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May-June 2016
The procurement function is at an inflection point.” So begins “The reinvention of procurement," an article by Jonathan Hughes and Danny Ertel, partners at the Boston-based consulting firm Vantage Partners. The authors argue that while many leading companies have transformed their procurement organizations into a linchpin of their enterprise strategy, far too many others remain trapped by procurement models that are out of date in today’s fastpaced economy, where the acquisition of innovation, collaboration, services and solutions is more important than transactions based on the lowest cost per unit. Reinvention is a fitting theme for… Browse this issue archive.Need Help? Contact customer service 847-559-7581 More options
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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Sorry, but your login has failed. Please recheck your login information and resubmit. If your subscription has expired, renew here.
May-June 2016
The procurement function is at an inflection point.” So begins “The reinvention of procurement," an article by Jonathan Hughes and Danny Ertel, partners at the Boston-based consulting firm Vantage Partners.… Browse this issue archive. Access your online digital edition. Download a PDF file of the May-June 2016 issue.|
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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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