How much difference does it make?

There are several statistics cited in the report, some of which indicate that there are only two types of company, world class and those that are doomed.  This is the problem with infographics where the differential between numbers can be inflated.  For example the 17% cited in the difference cost of procurement as a percent of spend is not as large as that figure might indicate. World-Class organisations spend 0.596% on procurement, where as their peer group spend only 0.720%.  Sawchuk acknowledge this issue but when procurement costs are in the billions, these differences can make a substantial difference to the bottom line..

While the spend of large organisations may be noteworthy, it is worth check one’s own cost of procurement and reasons behind it before panicking. The difference in FTE (Full Time Employee’s) is perhaps more interesting with 43 employees per billion as against 59 employee’s.  Bearing in mind that these will factor into the overall cost of procurement one wonders what the whole breakdown and comparison of costs are.

Sawchuk also confirmed that these gaps have been consistently narrowing over the last ten years.  This indicates that procurement has been improving generally and the leading edge companies are finding it harder to make improvements that show significant differences.  So what is changing?

It’s no longer just about how much you save.

Why haven’t procurement teams moved the conversation forward. Sawchuk felt that the blame is associated with inertia. Procurement teams and Finance are still focused on spend savings. They have spent the last 20 years trying to get organisations to save money, and have succeeded in doing across the board.  There are few low hanging fruit left though now and procurement teams need to work more like gardeners.  Not just dead heading but changing the shape of the business to maximise the growth in terms of quality and quantity.

It is perhaps ironic that sometimes having spent the last few tears at odds with procurement teams who saw best cost equal to best value that CIO’s may now find it easier to convince procurement that there is most than just going for the lowest bid. The change will not make it easier for IT to make its case and in fact simply having an argument that it is a “better” product for the business may no longer be enough; that “better” needs to be justified properly, probably with a sponsor from the business.

(Next : How do you achieve it?)

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