As the old business adage goes, “what gets measured gets done.” This is certainly true in procurement. If you want to do the right things for yourself and your stakeholders, you need to measure the right things and do it efficiently. You also need to ensure that you are measuring what your stakeholders want and what you are in fact delivering. It’s a foundational competency. For example, in a past Hackett Group procurement key issues study, “value contribution visibility” ranked third (after sourcing and category management) in terms of procurement key capabilities that were viewed to be major or critical, with 76% of firms having picked this. It even outperformed “SRM programs,” which got the fourth slot. In other words, the competency for value contribution measurement was higher than an area of actual value creation! (In the 2017 version of this report, "measuring value beyond savings" is a big part of Priority #1 — improving the stakeholder experience.) In this research brief, I’ll discuss how you can assess the quality of your procurement scorecard and how to improve it. To do so, I’ll assume that you have some type of procurement scorecard already, and that maybe you’ve even already adopted some smart principles to it. But, I’m going to go deep on this one and ask you a set of 21 questions about your scorecard. This first installment covers the first five.
The Procurement Research Category
Consultancy Future Purchasing completed late last year the largest category management survey of its kind ever attempted (as far as we know). With more than 300 respondents from a range of sectors and countries, the results provide much fascinating material to help understand just what differentiates the best exponents of “CatMan” from the pack. And if you have any interest in the topic, as a category manager or a procurement leader looking to improve performance, or indeed as a less mature organization in the field, we are confident you will get something useful out of our upcoming webinar next Tuesday, March 14, at 11 a.m. EST.
EcoVadis released its seventh and latest Sustainable Procurement Barometer on Tuesday, a joint study with HEC on supply chain sustainability that was first carried out over a decade ago. These studies measured sustainable procurement practices in global procurement organizations and aimed to provide a landscape view, including “sector and geographical differences, industry strengths, improvement areas [and] new frontiers for innovation.” In short, companies worldwide are now investing in sustainability practices across the supply chain, and sustainable procurement has become vital for revenue and costs, risk mitigation, brand reputation, and innovation and growth.
E-catalogs (catalog management) are a key part of any e-procurement solution. For e-procurement, catalogs provide more than just a list of items. They enable the loading of prices, and they enable features of products and services to be approved and integrated into an e-marketplace in order to purchase against.
Catalogs are a living, often-changing and integrated source of information (within a single database) that enable all purchasing scenarios. Combined with the support of a robust e-marketplace — advanced search engine; advanced purchasing mechanisms such as e-forms, lists, kits, etc.; a powerful workflow engine and flexible system integration capability — they provide key support for buying requirements.
As I’ve been known to say, I consider e-catalogs the “fifth element” of procurement. “The fifth element” comes from the eponymous 1997 fiction action film starring Bruce Willis and Milla Jovovich. In the movie, earth is considered "north," fire is "south," air is "east," water is "west" and the fifth element is the "spirit" or "soul” — the "spiritual force" that earth, air, fire and water descend from.
Although they may not be truly spiritual in nature, I think that e-catalogs are a sort of hidden force that breathes new power into broader e-procurement. In this Spend Matters Plus brief, we give procurement practitioners 12 ways e-catalogs can do just that.
Need an e-procurement and invoice-to-pay primer before reading or subscribing to Plus for the first time? Download this free report.
Nearly all progressive organizations have some sort of Procurement Center of Excellence (CoE). A Procurement CoE is an internal entity that performs internally facing knowledge-based services on a one-to-many basis to procurement (and to broader stakeholders) in order to drive scale, repeatability, and best practice. What we’re talking about is the industrialization of the Procurement portfolio of services. In this Spend Matters Plus article, we will investigate 14 procurement competencies that are being enabled and improved in a Procurement CoE. We will evaluate the relative priorities across these based on some key research and provide insight on how a Procurement CoE can not only make procurement processes more effective, but also align with broader enterprise services delivered in a “Global Business Services (GBS)” environment.
Majority of Procurement Organizations are at a Basic Level of Maturity, And Why That Needs to Change
When it comes to the maturity of procurement organizations, it’s Spend Matters' belief the majority are at the foundational, or basic level. It’s not a bad place to be, at least when it comes to starting a true procurement transformation, as Jason Busch, Spend Matters founder and head of strategy, points out in the research paper “Reframing Maturity Models: Empirical Perspectives On Radically Improving Procurement Performance.” Yet these procurement organizations should aim to reach other industry peers that are fully integrating source-to-pay processes with the supply chain, accounts payable, finance and other departments and leveraging advanced technology suites, platforms and networks.
Companies are increasingly using cost reductions to fund growth initiatives, according to Deloitte’s 2016 Cost Survey Report, a biennial survey looking at cost management and cost improvement trends among U.S.-based Fortune 1000 companies. Of the 210 senior executives surveyed for this year’s report, 57% identified gaining a competitive advantage over competitors and 43% pointed to investment in growth areas as the top drivers of cost reduction.
A new report from Deloitte and MHI identified the eight technologies enabling today’s “always-on supply chain” where supply networks continuously share information and analytics. These technologies, including widely used ones such as robotics, sensors and inventory optimization tools, can now provide a competitive advantage for companies, and in time, they will also become essential for business survival.
APICS and Michigan State University recently asked supply chain managers what burning issues were at the top of their mind. The results, published in the report “Supply Chain Issues: What’s Keeping Supply Chain Managers Awake at Night?,” show how supply chain professionals are taking on much more strategic role within their companies and tackling rising global supply chain complexities.
Deloitte Discusses Procurement’s Major Cost Reduction Effort in 2016, Shares Additional Insights from CPO Survey
We recently reached out to Deloitte to get its take on results of the consulting firm’s 2016 CPO Survey, which features insights from more than 300 chief procurement officers on the top issues they are tackling this year. Many of the CPOs in the survey pointed to cost reduction as a main focus for them. Today, Ryan Flynn, principal at Deloitte, answers our questions on how CPOs are tackling cost reduction in 2016 and what role technology is playing. You can also check out Part 1 of our conversation with Flynn, which focuses on what Deloitte found most interesting about its CPO survey results this year.
Most companies attempting a benchmarking effort consider questions around areas such as savings measurement, transactional compliance, procurement value contribution to the business, purchase order or invoice approval cycle time and the like. Many of these types of metrics are timeless and remain valuable. But taken alone, they often fail to capture how procurement’s overall contribution to the business is changing.
Deloitte Consulting recently released its 2016 Global CPO Survey, which features insights from 324 chief procurement officers from 33 countries on what key issues they are facing today. Cost reduction, trends in technology, improving relationships with suppliers and the growing talent gap were just some of the key focus areas these procurement professionals identified. To gain some additional insight on the survey’s findings, we reached out to Ryan Flynn, principal at Deloitte.