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National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
National Procurement Survey
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National Procurement Survey

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  • 1. High Performance throughProcurement:2010 National Procurement Survey of Ireland:Accenture Procurement Mastery Benchmarking 1
  • 2. ContentsIntroduction 3Executive Summary 4Survey Demographics 6Survey Insights 8Bottom Line Impact 10Procurement Decision Drivers 11Trends and Innovations in Irish Procurement 12The Dimensions of Procurement Mastery 14Case Study 15Strategy 16Sourcing and Category Management 18Requisition to Pay 19Supplier Relationship Management 20Workforce & Organization 21Technology 22Summary 23Contacts 24
  • 3. IntroductionAccenture has created the term—“procurement mastery”—andover the past 4 years has gathered data from around the worldto quantify the relationship to high performance (the traitsexhibited by those companies that consistently outperform theirpeers). The National Procurement Survey research looks at howprocurement mastery in the Irish market compares to normsseen in the Accenture global database. The basic dimensionsof procurement mastery (strategy, sourcing and categorymanagement, requisition to pay, and supplier relationshipmanagement) and two key enablers (workforce & organizationand technology) have been shown to be predictors of highperformance in procurement and key drivers of competitiveadvantage. 3
  • 4. Executive SummaryFew corporate functions have for the lowest possible total cost of productivity are the hallmarksevolved more dramatically than ownership. Increasingly however, the of procurement mastery. In thisprocurement. As recently as the procurement function is becoming report, Accenture will benchmark1970s, it was generally regarded as pivotal to fulfilling requirements Procurement practice in Ireland—toa clerical, reactive position—a cost around Risk Management, define, understand and quantifycenter. At many companies, the exact Sustainability and innovation. procurement mastery compared toopposite is now true. Procurement the global database. In this way, wehas become a strategic, proactive In summary, processes and potential will help companies to understandprocess that contributes as much or are what’s new about procurement— where they reside along the path tomore than other business functions new strategies, insights, partnerships mastery, and provide a framework forto profitability, corporate growth and technologies applied to the improving performance regardless ofand competitive advantage. In the singular objective of acquiring low their current competence. Inputs fromNational Procurement Survey 85% cost, high-quality products. The 77 senior procurement executives inof procurement functions reported fact remains, however, that most Ireland, across many industries anddelivering 6% or more bottom line companies continue to undervalue government departments and agenciessavings to their company’s bottom line and under optimize their procurement are the basis for our insights.in the past 12 months. But although functions. Accenture globalthe strategic nature of procurement research indicates that the masters’ Irish Procurement masters excelhas changed completely, its core goals procurement organizations typically across the board.have changed very little. Then, as now, cost half as much to run as thoseprocurement is all about obtaining who do not follow procurement They exceed the survey average inhigh-quality goods and services best practice. Lower cost and higher strategy, sourcing and category 4
  • 5. management, requisition to pay,supplier relationship management, In summary, processes and potential areworkforce & organization, andtechnology. Ireland matches what’s new about procurement—newthe Accenture global data base strategies, insights, partnerships anddistribution for procurement mastery;with 14% achieving mastery across all technologies applied to the singulardimensions. objective of acquiring low cost, high-Procurement mastery is a clearpredictor of high performance quality products and services.through procurement.Mastery in Procurement was shownto be a predictor of procurementeffectiveness and organizationperformance. This is confirmed bythe findings of the Irish NationalProcurement Survey. NationalProcurement Mastery is aboveaverage mid range performance in alldimensions of procurement and 85%of respondents were shown to deliver6% or more bottom line savings totheir organization in the past year. 5
