World-Class Procurement Spends 17 Percent Less

World-class procurement organizations are well on the way to becoming client-focused service providers

Miami and LondonAugust 6, 2015—World-class procurement organizations now deliver services at 17 percent less cost than typical companies while offering improved effectiveness, largely by becoming more customer-centric, according to new research from The Hackett Group, Inc. A key differentiator is the superior ability of world-class procurement organizations to gain a deep understanding of the needs of their business, react more quickly to changing requirements, and drive higher overall value and greater stakeholder satisfaction, the research, entitled The World-Class Performance Advantage: How Procurement Organizations are Reinventing the Stakeholder Experience, found.

“Our research finds that world-class procurement organizations have made major strides in terms of finding ways to become true client-focused service providers,” said The Hackett Group Global Procurement Advisory Leader Chris Sawchuk. “They have increased the scope of their spend influence, the savings they are able to capture and the value delivered beyond hard-dollar savings, in part by emphasizing on-demand analytics and market intelligence, and realigning their service portfolio.

“As typical procurement organizations strive towards these same goals, success will hinge on their ability to market themselves in new ways to build awareness. They need to learn how to speak the language of the business, change how they’re viewed, build trust and gain permission to take on higher value work over time.”

World-class procurement organizations excel at cost reduction and deliver services at 17 percent lower cost than typical companies, while requiring 26 percent fewer staff, The Hackett Group’s research found. At the same time, they operate at dramatically higher levels of effectiveness, delivering superior stakeholder satisfaction, in part because they have successfully transformed into truly customer-centric organizations.

The Hackett Group’s research identified an array of procurement strategies and capabilities most strongly correlated with high performance and success of the procurement organization. World-class procurement organizations continue to invest in activities that elevate their role to that of a trusted advisor, moving beyond the traditional role of procurement as a gatekeeper. Delivering greater value is key and procurement organizations that are viewed as a true business partner report 68 percent higher savings than those viewed as gatekeepers, reflecting higher effectiveness at both cost reduction and cost avoidance.

World-class procurement organizations become deeply embedded in their stakeholders’ teams, the research found. Procurement organizations that improved stakeholder alignment report 28 percent higher savings than those that don’t. World-class procurement organizations also commit dedicated resources to act as a liaison between procurement and the business nearly twice as often as typical organizations, and are better prepared to adjust alignment between procurement’s goals and stakeholders objectives as requirements change.

To achieve world-class performance, The Hackett Group recommends that procurement organizations take a structured approach to improving the customer experience, focusing in four areas. First, they should identify and understand key stakeholders, and segment their internal customers based on attributes, such as importance and level of influence within the organization. In addition to seniority, issues such as language, culture and even personality should be taken into account. Next, procurement organizations can develop formal customer satisfaction surveys tailored to key stakeholders, taking care to use a variety of ad-hoc and structured approaches to gain deeper insights.

Procurement organizations should also analyze the results of customer satisfaction surveys, and ensure that stakeholders understand their feedback is being valued and utilized. Finally, procurement can improve their level of customer service by taking a holistic view, and by implementing self-service tools to answer common inquiries and provide real-time visibility into order status.

The Hackett Group’s World-Class Procurement Performance Advantage Research is based on an analysis of results from recent benchmarks, performance studies, and advisory and transformation engagements at hundreds of large global companies.

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