Operations Advantage: The New Language of Procurement

This is an excerpt of the original article. It was written for the November 2014 edition of Supply Chain Management Review. The full article is available to current subscribers.

November 2014

Supply chain managers are on the lookout for metrics that will allow them to put a number to their progress - or lack thereof. Welcome to KPI's that allow them to demonstrate the quantifiable value that they deliver. At the same time, Murphy's Law may intervene or they may be called upon to put out fires or come to the rescue and make good on the promises sales and marketing have made to customers - regardless of the cost. So, how do you measure success? I hope this month's issue and online bonus feature help you consider how you measure your progress.

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The language of procurement speaks to an agenda driven by delivering value. Leading procurement organizations are well-versed in areas that resonate with financial officers and the performance narrative. They lead with hard value contributions of procurement, can discuss their performance across an array of value drivers, and advance intangible value to their organizations as well. Knowledgeable about how their teams are performing, leading CPOs know what they need to do to improve their organization’s performance and are laying out career paths to attract and retain the best talent.

Chief procurement officers who are literate in this new language are building the brand of procurement by making themselves valued partners to chief financial officers and the rest of the C-suite. In 2011, A.T. Kearney began homing in on benchmarking value delivery with Return on Supply Management Assets (ROSMA), a performance measurement framework built to help companies understand and measure how procurement contributes financially to the business.

In the inaugural ROSMA Performance Check report, we have gathered the feedback of hundreds of companies. The insights are powerful.
• Top-quartile performers are reporting hard financial results in excess of seven times their costs and investment base in procurement, providing a strong basis for reinvestment and recognition. These leaders generate about $1.6 million in financial benefits per procurement employee each year, with 35 percent of the financial benefits coming from using advanced methods that create hard value beyond unit cost reduction.

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