  • 6. Survey DemographicsIn Q3 and Q4 2010, Accenture Ireland Survey respondents and theirSupply Chain Practice requested organizations come from a wide mixprocurement-related input from of industries. As shown in Figure 2.senior executives at leading companies Services, Public Sector, Healthcareand public agencies across Ireland and Financial Services were mostthrough an online survey known as strongly represented (Figure 2).the National Procurement Survey. The 40% of respondents to the Nationalaim of the research was to understand Procurement survey sourced 60%the practices and perspectives or more of their total spend withinassociated with procurement mastery Ireland (Figure 3). The UK and the restin Ireland and to make a comparison of Europe account for 69% of importsbetween global norms documented with the US and Asia accounting forin extensive research known as the 12% and 13% respectively of totalHigh Performance Procurement (HPP) imports by respondents (Figure 4).asset conducted over 4 years with over600 companies worldwide. 77 surveyresponses were collected and theinsight provided by many of the topstate and private organizations withinthe country has been analysed. 6
  • 7. Figure 1. National Procurement Survey Size of Figure 2. Respondents to the first NationalEnterprise by Headcount Procurement Survey came from diverse industries and represented both public and private sectorsFigure 3. Local Spend of National Procurement Figure 4. Imports by region of respondents to theSurvey Respondents. 40% of respondents to the National Procurement Survey shows UK and Europefirst National Procurement Survey sourced more remaining as main trading partnersthan 60% of spend locally 7
  • 8. Survey InsightsThe National Procurement Survey each dimension of procurement.leveraged the Accenture High Masters were classified as those whichPerformance (HPP) database to performance was 1 standard deviationbenchmark procurement performance or more above the mean, while lowin Ireland against global norms. performers were 1 standard deviationThe process began with Accenture’s or more below the mean. Those in thedefinition of four procurement rage of + or – 1 standard deviationprocesses (strategy, sourcing and from the mean value were classifiedcategory management, requisition as mid-range performers (Figure6).to pay, and supplier relationship Procurement masters were thosemanagement) and two key enablers whose performance was more than 1(workforce & organization and standard deviation above the meantechnology). These were then across all dimensions of procurementgrouped into the six characteristics mastery.of procurement profiled later in thereport and illustrated in Figure 5.All together, 21measurable querieswere logged for each of the survey’s77 executive participants. Averagevalues for respondents scores (on ascale from 1-7) were measured for 8
  • 9. • Vision, mission, core values • Performance management 1. Procurement strategy • Operating model • Category strategic planning • Strategic sourcing • Category management framework 2. Sourcing and category management • Category policy setting • Compliance monitoring • Transaction processing • Master data management 3. Requisition to pay • Assisted buying • Fulfillment • Supplier performance management • Supplier development and 4. Supplier relationship management • Contract management integration • Having the right network of • Organization that facilitates 5. Workforce & Organization competent people working together • Technology that delivers the right • Systems cover all functions: 6. Technology information strategy to operationsFigure 5. The six procurement characteristics assessed for Accenture’s Procurement Mastery research and benchmarked with the NationalProcurement SurveyFigure 6. Research-based distinctions among participants. 9
  • 10. Bottom Line ImpactMost striking about the results ofthe National Procurement Surveyis the level of savings delivered byProcurement functions to theirorganizations over the past 12 monthsin Ireland. 85% of procurementorganizations delivered 6% or more insavings on addressable spend to theirorganizations in the past 12 months(Figure 7.). Figure 7. Annualised savings delivered by National Procurement Survey Respondents in the past year 10
  • 11. Procurement Decision DriversThe Survey explored the decisiondrivers of the procurement function;respondents were asked “what arethe primary and secondary driversfor their procurement decisions?”Traditionally procurement’s functionwas seen to provide the lowest totalcost of ownership with highestquality. It is not surprising thereforeto see that Cost is the single largestdriver of procurement decisions,closely followed by Service. However,Sustainability and Green Procurementis now top of mind for CPOs andis the leading secondary driver ofprocurement decisions; driven byregulatory, competitive and corporate Figure 8. Decision drivers for Procurement functions in Ireland: primary and secondary.citizenship requirements to complyand differentiate in the market place. After sustainability, Risk Management and supplier bankruptcy. 