A Look Into Procurement Metrics Amidst The PandemicProcurement
Historically, so much of what Procurement teams did went unnoticed. Ensuring employees are able to easily buy the things they need to do their jobs, flagging high risk suppliers before they become a problem, helping suppliers develop and improve their own practices, ensuring services are not disrupted, supporting small and diverse businesses, etc. Of course, over the last few years, the role of Procurement has become more visible, in large part due to broader recognition of the value and closely monitored and tracked performance metrics that are now more mainstream. Over the last 12-18months, Procurement’s value to an organization has been made abundantly clear and this time it was noticed at the highest levels.
Now, looking forward, while cost management is certainly of concern, so is restoring growth, building resilience, accelerating ESG related initiatives, actively monitoring procurement risk and much more. When these are viewed from a Procurement lens, there is significant value that can be added to drive and execute on these initiatives. With the heightened visibility, the Procurement team’s priorities are only growing.
Over the last decade, Ardent Partners and my friend Andrew Bartolini have been benchmarking and tracking key metrics across Procurement organizations around the world. In this edition of the Procurement Metrics That Matter in 2021 report, over 350 Procurement leaders shared their strategies, intentions and performance results as reported during the Covid-19 pandemic.
Here are some of my takeaways.
- Procurement teams stepped up during the pandemic, but in fact, they always have. During the pandemic, procurement’s impact has been defined as either “game-changing” (12%) or “significant” (40%) at a majority of enterprises; another 30% reported a “solid” impact while less than 20% found procurement’s help to be negligible over the past year.
- Delivering savings is part of the role, and it is needed now more than ever. Ardent’s research has shown that enterprises realize a savings of between 6% and 12% on every new dollar of spend placed under procurement’s control.
- There is lots of room to improve Procurement processes and effectiveness. Today, the average procurement team reports that just under two-thirds (65%) of their total spend is contract compliant.
- Surprising that we’re still at this level for electronically enabled suppliers, but this really depends on the procurement technology provider. On average, 38.1% of a business’ supplier base is electronically-enabled. This seems extremely low, especially when I know of several Ivalua customers that have enabled a large majority of their suppliers (over 80%)
- CPO’s top two hurdles really highlight the dangers of having multiple systems in place across the source-to-pay process:
- Aligning Procurement Processes & Systems
- Missing or Incomplete Procurement Technology
- A foundational element of any successful Procurement transformation that can fuel the effectiveness of all other Source-to-Pay processes – Supplier Management. 48% of respondents either recently launched or plan to launch a central supplier management program. In fact, in the study, 87% rate supplier management programs as important, high priority or top priority. Having a 360-degree view of all supplier activity, including information, supplier risk and performance at your fingertips can enable a step change in value creation.
Above are just some of the highlights from the report, there is much more that will enable procurement teams to benchmark their performance against the Best-in-Class across metrics such as:
- Spend Under Management
- Addressable Spend That is Sourced
- Data Management Capabilities