Defining excellence in the advanced procurement organization
Many companies have little visibility into their external spend in a detailed and holistic manner; it is fragmented, managed in silos by disparate stakeholder groups, and under-leveraged as a result.
There are three principal value streams in managing a business comprised largely of all the goods and services that a company procures externally. Those are revenues, people (activities and costs), and “all the rest.” For many industries, this external spend represents an astounding 40% to 70% of a company’s total cost base. However, many companies have little visibility into their external spend in a detailed and holistic manner; it is fragmented, managed in silos by disparate stakeholder groups, and under-leveraged as a result.
This situation starkly contrasts with how leading procurement organizations go about managing spend. Our research shows that companies that excel in procurement value-add invest in a supply management capability that delivers more than double the performance of the average procurement function while earning the executive mandate to drive value beyond cost. This raises the following questions:
- What does excellence look like for a world-class procurement organization?
- As procurement functions become more advanced and the value expectation contin¬ues to increase, how does procurement best organize itself for continued success?
What does success look like for a world-class procurement organization?
Leading organizations boldly position procure¬ment as an ongoing critical driver of enterprise value. They deliver higher performance and achieve a competitive advantage through long-term category strategies and extensive supplier partnerships. They continually invest in their team and capabilities to sustain efforts in the long term. In short, they achieve a significant durable supply advantage through developing a combination of category, supplier and team excellence. Figure 1 summarizes procurement leadership characteristics based on A.T. Kearney’s recent Assessment of Excellence in Procurement study.
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There are three principal value streams in managing a business comprised largely of all the goods and services that a company procures externally. Those are revenues, people (activities and costs), and “all the rest.” For many industries, this external spend represents an astounding 40% to 70% of a company’s total cost base. However, many companies have little visibility into their external spend in a detailed and holistic manner; it is fragmented, managed in silos by disparate stakeholder groups, and under-leveraged as a result.
This situation starkly contrasts with how leading procurement organizations go about managing spend. Our research shows that companies that excel in procurement value-add invest in a supply management capability that delivers more than double the performance of the average procurement function while earning the executive mandate to drive value beyond cost. This raises the following questions:
- What does excellence look like for a world-class procurement organization?
- As procurement functions become more advanced and the value expectation contin¬ues to increase, how does procurement best organize itself for continued success?
What does success look like for a world-class procurement organization?
Leading organizations boldly position procure¬ment as an ongoing critical driver of enterprise value. They deliver higher performance and achieve a competitive advantage through long-term category strategies and extensive supplier partnerships. They continually invest in their team and capabilities to sustain efforts in the long term. In short, they achieve a significant durable supply advantage through developing a combination of category, supplier and team excellence. Figure 1 summarizes procurement leadership characteristics based on A.T. Kearney’s recent Assessment of Excellence in Procurement study.
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