43% of those was reported as the next highest who have no Risk management plan “secondary” driver of procurement indicated that they sourced most of decisions. The National Procurement their purchases within Ireland. This Survey found that 34% of companies means that they have no currency in Ireland had revised their risk risk from their suppliers, but they are management strategy to anticipate, clearly still vulnerable to the 4 other monitor and mitigate risk in the types of procurement risk cited. past year (Figure 9.). A further 25% Risk management is often viewed implemented a risk management as the responsibility of the finance strategy for the first time in the function, instead of a cross functional past year, indicating the increasing capability. A cross-functional recognition of Risk Management approach to risk management isFigure 9. Risk planning activity in the past as an indispensible way to protect needed to fully quantify the far12 months by National Procurement Survey business from the prevailing turbulent reaching impact of volatility inrespondent economic conditions. However, 41% procurement. A recent Accenture of survey respondents are still dealing survey of Risk Management** found in an adhoc manner with the impact that 64% of market price increases from price volatility due to currency cannot be passed on to the end user: exchange rate fluctuations, raw these must instead be absorbed by the material fluctuations, supplier quality corporate buyer or supplier. problems, supply chain disruptions**High Performance in Risk Management- Research & insights in collaboration with Massachusetts Institute of Technology 11
  • 12. Trends and Innovations in Irish ProcurementThe National Procurement Survey through centralising procurement Sustainable procurement wasdemonstrated that Irish procurement process, rationalising suppliers and highlighted by a number ofpractice compares strongly with negotiating contracts across business respondents citing regulatory andinternational best practice across units and geographies. A number of corporate citizenship objectives. Thisall dimensions of procurement. public sector responses highlighted highlights the developing nature ofIrish Procurement functions are, as inter departmental collaboration to this capability from both a complianceexpected delivering strategic direction increase value for money. and differentiation in the marketto their organizations and bottom line place as customers are increasinglysavings. In order to remain competitive At the heart of executing strategy is citing Green credentials as a decidingand to continue to identify and deliver defining an operating model which factor in their choice of providers ofvalue in challenging and volatile recognises the mandate and strategic goods and services.markets there is a need to constantly importance of the procurementinnovate and identify new trends function and sets key objectives Technology is a key enabler forin the market. There are a number and documents responsibilities procurement performance byof areas where Irish companies are for delivering on key performance automating manual tasks, improvingidentifying and expanding their indicators for the organisation. visibility of spend and standardisingprocurement capability. Many respondents reported that process. In support of sourcing a their organisations were realigning number of respondents highlightedIn terms of strategy Collaborative to meet their organisations strategic the use of eProcurement includingProcurement for effective sourcing objectives by centralising process, Procure to Pay implementation,and category management was developing procurement capability eAuctions as well as Supplier Portalshighlighted by a number of in their workforce through training, and the use of eRFx as initiativesrespondents as a way of delivering technology and through process which they were investigating orvalue to their organisations either standardisation. implementing over the past 12 12
  • 13. months. But as well as investing in buy decisions are key contributors tothe latest trends in technology there competitive advantage and need to berespondents were also looking to constantly evaluated, monitored andtheir current ERP systems to improve reassessed with an appropriate riskperformance through enablement of management framework.existing functionality not previouslydeployed. This is especially relevantin terms of real time reporting ofbenefits and highlighting of potentialissues.Supplier Relationship Managementtrends indicated by respondentsinclude supplier segmentation.Proactive management of contractsand where possible aggregationof spend and centralising contractnegotiation. The National ProcurementSurvey identified low cost countrysourcing from Asia as well as areaswithin Europe as a way to sourcecompetitive inputs for their valueadd goods and services. Make versus 13
