value of supplier relationships through supplier collaboration”
  • “Drive a lean philosophy and implement a design-to-value approach”
  • “Enable superior management decisions through advanced analytics”

While cost savings seems a key driver of procurement value from a direct EBITDA standpoint if you look at McKinsey’s research, Liakopoulou was quick to point out a number of examples in the core of her talk about how supplier development and collaboration and the outsourcing of non-core activities to suppliers is a key basis of leveraging the function to drive true competitive differentiation.

Procurement sourcing and savings is the ante. It’s everything else that makes the difference.

Stay tuned for further coverage from the Procurious Big Ideas summit. Coming up next: insights and data from Hackett’s Chris Sawchuk.

First Voice

  1. Pierre Mitchell:

    Wow, Chris really gets around – even for his standards! I like how McKinsey shows the enterprise performance metrics. But correlation is not causation. i.e., great companies tend to also have great P/SCM in additional to great HR, R&D, customer support, etc. They should show the % of Net Income (or EBITDA is fine too) that the procurement savings represent. I did this at Hackett in the following presentation I developed (that Chris presented)… see page 6 … http://www.ism-florida.org/wp-content/uploads/2010/01/Hackett-Group_Procurement-Excellence-How-World-Class-Procurement-Optimizes-Global-Performance_061412.pdf

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