Benchmark your Organization – Results of the 2020 Procurement Performance Excellence Survey

Procurement has developed rapidly in recent years, and with the application of transformative technologies such as artificial intelligence and new challenges such as Covid-19 and changing global trading relationships, the rate of change is accelerating.

So, what is the current state of best practice in procurement? And what should your organization consider doing to move up to the next level? Simple questions, but the answers are the subject of endless discussion and every senior procurement professional has an interest in finding answers. 

That’s why JAGGAER co-sponsored a new survey in collaboration with leading global innovation consultancy IPG.

 

And now, the results are in for the 2020 Procurement Performance Excellence (PPE) Survey. 

PPE Survey Highlights

It’s been four years since we last conducted a Procurement Process Excellence survey report. The 2020 survey results indicate that since then, some progress has been made on the digital transformation journey, but this progress has not been as rapid, and certainly not as systematic, as we had hoped. ​

The majority of organizations are only on the first stage of the journey and a sizeable minority have barely started. A much smaller minority are among the real leaders, e.g., the 9% that have implemented supply chain mapping or the 2% who are already using predictive analytics.​

Overall, the mixed results – strong in some areas, weak in others, but with the bulk of effort still focused on operational tasks – indicates the absence of a holistic approach to digital transformation. Large enterprises are in a better position to finance and execute the transformation, while small companies often have the flexibility to adapt; recent startups have been able to implement digital solutions from the get-go. The report findings, and what we learn in our day-to-day business with customers, suggest that it is organizations in the middle that are struggling to keep up.​

The main positive is that procurement is viewed more strategically than four years ago. Heads of procurement have moved up the hierarchy. This is a necessary but insufficient condition for further progress: it gives procurement the visibility and proximity to the leaders of the stakeholder functions needed to push for change, for investment, and for project sponsorship.

2020 was, of course, an exceptional year, consequently some of the results have been influenced by the “Covid-19 effect”. One clear impact is that insofar as they have thus far taken a strategic approach to procurement technology, these may have had to take a backseat while companies digitalize those functions that enable them to weather the storm, e.g., by facilitating remote working and paper-free document exchange.​

 

• Procurement remains heavily weighted towards operational as opposed to strategic functions. Participants in the survey employ on average 125 operational procurement FTEs to 37 strategic procurement FTEs​
• The average price rate was 0.2%. Less than 7% of participants are achieving annual cost reductions of 5% or more and nearly half the panel are seeing year-on-year price increases​

 

 

• Concentration on key suppliers was diluted slightly compared with 2016, probably as a result of Covid-19, but is still high​
• The average number of suppliers managed by a strategic procurement professional has increased considerably – from 6 in 2016 to 16 in 2020. This would seem to be a blip caused by Covid-19 because it is unsustainable for any length of time​
• Overall, procurement strategy maturity has improved over the past four years; nevertheless the ”end-to-end process view” and future procurement areas are still significantly neglected​

 

 

• Although continuous benchmarking and multi-year contracts are largely established, the low degree of transparent open calculations indicate potential for additional savings​
• The survey surfaced participants’ engagement on “special projects”, which we interpret as a Covid-19 impact on procurement, because overall the strategic time profile lacks focus​
• Procurement’s cooperation with certain functions and departments, notably Quality Control, R&D, Production and Marketing still needs to be significantly improved​
• Procurement suffers from a lack of digital competence and cross-functional collaboration: these must be addressed as a matter of urgency​
• Procurement is gaining in influence, with an increasing number of heads of procurements now at board level​
• Supplier selection and evaluation is highly standardized and well-defined by most companies, but there is limited collaboration intensity with key suppliers. Supplier integration and supplier portfolio management also require attention and investment

 

 

• 55% of participants have digitized key processes. 43% have developed big data applications and/or implemented data lakes, a prerequisite for the next leap forward​

 

 

• 68% have implemented SRM but many are struggling with full execution and rollout​
• 43% have not implemented eSourcing and a majority have yet to run an eAuction event​

 

 

• 85% of respondents have digitized contract lifecycle management, but a large proportion of these have only taken the first step(s)​
• Two-thirds have digitized order management. Most do digital document exchange with suppliers but nearly half are using classical EDI as opposed to more advanced options​

 

 

• 70% have implemented or partially implemented procure-to-pay (P2P) technology​
• Two-thirds of organizations do spend analysis. There is some way to go to implement business intelligence beyond rudimentary KPI dashboards

This survey was designed to help you find your organization’s level of maturity in procurement through internal and external benchmarking.

 

Internal benchmarking should help you to stimulate a process of discussions with other senior decision makers to assess the current status quo and to reach agreement on future strategic direction and next steps. External benchmarking will allow you to assess your current level of maturity in specific areas of technological innovation against current best practices globally, in your region or in your vertical sector. 

Download the full highlights infographic here

What’s more, if you wish to explore these findings individually and in more depth, JAGGAER and IPG will also be available to discuss them and produce an action plan, if desired, without any obligation.