  • 14. The Dimensions ofProcurement MasteryProcurement masters are different. procurement masters are technology Procurement masters excel acrossThey approach the function more leaders. They use processing power all six of the functional componentsstrategically and holistically. They to increase efficiency; make better to form an integrated value chain.engage more fully with suppliers and or faster decisions. They also leverage Accenture’s has shown throughfrequently work to partner rather than and focus internal skills; and connect research that companies excelling inbargain. Perhaps most importantly, with suppliers and third parties. procurement operate more efficiently and effectively than companies that do not. The National Procurement Survey showed that procurement in Ireland performs well across all six dimensions of the Accenture High Performance Procurement model. This is encouraging as we are clearly adopting and practicing best global procurement practice. However, as can be seen in Figure 10 there is still opportunity to enhance performance and as a result increase effectiveness through procurement mastery.Figure 10. Overall Mastery Scores from National Procurement Survey show Ireland’sperformance relative to Accenture Global database 14
  • 15. Case Study* How procurement masters cost less and contribute more to their organizations Consider the following illustration of deliver a ratio of about three to four procurement mastery’s performance times. In effect, masters spend half as improvement potential. In previous much as low performers, yet they save Accenture research it was determined 30 percent more. that procurement masters achieve significantly higher savings than the Example: For a company with US$1 balance of the survey population. billion in controlled spend, this means Based on controlled normalized a procurement master would incur spend from one year to the next, costs of US$8 million and savings of masters save almost 10 times as much US$82 million, while a procurement as it costs them to operate their low performer would incur costs of procurement organizations. According US$16 million and savings of only to our experience, the very best US$63 million (Figure 11). companies deliver a ratio of eight to 10 times the cost of running their procurement organizations. Ineffective organizations, on the other hand, Figure 11*. On US$1 billion of controlled, normalized spend, procurement masters achieve 30 percent higher savings with costs that are 50 percent lower.*Source “High Performance through procurement: Accenture research and insights into procurement performance mastery,” 2007 15
  • 16. Strategy Compared to midrange performers and Lastly, procurement masters do a areas. Strategic planning is low performers, procurement masters better and often more innovative typically executed every three to think, plan, operate and interact job of measuring procurement five years and revised yearly. more strategically. For example, they performance. Most use a balanced • Proactive planning of Value Add look and think three to five years scorecard approach and apply a clear indicates the level to which out when planning purchases for definition of value across the company. Procurement proactively seeks critical business categories. By closely to add value to the organization examining future business needs and The National Procurement Survey rather than being reactive to market trends, masters are better compared the Strategic importance of requests external to procurement. positioned to acquire the right items Procurement to enterprises in Ireland at the right cost at the right time. by benchmarking the responses to 3 One clear trend identified in the Procurement masters also have a questions regarding their mandate National Procurement Survey clear mandate from top management. within the organization, strategic was Collaborative Procurement. Masters’ strategies enjoy boardroom focus and how they proactively seek Respondents indicated that they awareness and support. In return, they value add for their organizations to were pooling spend and collaborating frequently implement mechanisms global norms. across public sector departments and (for example, shared services or • Clear mandate means that across business units and geography outsourcing business models) that procurement is supported by in the private sector. Supplier promote accountability across the a formal operating model that segmentation and risk management purchasing cycle and in relationships allows the organization to are also strategies highlighted in the with related business areas such as implement meaningful and lasting survey; proactively targeting and engineering, manufacturing and field change. engaging with suppliers to create service. • Strategic focus refers to the savings and to minimize supplier and ability to drive a formal process price volatility, particularly with key in collaboration with key business suppliers and raw materials. owners for all primary spendFigure 12. National Procurement Survey Strategic performance: relative to global norms 16
  • 17. From the HPP Research Accenturedemonstrated that many procurementorganizations achieve more strategicfocus through contracting oroutsourcing more transactionalactivity. Figure 13 shows thatprocurement masters are 3 timesmore likely to contract or outsourcetransactional activity compared tolow performers. Figure 9 shows indetail which operational processes aretypically contracted or outsourced. Figure 13*. Operational Processes typically outsourced or contracted out by Procurement masters.* Source: High Performance through Procurement: Accenture research and insights into procurement performance mastery 17
