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New Research Reveals That “World-Class” Procurement Organizations Save on Labor Costs

The research also found that digital transformation enables typical procurement organizations to reduce process costs by 30 percent, and world-class procurement organizations by 22 percent.

By ·
By ·

A new research paper released by The Hackett Group maintains that “world-class” procurement organizations now operate at 21 percent lower labor costs than peers and have 29 percent fewer staff.

The research also found that digital transformation enables typical procurement organizations to reduce process costs by 30 percent, and world-class procurement organizations by 22 percent.

“Technology has always played an important role in enabling world-class performance through improved efficiency and effectiveness,” said spokesmen. “But procurement is now at an inflection point, the research found, and both world-class and typical procurement organizations will need to turn to digital transformation to ensure that they can continue to reduce costs and add value.”

Constantine Limberakis, Senior Director, Advisory, The Hackett Group, told Supply Chain Management Review in an interview last April that risk mitigation is also enhanced by digitization. .

In part, world-class procurement organizations improve efficiency by standardizing and automating routine tasks, the research found. To improve effectiveness, world-class procurement organizations continue to significantly outperform peers in service delivery productivity. In combination, for a typical company with $10 billion in revenue, attaining world-class performance in procurement represents as much as $6 million in potential savings annually.

World-class procurement groups also have a significantly higher ROI than peers, generating a 10.7X payback on investment in procurement, more than twice that of typical procurement organizations, the research found. But cost reductions and savings are forecasted to level out in coming years, making it necessary to find new ways to continue to unearth value.


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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From the September-October 2018
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