What's the difference between a top-performing procurement organization and one that performs at average levels? To find out, IBM's Institute of Business Value and the Economist Intelligence Unit surveyed 1,023 chief procurement officers from companies with revenues of more than $1 billion. The resulting study, "The Journey to Value: Transforming procurement to drive the enterprise agenda," compared the respondents and identified approximately 100 companies that achieved the best revenue and profit performance relative to their industry peers. Researchers then compared the responses from these "role models" to those from their peers.
The comparison revealed three main ways that procurement "role models" differed from "underperformers." First, they focus on improving enterprise success rather than just on procurement performance. Second, they engage with stakeholders to understand and anticipate their needs. And third, they used innovative procurement-related technologies to simplify transactions.
While the role models are just as concerned with traditional procurement priorities such as reduced spending and corporate profitability, the study found that these companies were more likely to place revenue growth and increasing the company's competitive advantage among their top three priorities. Procurement role models are also twice as likely to make the adoption of innovations from suppliers and other sources as a top priority.
The study also found that procurement role models were more likely to have regular meetings with business line leaders and outside suppliers, and to value that input.
The biggest difference between the procurement role models and underperformers, however, occurred in the area of technology implementation. According to the study, 72 percent of role models said that their procurement operations are automated, and 22 percent said they are somewhat automated. In comparison, only 47 percent of underperformers reported having automated operations, and 26 percent said they are somewhat automated. Role models are also implementing much more sophisticated technologies, including supplier management software, advanced analytics, and risk management capabilities.
The full report is available here.