  • 18. Sourcing and Category ManagementAll companies classified as The National procurement survey categories. Masters reengineerprocurement masters have showed that 36% of Irish enterprises processes, cutting the lead times forimplemented a centrally guided had a centrally led category switching suppliers and ensuringcategory management structure that management structure which that logistics, quality, purchasingcuts across organizational entities. compared favorably to the global and engineering all cooperateAlmost all masters have a “leading survey responses. For masters, global effectively. They work closely withpractice” strategic sourcing process sourcing is an ongoing, flexible and the new suppliers to make them fullyand structure in place— one that constantly shifting activity. But it is aware of requirements and how toemphasizes: guided by a formal mechanism whose fulfill them and, when necessary,• Common processes across the mission is to constantly seek new they invest in supplier development company. opportunities to reduce total cost programs. Companies must therefore• Widespread use of cross-functional of ownership. Investing in and using take a more integrated view, bringing sourcing teams for managing e-sourcing tools is a key enabler to together their processes and practices, projects, formulating strategies, reduce total cost of ownership for combining cultures and skills with managing supplier selection and masters in sourcing and category well-defined roles and responsibilities. implementing contracts. management. Ireland again compared Clearly, what separates the masters• Activities that are formally tracked. favorably to the global database with from the rest is their ability to do so• A tight focus on total cost of 33% citing master’s level. by executing a global sourcing plan. ownership. By using a network of international• An end-to-end, supply chain- Masters review their complete spend procurement offices in key low-cost wide orientation, with top-down profile in a systematic way, making country markets, masters are able to administration from a procurement sure they understand the cost implement and maintain local supplier or category board. structure of each of their key relationships and achieve excellence in execution.Figure 14. Best Practice in Sourcing and Category Management 18
  • 19. Requisition to Pay Requisition to pay is shorthand best practice level. 56% of Irish for an integrated procurement respondents also cited masters level process. Defined and practiced by in the efficiency and transparency of procurement masters, it implies their procurement approval processes. an end-to-end perspective, with activities bound to each other by transparency, common goals and common metrics. Requisition to pay is all about integration, visibility and standardization. Superior practitioners in requisition to pay were found to share numerous characteristics. First and foremost, 83 percent of procurement masters and only 8 percent of procurement low performers excel at providing clear and documented buying channels to the end user. In the National Procurement Survey Ireland showed almost half of the respondents operated atFigure 15. Best Practice in Requisition to pay 19
  • 20. Supplier Relationship ManagementAccenture research has shown that markets and supplier characteristics—procurement masters are three times including relevant strengths andmore likely than low performers to weaknesses, product complexities,have a formal program for managing and geographies. It is this proficiencytheir supply base. In no other category that enables other capabilities, suchare the disparities between master as forging deeper relationships withand low performer greater than in key suppliers, establishing long-termsupplier relationship management. partnering agreements, and evenIn fact, the simple size of the gap developing joint operations basedsuggests that supplier relationship on knowledge sharing, seamlessmanagement is a leading practice in processes and mutually beneficialitself—that the intelligent, aggressive product improvements. 43% ofpractice of supplier relationship Irish respondents to the Nationalmanagement is readily indicative Procurement Survey segment theirof high performance through supply base and 40% are collaboratingprocurement. Masters excel by using to continuously innovate process anda supply base segmentation strategy products for mutual gain.that aligns approaches and types ofrelationships with specific supplyFigure 16: Supplier Relationship Management of masters means segmentingsuppliers and partnering with key suppliers 20
