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Strong procurement linked to success


Posted on 24/05/2013 by Wayne Brophy FCILT

A strong procurement department can have a significant impact on the success of a company, according to new research.

The 2013 Chief Procurement Officer Study was conducted by the IBM Institute of Business Value (IBV) found that companies with high-performing procurement organisations are driving better bottom line results.

These firms report profit margins of 7.12 per cent, compared to 5.83 per cent seen in companies with less successful procurement organisations.

In addition to this, those firms with the best performing procurement departments had profit margins 15 per cent higher than the average company, and a huge 22 per cent more than the lowest performing companies.

The ability to gather key data, the use of insights and analytics and collaboration with suppliers were all named as important differences between the best and worst performing procurement organisations.

“There are tens of millions of dollars at stake, and the IBM IBV CPO study reveals how and why high performing procurement leaders have significant impact on their organisation,” says Craig Hayman, general manager, IBM Industry Solutions.

“As CPOs take a broader view of their role and embrace technology, they have an unprecedented opportunity to become even more instrumental in transforming their organisations by modelling themselves against the world’s most innovative and effective procurement organisations.”

It is clear that having the right staff in key procurement jobs in order to push forward with meaningful change and take a more customer-centric approach is vital.

The study polled 1,128 procurement executives in 22 countries across North America, Europe and Asia Pacific. Of those surveyed, 15 per cent were found to be top performers – measured by the department’s impact across its company, as well as its ability to drive innovation.

According to the report, 80 per cent of high-performing companies report that collaboration across departments, including IT and marketing, is both a key strength and an investment priority. By comparison, only 45 per cent of low performers agree with this statement.

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