While capabilities of procurement organizations are being tested as never before, procurement today is better equipped to meet these challenges, according to Accenture's 2011 Procurement Mastery research study, which looks at the extent to which procurement organizations are evolving. One of the more compelling findings in the research showed that many chief procurement officers are now poised to influence their companies' financial performance.
Accenture has been conducting ongoing research with chief procurement officers for several years, and recently completed a new study of 432 global procurement executives across a broad range of industries. Accenture's analysis covered six key dimensions of procurement: strategy, sourcing and category management, supplier relationship management, requisition to pay, technology enablement, and workforce and organization. Here are the key findings:
• Procurement is creating a "brand" within their organizations contributing to more than just cost savings. Procurement is adding value beyond cost savings in a multitude of ways, such as contributing to risk management, sustainability, growth, tightening down spend for budget compliance, and applying advanced analytics.
• There are two kinds of procurement organizations: "Masters" that strive constantly to create new ways to improve their organizations' results, and the "Contenders" that continue to make meaningful progress by responding to the changing needs of the enterprise. Procurement Masters contribute compulsively to their organizations - that is, they never stop "getting better". Contenders lag behind what constitutes best practices today.
• A subset of procurement masters is stepping up to add value in unprecedented ways - beyond the traditional ways in which procurement's contribution has been measured. Masters "get" strategy - and practice it. A huge proportion has a formal procurement strategy, which is fully integrated with the goals of other core business functions.
• 29 percent of procurement executives have little to no visibility into their supply base beyond the first-tier suppliers while masters integrate effectively with their supplier networks and go beyond their first tier of suppliers.
• 37 percent say they have "some visibility into operations of suppliers," but do not actively manage those relationships. In other words, they have structures in place to manage risk, but handle adversities as they come up.
• Just 10 percent say their procurement team "proactively manages" their supply chain, such as by conducting their own market research, analyzing costs, or monitoring suppliers. This puts them in a better position to respond before sudden disruptions impact their market share or financial performance.
Accenture discovered five key themes, or the core characteristics of procurement leaders' best practices: 1) clear alignment of procurement strategies in sync with corporate and business functions' accountabilities and metrics 2) integrating effectively with supplier networks 3) superior sourcing and category management 4) controlling spend throughout the lifecycle and 5) the talent factor, hiring and retaining talent to support long-term success.
Drawing from these procurement best practices, Accenture identified four key areas to which over the next three to five years procurement standard bearers will focus more attention. These areas include sharpening their risk-management competencies; harnessing analytics to drive new insights; dedicating more effort to closed-loop spend management practices; and overhauling their approaches to talent management.
