Running the Numbers - February/March 2005

The latest facts, figures and benchmarking data from the worlds of procurement, sourcing, fulfillment/logistics, and supply chain technology and infrastructure


[From Supply & Demand Chain Executive, February/March 2005]

Procurement

According to research from the advisory firm The Hackett Group, world-class procurement executives leverage technology more effectively and have created procurement organizations that are much less labor-intensive. Although they spend 27 percent more than their peers on technology ($1.4 million versus $1.1 million per billion dollars of spend), world-class executives spend 27 percent less than typical companies on total procurement operations than their peers (0.74 percent of expenditures versus 1.01 percent) and operate with 38 percent fewer staff.

Hackett's research found that world-class procurement organizations also see an array of benefits tied in part to their increased use of technology, such as a shift in focus to more high-value activities like sourcing and supply management, increased investments in analytical activities, faster cycle times and lower error rates.

"Few back office functions have been more dramatically impacted by technology over the past decade than procurement," said Christopher Sawchuk, a senior business advisor at Hackett. "But there's still tremendous variation in the level of technology utilization in procurement and how much value companies are generating."


  • World-class procurement companies allocate 34 percent of their overall procurement activities to decision support and risk management activities, representing a 36 percent increase over the actions of typical companies.
    Source: The Hackett Group, 2005

  • World-class procurement companies process more than three times the number of purchase orders and material receipts per procurement staff person, and cycle times for requisitions and purchase orders are 34 percent faster.
    Source: The Hackett Group, 2005

Read the entire article.

Sourcing

The number of companies sourcing from China, Eastern Europe and India has increased significantly in the last five years and will continue to rise in the future, according to A.T. Kearney's Assessment of Excellence in Procurement study, covering procurement practices at 275-plus international companies. By 2009, 72 percent of companies plan to source from China, a rise from less than 30 percent in 1999. Fifty-nine percent of companies plan to source from Eastern Europe by 2009, an increase from one-in-three five years ago. Half of companies surveyed plan to source from India in 2009, nearly tripling the number sourcing from there in 1999.

Yet companies surveyed revealed they are not prepared to effectively manage this increased sourcing from low-cost countries. Only 53 percent have category strategies that indicate a clear understanding of the supply chain and logistics costs associated with emerging market alternatives. Just 41 percent of companies make emerging market skills and language capabilities a high priority for their sourcing organization. And just 39 percent have formal plans in place to increase their supplier base from global sources.

"Companies are chasing savings through overseas sourcing, but their internal structures are likely to prevent the full benefits of these savings from occurring," said John Blascovich, an A.T. Kearney vice president and leader of the study. "They need a sharper understanding of these new markets. Waiting too long to develop the right strategy or skill set could mean losing access to scarce, capable resources and the competitive edge they provide."


  • Procurement continues to shed its back-office reputation, with 60 percent of companies now using their procurement expertise to help set, rather than just execute, corporate strategy.
    Source: A.T. Kearney, 2005

  • 28 (in 1999) versus 67 (in 2005)
    Number of organizations pursing goals in value creation through approaches such as product and service innovation, advanced cost management, risk management and supply continuity and value chain optimization
    Source: A.T. Kearney, 2005

Read the entire article.

Supply Chain Integration & Technology Infrastructure

This content continues onto the next page...
  • Enhance Your Experience.

    When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

Already have an account? Click here to Log in.

Enhance Your Experience.

When you register for SDCExec.com you stay connected to the pulse of the industry by signing up for topic-based e-newsletters and information. Registering also allows you to quickly comment on content and request more infomation.

OR

Complete the registration form.

Required
Required
Required
Required
Required
Required
Required
Required
Required
Required
Required