Hackett: World-Class Procurement Drives 133 Percent Greater Return Than Typical Companies but Cuts Cost of Procurement by 20 Per
November 02 2005 - 4:30PM
Business Wire
World-Class Retain Lead in Effectiveness with 46 Percent Fewer
Suppliers, Planning Involvement & More Cross-Functional
Supplier Development World-class procurement organizations generate
133 percent greater return on their investment in procurement than
typical companies, driving an additional $3.6 million to their
company's bottom line for every $1 million in procurement
operations costs, according to 2005 Book of Numbers(C) Research
from The Hackett Group, a business process advisory firm (NASDAQ:
ANSR). Hackett found that while typical companies are narrowing the
cost gap to world-class in procurement, world-class companies now
see procurement operations costs that are 20 percent less than
typical companies and have about half the procurement staff. But
there are significant differences in how procurement leaders
generate increased effectiveness and strategic business value in
their enterprises. According to Hackett, world-class procurement
organizations also show dramatically improved effectiveness over
typical companies. They now operate with 46 percent fewer
suppliers, are nearly five times more likely to be involved in
enterprise-wide planning initiatives, and make much greater use of
cross-functional teams for supplier sourcing,
selection/negotiation, and partnering/development. The Hackett
Group is a world leader in best practice research, benchmarking,
and advisory services that empower executives to achieve
world-class enterprise performance. Hackett offers analysis and
insight backed by metrics derived from 3,300 benchmark studies over
13 years at nearly 2,000 of the world's leading companies,
including 96 percent of the Dow Jones Industrials. "Yes, typical
companies have narrowed the functional cost gap to world-class. But
all cost reductions are not created equal," said Hackett
Procurement Practice Leader Chris Sawchuk. "In too many cases,
typical companies end up cutting into high-value areas like
performance management, customer management, and strategic
sourcing. By contrast, world-class companies increase their focus
on spend avoidance, develop deep partnerships with suppliers, and
minimize costs in low-value areas like transactional processes."
According to Hackett Director and Senior Business Advisor Pierre
Mitchell, "The bottom line is that world-class companies continue
to take a very different view of procurement, looking at it as an
investment rather than a cost center. This is how they generate the
millions of dollars in additional savings that typical companies
simply don't see." According to Hackett, world-class procurement
organizations now see procurement operations costs that are 20
percent less than typical companies (0.68 percent of procurement
spending versus 0.85 percent). World-class procurement
organizations also now operate with nearly half the staff (44.9
staff/billion of spend versus 89.2). Hackett's research showed that
world-class procurement organizations generate 133 percent greater
return on the cost of procurement operations than typical
companies. Hackett calculated these returns by dividing spend
savings (spend reduction attributable to procurement practices) by
the total cost of procurement operations, generating a return as a
percentage of procurement operations costs. While world-class
organizations netted a return of 630 percent, typical companies
only saw a 270 percent return. This gap demonstrates that
world-class procurement organizations deliver additional savings of
360 percent, or $3.6 million for every $1 million invested in
procurement operations. NOTE TO JOURNALISTS: A chart illustrating
select findings described above is available on request, and will
be distributed via Business Wire. Supply base rationalization and
partnering with key suppliers remain key techniques that
world-class procurement organizations utilize to reap benefits,
according to Hackett's research. World-class procurement
organizations operate with 46 percent fewer suppliers than typical
companies (7,710 per billion of spend versus 4,171) and also
concentrate 80 percent of their spending on just 5.9 percent of
their suppliers, significantly fewer than typical companies. But
cost savings are only one measure of success. World-class
procurement organizations also outperform their peers across a wide
range of other effectiveness metrics, and show clear strategic
alignment and linkages between procurement and the spend owners.
Procurement is highly involved in enterprise-wide planning and
budgeting 57 percent of the time at world-class companies, nearly
five times more often than typical companies. Hackett also found
that 100 percent of all world-class procurement organizations use
cross-functional teams for supplier partnering/development,
sourcing, and selection/negotiation, making them 37 to 50 percent
more likely to do so than typical companies. The Hackett Group's
research into world-class performance is compiled in its Book of
Numbers series, which provides senior executives fact-based
performance metrics and insights based on Hackett's extensive
database of best practices and process metrics in IT, finance, HR,
procurement, and other areas. Hackett Book of Numbers volumes are
available to members of Hackett's World-Class Programs --
premium-value, membership-based programs providing a tailored mix
of benchmarking services, confidential advisor inquiry, best
practices research, and peer learning opportunities. More
information on The Hackett Group is available: by phone at (770)
225-7300; by e-mail at info@thehackettgroup.com; or on the Web at
www.thehackettgroup.com. About The Hackett Group The Hackett Group
(www.thehackettgroup.com), a business process advisory firm and an
Answerthink company, is a world leader in best practice research,
benchmarking and advisory services that empower executives to
achieve world-class enterprise performance. Only The Hackett Group
empirically defines world-class performance in sales, general and
administrative (SG&A) and supply chain activities with analysis
gained through 3,300 benchmark studies over 13 years at nearly
2,000 of the world's leading companies. The foundation of Hackett's
benchmarks, transformation services, and membership-based advisory
programs is our proprietary database of Hackett-Certified(SM)
Practices, approaches which are proven to correlate with superior
performance metrics. This unparalleled knowledge repository enables
Hackett business advisors to provide data, advice, and strategic
insight with a level of integrity and authority available nowhere
else. As of this writing, Hackett clients comprise 96 percent of
the Dow Jones Industrials, 77 percent of the Fortune 100 and 92
percent of the Dow Jones Global Titans Index. Hackett-Certified,
Book of Numbers, and Hackett World-Class Passport are service marks
of The Hackett Group. This press release contains "forward looking
statements'' within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve known and unknown risks,
uncertainties and other factors that may cause Answerthink's actual
results, performance or achievements to be materially different
from the results, performance or achievements expressed or implied
by the forward looking statements. Factors that impact such forward
looking statements include, among others, the ability of the
products and services mentioned in this release to deliver the
desired affect, our ability to effectively integrate acquisitions
into our operations, our ability to attract additional business,
our ability to effectively market and sell our recently launched
transformation advisory product offerings and other new services,
the timing of projects and the potential for contract cancellations
by our customers, changes in expectations regarding the information
technology industry, our ability to attract and retain skilled
employees, possible changes in collections of accounts receivable,
risks of competition, price and margin trends, changes in general
economic conditions and interest rates as well as other risks
detailed in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2004 filed with the Securities and Exchange
Commission. We undertake no obligation to update or revise publicly
any forward-looking statements, whether as a result of new
information, future events or otherwise.
Answerthink (NASDAQ:ANSR)
Historical Stock Chart
From Oct 2024 to Oct 2024
Answerthink (NASDAQ:ANSR)
Historical Stock Chart
From Oct 2023 to Oct 2024