What Procurement Strategies Drive Business Value?

Spend Matters welcomes this guest post by Matt McGovern of IBM.

IBM’s Institute for Business Value (IBV) recently completed its groundbreaking Chief Procurement Officer Study, one of the largest known surveys of procurement organizations at global companies. IBV surveyed more than 1,000 CPOs and senior procurement executives in more than 40 countries around the world. The goal of the study was to “harvest insights” to better understand the impact of procurement on business performance.

We all know that procurement organizations can deliver significant savings and value to their businesses. However, the results of last year’s inaugural CPO study detailed a striking correlation between the proficiency of the procurement organization and a company’s bottom line: Companies with high performing procurement organizations have profit margins 15% higher than the average company and 22% higher than those of companies with lower performing counterparts.

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The study documented a strong correlation between the extent of procurement’s influence in the business, the extent to which procurement seeks to collaborate and innovate and the extent to which companies leverage technologies – to procurement’s bottom-line impact.

To understand the strategies and priorities most impactful to procurement success, IBV conducted a follow-up survey, paying special attention to “procurement role models,” those organizations with the most significant impact on revenue growth and profit improvement.

How do top performing CPOs drive greater business value? What programs and capabilities have the most impact on driving innovation both for procurement and for the company? What are procurement leaders doing to stay ahead of the competitive curve?

These questions are at the heart of the 2014 Chief Procurement Officer (CPO) Study.

This year’s study delves into the details of specific programs and actions that enable some procurement organizations to achieve greater results than their peers. The preliminary results of the study show that procurement role models tend to have 3 attributes that separate them from the pack:

  • They focus on improving enterprise success, not just procurement performance
  • They engage with stakeholders to understand and anticipate their needs and values
  • They embrace progressive procurement practices and technologies to drive results

In sum, procurement role models tend to think about procurement in broader terms than their peers; and, notably, they are more likely to embrace strategic enterprise objectives.

The study explores these issues in more depth and recommends actions to help ensure your procurement organization is positioned to make its greatest possible contribution to enterprise performance.

We’ll share more results of the study in a post later this month.

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