Procurement Drives Bottom Line

New IBM study says better procurement performance leads to higher profit margins—and other news from Nashville


Collaborate well within and beyond the enterprise—Social business technology helps global procurement organizations connect with internal and external partners. According to the study, 80 percent of high-performing companies report that collaboration across departments, such as IT, marketing and sales, is both a key strength and an investment priority, compared to only approximately 45 percent of low performers. High performing procurement organizations see the benefit of close partner collaboration and therefore are more likely to create strategic alliances. For example, top performers direct 38 percent more of their annual spend through strategic alliances than low-performing organizations.

Adapt to changing market conditions—By using big data insights and collaboration, high-performing CPOs are in a better position to quickly respond to changing internal and external conditions, from demand changes to supply disruptions and product redesigns. The study showed that 73 percent of top performing procurement organizations are effective at gathering insights from the supplier community, compared to only 16 percent of lower performing counterparts.  

“There are tens of millions of dollars at stake, and this study reveals how and why high performing procurement leaders have significant impact on their organization,” said Craig Hayman, General Manager, IBM Industry Solutions. “As CPOs take a broader view of their role and embrace technology, they have an unprecedented opportunity to become even more instrumental in transforming their organizations by modeling themselves against the world's most innovative and effective procurement organizations.”

Charles Chu, Vice President of Product & Strategy for IBM, added that a level of sophistication is necessary for a successful procurement organization. “The days are gone where people look at it in an overly simplistic way,” he said. “People want the lowest cost possible, not the absolute lowest cost.”

An effective CPO will recognize that it’s not a good idea to have all of his suppliers be the lowest cost. How do you score a company that costs five percent more but has 100 percent on-time delivery against one that is five percent lower cost but only comes through on 80 percent delivery? What about quality? The high-performing procurement organizations know the answer.

To download the report, visit www.ibm.com/business/value/chief-procurement-officer.

Marketing the brand

Another IBM survey, this one of Chief Marketing Officers, finds that CMOs are differentiating their brands by crunching big data in real-time and automating personalized marketing campaigns. The price tag for failing to meet the needs of omni-channel shoppers—those who frequent both online and in-store channels—is $83 billion in lost sales in the U.S. each year due to poor or inconsistent customer experiences.

Other top findings from the survey point to leading marketers taking greater responsibility over customer service interactions as they become the official brand stewards company-wide. At the same time, leading marketers are capitalizing on big data to better personalize their marketing communications. They are looking beyond segments and demographics to provide the right offers, services and information at exactly the right moment in the customer relationship. Further, marketers are looking to use location-based services to target more digitally-savvy, on-the-move customers and deliver seamless, intuitive customer interactions.

The survey, which identified leading marketers based on their level of adoption of cross-channel technologies and their ability to proactively influence the customer experience, found that 39 percent of leading marketers are adjusting real-time offers based on customer wants, needs and preferences. In comparison, only 15 percent of remaining marketers surveyed do so. 71 percent of leading marketers are delivering personalized messages in real-time through social media channels, including Facebook, Twitter, blogs and review sites; while 62 percent of leading marketers are delivering those same personalized messages through the mobile channel.  

While marketers are embracing these new channels, the study finds that cross-channel integration is still lacking. Only 35 percent of leading marketers currently integrate their campaigns across all channels, with eight percent indicating they are not currently integrated at all. In comparison, only 12 percent of remaining marketers surveyed currently integrate their campaigns across all channels, with 39 percent indicating they are not currently integrated at all.

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