Procurement ROI

The Hackett group reports that “Overall, world-class procurement organizations now see procurement operations costs that are 20% less than typical companies (0.68% of procurement spending versus 0.85%), and operate with nearly half the staff (44.9 staff/billion of spend versus 89.2). They also see 133% greater return on the cost of procurement operations than typical companies, generating $6.3 million in spend savings for every $1 million spent on procurement operations, while typical companies generate only $2.7 million in savings.”

Their strategy to achieve this ROI is as follows:

“World-class procurement leaders establish their organization as a strategic function, one that is fully integrated with other relevant parts of the business,” states Hackett procurement practice leader Christopher S. Sawchuk. “They take a wider view, understanding the implications of procurement policy for suppliers, internal and external customers, and shareholders. Their staffs lead crossfunctional teams to establish which goods and services are most beneficial to the company, taking a broad array of factors into account, not just purchase price.”

To retain and keep staff with the skills to perform these functions, world class procurement organisations typically pay 41% more than other organisations and have far lower ratios of clerical staff to professional staff.