  • 21. Workforce & OrganizationAccording to Accenture research, company goals and the contributions • Emphasizing ongoing training andprocurement masters excel at they make to those goals. One linking it to performance metrics.building results-focused procurement hundred percent of procurement • Blanketing competency developmentprocesses, as well as results-oriented masters have implemented a structure strategies across the procurementprocurement organizations. The of centrally led category management. network of users, technical people,clearest evidence is the first item In procurement, buyer skills are suppliers and partners.in Figure 17, which shows that particularly important. Recognizing100 percent of masters follow a this fact, Accenture researchersmanagement-by-objective approach, looked closely at the principals ofcompared to only 15 percent of low competency development. As Figureperformers. 53% of respondents to 17 shows, we found that 78 percentthe National Procurement Survey of masters but only 3 percent of lowmanage their procurement workforce performers excel in this area by:by objectives; assigning clear targetsand responsibilities for procurement • Objectively measuring existingfunction performance. Clearly, competencies.procurement masters are more • Making frequent adjustments tocommitted than most to improving organizational skills so that theycommunication and visibility, and always align with procurementto helping employees understand strategy.Figure 17. Masters manage exclusively by objective to give value to their organizations andadd value to the workforce through competency development 21
  • 22. TechnologyProcurement technologies have enhancing supplier relationships, common and automated Requisitionprogressed considerably. New Web- this is a logical spot for procurement to Pay platform. Developing user-based tools are adding significant masters to focus their efforts. friendly ad-hoc reporting capabilitiescapability and productivity Almost as common is masters’ use is, in Accenture’s view, one of theenhancements in gathering, of common technologies to support most fundamental ways to increaseinterpreting and sharing procurement- their requisition to pay processes, buy-in, raise entity-wide transparency,related information; purchasing followed by tools for harmonizing and capture the information neededservices; and connecting with other master data— creating a central to discover and drive improvementparts of the business, to name just a corporate repository to ensure opportunities.few. Even more than before, the name that information about materials,of the game is about integration. products, customers, suppliers andConsistent with other principles of assets is current, consistent andmastery, huge disparities exist in the accurate. More than 1/3 of Nationaldegree to which leaders leverage Procurement survey respondents havetools. As shown in Figure 18, the use implemented technology to betterof technology to support sourcing integrate with their suppliers andprograms is most prevalent among harmonize procurement master datamasters. Given the rewards associated at the level of Master. However, onlywith regularly rationalizing and 17% are using technology to drive aFigure 18. Percentage of survey respondents (masters versus low performers)that leverage various technology-based capabilities. 22
  • 23. SummaryIn the first National Procurement Survey we have shown thatlevels of Procurement Mastery in Ireland compare well withglobal norms. Mastery in Procurement is a key indicator ofhigh performing companies in terms of key efficiency metricssuch as savings on addressable spend. We found in the research,that trends in Procurement in Ireland show a move away fromtransactional activity to a more strategic focus which adds value.Using the “High Performance through Procurement” frameworkwe have identified where on the Mastery continuum Irelandresides as a country. It is key to maintain the momentum ofProcurement Mastery and Procurement Innovation as reported inthe first National Procurement Survey as a means to increase thecompetitiveness of individual enterprises and of the country ingeneral. 23
  • 24. About Accenture ContactsAccenture is a global management Irelandconsulting, technology services andoutsourcing company, with more than Armin Samali176,000 people serving clients in 1 Grand Canal Squaremore than 120 countries. Combining Dublin 2unparalleled experience, comprehensive Irelandcapabilities across all industries and Phone:+353 1 6462333business functions, and extensive armin.samali@accenture.comresearch on the world’s most successfulcompanies, Accenture collaborates Justin Hayeswith clients to help them become 1 Grand Canal Squarehigh-performance businesses and Dublin 2governments. The company generated Irelandnet revenues of US$21.58 billion for Phone:+353 87 8239981the fiscal year ended Aug. 31, 2009. Its justin.hayes@accenture.comhome page is www.accenture.com.Copyright © 2010 AccentureAll rights reserved.Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture. 24

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