F or many organizations, finding a way to save money is a key business challenge. After all, most organizations want to improve and drive economic performance. Despite the economic fluctuations of recent years (and the many lessons learned from all the ‘ups and downs’), many companies still have not realized all of their possible cost savings. For some reason, many business leaders look everywhere for ways to cut costs and boost results, but do not realize one thing…
For Enterprises, Procurement Is a Hero Hiding in Plain Sight
Remember “The Wizard of Oz?” A storm transports Dorothy Gale from her home in Kansas to the magical land of Oz. Glinda, the good witch, suggests if Dorothy wants to go home, she should travel to the Emerald City and seek help from the Wizard of Oz. Just getting to the Emerald City was an adventure, but then the Wizard sent Dorothy and her friends on an even more dangerous journey before he would help her. She returned to the Emerald City, only to discover that the Wizard was a fraud. In the end, he had a plan to get her home, but that still did not work.
Finally, Glinda appears and explains that Dorothy has always had the power to achieve her goal. She could have returned home any time she wanted to using the ruby slippers she wore on her feet the entire time! It is time to realize that you are already wearing the “ruby slippers” and your “hero” is right under your nose. That hero is your purchasing department.
Here’s Why Procurement Is Poised to Meet This Challenge
Historically, realizing cost savings has been the domain of the purchasing department. Over the years, most sourcing and procurement executives have considerably enhanced supplier performance. In today’s business environment, organizations must move faster and deal with more risk. According to Ardent Partners, “dependence upon supply chains continues to rise and sourcing has never been more critical to overall success.” Uniquely positioned to help the organization, Services Procurement and Sourcing teams can create a cutting-edge supply chain.
As you can see, many of the largest sourcing opportunities exist beyond current, managed spend. The data helps make a compelling case that the time has never been more right for procurement to “step up” and help make a bottom line impact—not just in purchasing—but across the organization.
As Christina DeLuca, Chief Procurement Officer, Refining and Marketing, British Petroleum (BP) said in an Ardent Partners and CPO Rising’s report, “There has been a change in context, speed, and risk. It’s time for procurement to be the hero.”
5 Statistics That Explain Why Procurement Matters Right Now
If you are still not convinced, consider the following statistics:
- Ardent Partners’ research has found that for every new dollar placed under management of procurement, enterprises realize a benefit of between 6 and 12 percent.
- Top performers, according to Gartner, report more than 95 percent of spend is accurately classified at line item level.
- Enterprises that leverage spend analysis into their sourcing projects save, on average, between 24 and 41 percent more per project.
- According to a study by Aberdeen Group, “companies taking a best practices approach to contract management have seen capabilities around risk management rise by 41 percent, while increasing compliance by 90 percent.”
- Operational excellence helps drive business performance. The International Association for Contract and Commercial Management (IACCM) estimates that weaknesses in contract management can affect bottom line performance by an average of 9.15 percent, according to survey results from The Value of Contract Management Return on Investment.
The evidence seems clear. Procurement and sourcing teams have the tools, processes, and experience to influence the organization’s bottom line. In other words, they may just be the hero you have been searching for all along. What are you doing to help your procurement team “save the day?” Join the conversation by tweeting us @BeelineVMS.