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2014 BENCHMARKING SURVEYwww.procurecon.com

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Created by the team behind Worldwide Business Research’s ProcureCon conference, Europe’s only event focused on the knowledge and networking needs of senior procurement leaders, this survey was distributed to over 2,000 procurement professionals from companies across Europe.

The study aimed to discover their opinions on the following topics:vhow procurement value is measured vhow talent is created vwhat the key objectives are for procurement vhow collaboration is being used to deliver against these objectives

The goal of the survey was to understand where today’s procurement teams stand on the most pressing issues arising in the marketplace. This is the first survey of its kind that gives senior procurement leaders the opportunity to share their views on how they can sustain and demonstrate procurement value more effectively.

As businesses emerge from the recent recession into a fragmented supplier ecosystem, a normal approach to creating value through cost saving alone is no longer relevant. Instead, businesses are tasking procurement to affect enterprise-wide change, including implementing process improvement, operating beyond the contract with suppliers to co-create value, and exploring payment innovation. Undertaking these initiatives well requires a different skill set, understanding how these skills need to be developed is a key part of this year’s survey.

The roles of those answering this questionnaire included Chief Procurement Officer, Head of Indirect Procurement, Procurement Director, Head of Category Management and Head of Global Sourcing among many others of similar standing.

Respondents represented companies including Mars, Ericsson, Coty, Bayer Healthcare, Tata Steel and more. So please read the first report that shares how procurement leaders are thinking and find out how you compare to your peers and competitors by reviewing the results and analysis inside.

INtRodUCtoRY REMARKS

WHICH MEtRICS doES YoUR oRGANIzAtIoN USE to MEASURE tHE VAlUE of PRoCUREMENt?

ARE tHERE BEttER MEtRICS?01 02

t Total cost savings 84.5%t Quality 60.3%t Delivery 34.5%t Cost avoidance 77.6%t Implemented cost reduction savings 55.2% t Procurement Cycle Time 19%t Supplier consolidation 44.8%t Procurement ROI 37.9%t Managed send as percentage 44.8% of total spend t Contract Compliance 53.4%t Other 13.8%

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84.5%

60.3%

34.5%

77.6%

55.2%

19%

44.8%37.9%

44.8%53.4%

13.8%60.3%YES

39.7%NO

‘total cost savings’ came out on top as the most popular metric for measuring the value of procurement [85%]. In line with this, the second most popular answer was ‘Cost avoidance’, with 77% of respondents using this metric. though 60% highlighted ‘Quality’ as a metric, again cost was cited as key when 55% chose ‘Implemented cost reduction savings’.

the majority of procurement professionals surveyed believe better metrics do exist [60%]. those who believe there are better metrics in general wanted to move the focus away from solely looking at cost.

“I am not surprised that cost savings comes out on top but the deeper point is that I don’t think it is very clear what cost savings actually really means. different companies have different definitions of cost saving and there are numerous ways of calculating it. there appears to be no standard procurement definition and as such there is limited credibility or interest for this measure within the finance community.” Roger davies, Group Head of Procurement, Marks and Spencer

“the procurement function is still a little bit in self-justification mode and hence the continued attempt to push savings as the sole and major measure. Clearly measures are needed but it is a shame we aren`t reaching the status of a legal or finance team where there is clear acceptance of the role and need for it. the sign of a mature function would be one where there was no doubt regards the existence , need or benefit delivered.

“there should be measurement. As well as financial benefits I aim to measure my team on internal stakeholder satisfaction and business influence they are having. overall, measuring the value of procurement should include some form of gauging financial benefit, risk mitigation, efficiency, and customer satisfaction.”

Roger davies, Group Head of Procurement, Marks and Spencer

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HoW fAR AloNG ARE YoU WItH IMPlEMENtING CAtEGoRY MANAGEMENt of YoUR INdIRECt SPENd?

WHAt lEVEl of SUPPlIER CoNtRACt CoMPlIANCE do YoU fEEl YoU HAVE RIGHt NoW?

03 04

tNot started 8.6%tRolling out a strategy now 37.9%tEstablished 41.4%tBest practice 12.1%

tNone 1.7%tPoor 20.7%tAcceptable 69%tExcellent 8.6%

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Most businesses are neither at the start nor at the end of their journey for implementing category management for indirect spend: 38% said they are rolling out a strategy now; 41% called it established; while only 12% described it as best practice.

the lion’s share of respondents [69%] believe their level of supplier contract compliance is ‘Acceptable’, while only a small minority [8%] called their supplier contract compliance ‘Excellent’. However, 21% did call their level of compliance ‘Poor’.

“Category management means different things to different organisations. ‘Am I structured by category?’ ‘Yes.’ ‘do I work very closely with the stakeholders in charge of each of these categories?’ ‘Absolutely.’ ‘do we create very detailed category plans that are specific to each category?’ ‘No, but we will produce something that is appropriate to each of those categories that is of interest to the relevant stakeholder.’

“Yet, the big question is whether procurement is able to, empowered to and encouraged to look at spend under a broad category irrespective of what budget it sits in and to then try to drive better procurement decisions.”

Roger davies, Group Head of Procurement, Marks and Spencer

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