Their success formula uses procurement as a catalyst to drive durable business performance through excellence in managing categories, suppliers and teamsLeading company procurement organizations reap double the measurable cost reduction versus other companies, while also driving competitive advantage through supplier-driven innovation and risk management. While procurement organizations for leading companies have continued their upward trajectory, most companies only sustained the gains they made between 2008 and 2011.

These findings were reported in a study released today by A.T. Kearney titled “Procurement Powered Business Performance: Assessment of Excellence in Procurement (AEP) Study 2014.” This year’s AEP is the eighth edition in a series that started in 1992.

John Blascovich, A.T. Kearney partner and co-author of the report noted, “We were surprised that after the gains made between 2008 and 2011, many companies only sustained their improvements over the last three years. The typical company may be ‘wasting a crisis’ by not continuing to enhance one of the most powerful levers to improve profitability and competitive advantage.”  The reasons that many companies have not reached the next level of procurement performance include the lack of designated responsibility to take the lead for all major spend categories and explore broader value creation opportunities, weak strategic and organizational links to the rest of the business, and difficulty communicating the function’s return on investment.

Leading Practices
Leading procurement organizations have found ways to advance, delivering even greater impact since the 2011 study. Integrating more closely with the business units and regions has increased their relevancy, influence, and impact. These organizations have achieved breakthrough financial results from procurement – generating double the Return on Supply Management Assets (ROSMASM) performance levels compared to the typical company and delivering benefits at a rate ten times greater than the cost of their people, technology and external support.
Leading companies have achieved this performance by:

• Building high-performance teams as a catalyst for business alignment
• Reducing cost through category excellence
• Creating competitive advantage through supplier capabilities
• Investing in the procurement team to deliver durable superior performance

  
Stephen Easton, A.T. Kearney partner and co-author of the report said, “Leading procurement organizations communicate what the function delivers to the company in terms that the business can understand, typically by using finance organization language to measure and share performance data.” Alex Ferrer, A.T. Kearney Procurement & Analytic Solutions director said, “As procurement excellence helps to generate benefits and have greater business impact, companies will be more inclined to free up funds for innovation, growth and improved shareholder value.”

The full AEP 2014 report includes an explanation of ROSMASM  (Return on Supply Management Assets), case studies on Category Excellence and Innovation through Collaboration, and a summary of TrueSRMSM.

To read the full report please go to www.atkearney.com.

More Information
Marco Andreassi
Unit Head - A.T. Kearney
Mediterranean Unit
marco.andreassi@atkearney.com

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About the Study
A.T. Kearney's 2014 Assessment of Excellence in Procurement study is the eighth in the series since 1992. The objective of this latest study is threefold:
- Evaluate how procurement has progressed since 2011
- Determine how ready procurement is for the future
- Identify lessons learned from leading procurement organizations
The study includes input from procurement and supply chain executives at more than 185 companies in the manufacturing (33 percent), process industries (41 percent), and services (26 percent) sectors, with average annual revenues of approximately $15 billion. Participants are from all regions of the world: 43 percent from Europe, the Middle East and Africa, 41 percent from the Americas, and 16 percent from Asia Pacific.

About A.T. Kearney
A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world’s foremost organizations. A.T. Kearney is a partner-owned firm, committed helping clients achieve immediate impact and growing advantage on their most mission critical issues. For more information, visit www.atkearney.com.