How to become world class procurement organization

World-class procurement organizations outperform their peers by striving to providing unique value beyond cost reduction, including becoming a trusted advisor to the business, driving supplier innovation, and focusing on risk management.

 

Trusted Advisor - World-class procurement organizations are much more likely than typical ones to be considered valued partners by the business, not gatekeepers or administrators. The Hackett Group’s research shows that they have a high level of involvement in planning and budgeting half the time, nearly 4x more often than at typical companies. To achieve this status, world-class procurement organizations make certain to proactively understand what drives the requirements of the business as opposed to simply facilitating the buying process. This makes it possible to reverse-engineer costs and explore potentially less expensive and/or higher-quality alternatives.

Driving Supplier Innovation - World-class procurement groups are very effective at building strong business relationships with key suppliers, enabling them to work collaboratively to reduce costs and sometimes even create customized and unique breakthrough solutions.  Procurement organizations have seen positive results from investing in formalizing the innovation life cycle, from idea formation and evaluation to development, production, and continuous improvement.

Providing Insights - World-class procurement works closely with the business during operational planning and budgeting periods to provide predictive insights on supply markets. This requires having the tools and expertise to turn data into actionable knowledge.  The ability to view spend data by suppliers on a global basis is a building block of more predictive analytics. World-class organizations have a significant level of information available nearly 90 percent of the time, more than twice as often as typical companies.

 
Risk Protection - World-class procurement organizations have formal risk management programs to ensure supply continuity and regulatory compliance. Organizations with a formal and broadly-applied strategy for assessing risk have nearly 25 percent greater procurement ROI than those without them.

Agile Staffing - World-class procurement organizations are distinguished by the way they attract, develop, and retain talent. Their efforts are not limited by geographical borders, as they hire globally and from other parts of the business, opening the door to new sources of skills and fresh thinking. Many are utilizing global business services, or more traditional shared services organizations, and have also established relationships with external entities such as business process outsourcers to support activities such as providing supply-market intelligence. They also provide greater training hours per associate, invest much more in retention planning, and pay higher salaries.