NEW YORK; Oct. 8, 2007 – Companies that master procurement generate significantly higher savings and have far lower costs than companies with average- or low-performing procurement functions, according a study released today by Accenture (NYSE: ACN).
The study, which surveyed 225 procurement executives in North America and Europe, analyzed responding companies’ procurement capabilities according to six key measurements and segmented them into categories of “master” (16 percent of companies), “midrange performer” (67 percent of companies) and “low performer” (17 percent of companies).
Survey respondents qualifying as masters achieve savings equal to 10 times the cost of running their procurement organizations. By contrast, the savings achieved by low performers is only four times the cost of running their procurement organizations.
“The evidence is compelling,” said Kris Timmermans, executive partner responsible for Accenture’s Sourcing & Procurement practice. “Procurement mastery is a worthy and cost-effective goal for any organization.”
Further analysis of the characteristics of procurement masters found that their performance exceeds the survey average in every one of six procurement processes and enablers:
- Procurement strategy
- Sourcing and category management
- Supplier relationship management
- Workforce & organization
The study found that masters approach the function more strategically and holistically, engage more fully with suppliers and treat them like partners, are organized in such a way that they can make better and faster decisions and use technology to increase efficiency. For example, low performers were almost three times more likely than procurement masters to cite “lack of authority to get things done” as a challenge.
“Procurement has become a strategic, proactive process that contributes as much as—or more than—other business functions to profitability, corporate growth and competitive advantage,” said Timmermans. “However, most companies undervalue and under-optimize their procurement functions, leaving significant savings and performance-improvement opportunities untapped.”
The study also found that procurement outsourcing is a leading practice that is significantly more prevalent among masters than low performers. For example, 34 percent of masters outsource the purchase of non-strategic goods, compared with 18 percent of low performers. Similarly, 33 percent of masters outsource supplier help desks and catalog management, compared with 9 percent of low performers and 28 percent of masters outsource accounts payable, compared with 11 percent of low performers.
A copy of the study report is available at www.accenture.com/highperformanceprocurement.
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With approximately 170,000 people in 49 countries, the company generated net revenues of US$19.70 billion for the fiscal year ended Aug. 31, 2007. Its home page is www.accenture.com.