World-class procurement organizations now operate at 21 percent
lower labor costs than peers and have 29 percent fewer staff,
according to new world-class performance advantage research from
The Hackett Group, Inc. (NASDAQ:HCKT). The research also found that
digital transformation enables typical procurement organizations to
reduce process costs by 30 percent, and world-class procurement
organizations by 22 percent.
Technology has always played an important role in enabling
world-class performance through improved efficiency and
effectiveness. But procurement is now at an inflection point, the
research found, and both world-class and typical procurement
organizations will need to turn to digital transformation to ensure
that they can continue to reduce costs and add value.
A public version of the research, “Raising the World-Class Bar
in Procurement Through Digital Transformation,” is available on a
complimentary basis, with registration, at this link:
http://go.poweredbyhackett.com/wcpro1806sm
In part, world-class procurement organizations improve
efficiency by standardizing and automating routine tasks, the
research found. To improve effectiveness, world-class procurement
organizations continue to significantly outperform peers in service
delivery productivity. In combination, for a typical company with
$10 billion in revenue, attaining world-class performance in
procurement represents as much as $6 million in potential savings
annually.
World-class procurement groups also have a significantly higher
ROI than peers, generating a 10.7X payback on investment in
procurement, more than twice that of typical procurement
organizations, the research found. But cost reductions and savings
are forecasted to level out in coming years, making it necessary to
find new ways to continue to unearth value.
Across a wide range of metrics, world-class procurement
organizations also demonstrate higher levels of effectiveness than
peers. They have 2-3X fewer transaction discrepancies, a clear sign
of higher-quality process execution. They also focus on improving
their ability to influence business performance. World-class
procurement organizations are more than twice as likely to have
retention plans in place for procurement personnel and see a third
lower staff turnover. This enables them to better retain
organizational knowledge and demonstrates their improved ability to
match new hires with skills needs and deliver an employee
experience that matches expectations.
Technology costs per procurement staff member are generally
higher in world-class organizations, reflecting greater investments
in both digital technologies and process automation. Technology
enables world-class procurement organizations to reduce their cost
per order by more than 70 percent, and also allows procurement
staff to dedicate more time to talent development and other
activities that boost business performance.
The Hackett Group’s research found that digital transformation
can enable typical procurement organizations to reduce their
process costs by 30 percent, bringing them to cost levels slightly
below those of world-class procurement organizations, which have
invested to a greater extent in value-creating capabilities.
World-class procurement organizations can reduce process costs by
22 percent.
“There’s a tremendous opportunity for procurement organizations
to apply digital technologies – including cloud-based
infrastructure and applications, business analytics, and more – to
transform their service delivery model. It can make them faster,
cheaper, smarter, much more responsive to their customers and quite
simply a more valuable partner to the business,” said Christopher
S. Sawchuk, principal & Global Procurement Advisory Practice
leader, The Hackett Group.
According to Robert Derocher, principal, Strategy and Operations
Practice, The Hackett Group, “It’s important to understand that
while digital technology is a powerful new platform, on its own it
will not deliver the full performance improvement potential. New
technologies may lead the way, but they must fit within a larger
strategy, one based on a well-designed service delivery model that
incudes rationalization of ERPs and other legacy technologies along
with redesign of processes, information, talent and organization.
Digital technologies will allow procurement to significantly
accelerate headcount reductions. But procurement then has to
dedicate the resulting savings to fund more technology investment,
while redeploying or hiring new resources for higher-value
activities.”
The Hackett Group’s research identified six digital accelerators
for procurement. Digital Engagement, including self-service
for both employees and managers, can improve efficiency, engagement
and customer experience. Robotic Process Automation is
moving from pilots to widespread adoption, enabling the automation
of routine tasks in purchase-to-pay and elsewhere.
Analytics-Driven Insight is already a hallmark of
world-class procurement, and allows procurement to make be more
agile and make predictive rather than reactive decisions while
improving planning and analysis and facilitating more detailed
performance measurement.
Modern Digital Architecture such as software for
e-sourcing, supplier discovery and contract lifecycle management,
can enable procurement to significantly speed up tasks like finding
and qualifying suppliers, reduce lapsed contracts and increase the
use of standard terms and conditions. Digital Workforce
Enablement, including social media and messaging services, can
help create a culture of collaboration, enable crowdsourcing of
answers to questions and speed up work processes, particularly for
the new generation of procurement professionals. Finally
Cognitive Computing and artificial intelligence, which are
in more nascent stages, are starting to help procurement
organizations run models, make predictions and analyze large data
sets.
World-class procurement organizations are those that achieve
top-quartile performance in both efficiency and effectiveness
across an array of weighted metrics in The Hackett Group’s
comprehensive procurement benchmark. The Hackett Group’s
world-class procurement research is based on an analysis of results
from recent benchmarks, performance studies, and advisory and
transformation engagements at hundreds of large global companies. A
public version of this research, is available on a complimentary
basis, with registration, at this link:
http://go.poweredbyhackett.com/wcpro1806sm
About The Hackett Group
The Hackett Group (NASDAQ: HCKT) is an intellectual
property-based strategic consultancy and leading enterprise
benchmarking and best practices digital transformation firm to
global companies, offering digital transformation including robotic
process automation and enterprise cloud application implementation.
Services include business transformation, enterprise
analytics, working capital management and global
business services. The Hackett Group also provides dedicated
expertise in business strategy, operations, finance, human capital
management, strategic sourcing, procurement and information
technology, including its award-winning Oracle and SAP
practices.
The Hackett Group has completed more than 15,000 benchmarking
studies with major corporations and government agencies, including
97% of the Dow Jones Industrials, 89% of the Fortune 100, 87% of
the DAX 30 and 59% of the FTSE 100. These studies drive its Best
Practice Intelligence Center™ which includes the firm's
benchmarking metrics, best practices repository and best practice
configuration guides and process flows, which enable
The Hackett Group’s clients and partners to achieve world-class
performance.
More information on The Hackett Group is available at:
www.thehackettgroup.com, info@thehackettgroup.com, or by
calling (770) 225-3600.
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version on businesswire.com: https://www.businesswire.com/news/home/20180821005088/en/
The Hackett GroupGary Baker, 917-796-2391Global Communications
Directorgbaker@thehackettgroup.com
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