[Podcast] The Value of Benchmarking in a Procurement Team
REV It Up: A Procurement Podcast Series with Procurious
In this blog series, powered by Procurious, Philip Ideson sits down with speakers from JAGGAER’s REV2018 conference to discuss the latest trends in procurement and what the future holds.
A conversation with Deb Stanton
Setting Benchmarks in Procurement Teams
Q. What role should benchmarking play in understanding both the current capability and the aspirational performance of a procurement team?
As a former CPO, I actually have personal experience in the value of benchmarking. It allows us to take that outside perspective in evaluating our own organizations, the supply management practices that we have in place, and it’s really good to not only look outside your company for some of those comparisons, but also outside your industry.
Q. I think sometimes we often set some organizations on a pedestal in terms of what we want to align ourselves with. Is there really such thing as best-in-class, or is it more situational based on your company?
Companies are at very different places on their maturity curves. This can differ from one program or practice within their company to another. A company may find themselves very advanced in an area such as supplier performance management, but when they look at risk management or procurement technology, they may find that they’re behind.
And we, as a profession, continue to advance from the more tactical activity to strategic. Everybody aspires to achieve that strategic level of bringing value to their company. Best-in-class is a moving target.
Q. I’d love if you could share some of the trends that you’re actually observing in the growth of the evolution of procurement performance.
Sure. You can look at some of the traditional areas like cost savings. Often, people’s reaction will be, “When the low-hanging fruit is gone, doesn’t that decline?” We see year over year growth in increased savings numbers. Companies are now pursuing all categories in commodities of spend, where years ago they may have been focused on just production materials. They weren’t going after marketing spend, IT spend, HR, and legal services. They’re pushing the boundaries.
Other trends that we’re seeing definitely are in the areas of risk management, business partner engagement, talent management, technology.
We all remember the big push of e-procurement solutions many years ago. We were all racing to automate. And that got quiet for a while. Now, we see the whole next generation of automation really coming alive. You’ve got RPA, robotics, data analytics, predictive analytics. Some companies haven’t started on that journey yet. Some companies are just figuring it out. Some companies already have the robots in their P2P process and remarkable activity that’s driving things.
Leveraging Data Analysis
Q. I’m interested if you see that procurement organizations are applying new tactics to old spend. Not just, ” I have two or three things I’m going to do, and I’m going to apply to all my spend,” but whether you see organizations actually thinking about how they manage that spend in different ways?
Definitely, Phil, especially in the area of data analytics. They’re using data to give much better visualization, do not only real-time data analysis, but the predictive. They’re developing stronger category strategies. There’s more transparency in using the data, using some of the tools, you know, internet of things and so forth. We definitely see those improved category strategies in how they approach them and what they’re applying.
Q. Do you see procurement leaders actually investing at the level that they need to in data analytics?
Just recently we had 50 CPOs in a room, and we asked them that exact question. On a scale of one to seven, they rated it 6.2.
So, obviously a high area of importance. What did surprise me is we asked, “Do you already have some of these data analytics teams in place?” And 71% said yes.
Q. I do have one last question. I think one of the things that procurement leaders that I talk to always struggle with is, “How can I demonstrate the value that I’m creating beyond savings?”
That is a very common theme out there with CPOs and their organizations. What we see companies doing is adding some metrics to their dashboards that are very business-centric. It’s important to be integrated in the business so that you’re part of that value, that competitive advantage that you help drive.
In metrics and KPIs, we’re seeing contribution to revenue, measure increase margin, impact to budget. We see innovation contributions measured that either increase revenue, competitive advantage, or total cost of ownership. They’re definitely emerging as important metrics that also speak the business language.
The best thing I experienced as a CPO was when my metrics were exactly reflected on the business unit’s dashboard. We were so aligned on what was the best performance metric and the best KPIs for us to be impacting the business.