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1High Performance through Procurement:
2010 National Procurement Survey of Ireland: Accenture Procurement Mastery Benchmarking
Executive Summary 4
Survey Demographics 6
Survey Insights 8Bottom Line Impact 10
Procurement Decision Drivers 11
Trends and Innovations in Irish Procurement 12
The Dimensions of Procurement Mastery 14Case Study 15
Sourcing and Category Management 18
Requisition to Pay 19
Supplier Relationship Management 20
Workforce & Organization 21
3Accenture has created the termprocurement masteryand over the past 4 years has gathered data from around the world to quantify the relationship to high performance (the traits exhibited by those companies that consistently outperform their peers). The National Procurement Survey research looks at how procurement mastery in the Irish market compares to norms seen in the Accenture global database. The basic dimensions of procurement mastery (strategy, sourcing and category management, requisition to pay, and supplier relationship management) and two key enablers (workforce & organization and technology) have been shown to be predictors of high performance in procurement and key drivers of competitive advantage.
4Few corporate functions have evolved more dramatically than procurement. As recently as the 1970s, it was generally regarded as a clerical, reactive positiona cost center. At many companies, the exact opposite is now true. Procurement has become a strategic, proactive process that contributes as much or more than other business functions to profitability, corporate growth and competitive advantage. In the National Procurement Survey 85% of procurement functions reported delivering 6% or more bottom line savings to their companys bottom line in the past 12 months. But although the strategic nature of procurement has changed completely, its core goals have changed very little. Then, as now, procurement is all about obtaining high-quality goods and services
for the lowest possible total cost of ownership. Increasingly however, the procurement function is becoming pivotal to fulfilling requirements around Risk Management, Sustainability and innovation.
In summary, processes and potential are whats new about procurementnew strategies, insights, partnerships and technologies applied to the singular objective of acquiring low cost, high-quality products. The fact remains, however, that most companies continue to undervalue and under optimize their procurement functions. Accenture global research indicates that the masters procurement organizations typically cost half as much to run as those who do not follow procurement best practice. Lower cost and higher
productivity are the hallmarks of procurement mastery. In this report, Accenture will benchmark Procurement practice in Irelandto define, understand and quantify procurement mastery compared to the global database. In this way, we will help companies to understand where they reside along the path to mastery, and provide a framework for improving performance regardless of their current competence. Inputs from 77 senior procurement executives in Ireland, across many industries and government departments and agencies are the basis for our insights.
Irish Procurement masters excel across the board.
They exceed the survey average in strategy, sourcing and category
5management, requisition to pay, supplier relationship management, workforce & organization, and technology. Ireland matches the Accenture global data base distribution for procurement mastery; with 14% achieving mastery across all dimensions.
Procurement mastery is a clear predictor of high performance through procurement.
Mastery in Procurement was shown to be a predictor of procurement effectiveness and organization performance. This is confirmed by the findings of the Irish National Procurement Survey. National Procurement Mastery is above average mid range performance in all dimensions of procurement and 85% of respondents were shown to deliver 6% or more bottom line savings to their organization in the past year.
In summary, processes and potential are whats new about procurementnew strategies, insights, partnerships and technologies applied to the singular objective of acquiring low cost, high-quality products and services.
6In Q3 and Q4 2010, Accenture Ireland Supply Chain Practice requested procurement-related input from senior executives at leading companies and public agencies across Ireland through an online survey known as the National Procurement Survey. The aim of the research was to understand the practices and perspectives associated with procurement mastery in Ireland and to make a comparison between global norms documented in extensive research known as the High Performance Procurement (HPP) asset conducted over 4 years with over 600 companies worldwide. 77 survey responses were collected and the insight provided by many of the top state and private organizations within the country has been analysed.
Survey respondents and their organizations come from a wide mix of industries. As shown in Figure 2. Services, Public Sector, Healthcare and Financial Services were most strongly represented (Figure 2). 40% of respondents to the National Procurement survey sourced 60% or more of their total spend within Ireland (Figure 3). The UK and the rest of Europe account for 69% of imports with the US and Asia accounting for 12% and 13% respectively of total imports by respondents (Figure 4).
7Figure 1. National Procurement Survey Size of Enterprise by Headcount
Figure 2. Respondents to the first National Procurement Survey came from diverse industries and represented both public and private sectors
Figure 3. Local Spend of National Procurement Survey Respondents. 40% of respondents to the first National Procurement Survey sourced more than 60% of spend locally
Figure 4. Imports by region of respondents to the National Procurement Survey shows UK and Europe remaining as main trading partners
8The National Procurement Survey leveraged the Accenture High Performance (HPP) database to benchmark procurement performance in Ireland against global norms. The process began with Accentures definition of four procurement processes (strategy, sourcing and category management, requisition to pay, and supplier relationship management) and two key enablers (workforce & organization and technology). These were then grouped into the six characteristics of procurement profiled later in the report and illustrated in Figure 5. All together, 21measurable queries were logged for each of the surveys 77 executive participants. Average values for respondents scores (on a scale from 1-7) were measured for
each dimension of procurement. Masters were classified as those which performance was 1 standard deviation or more above the mean, while low performers were 1 standard deviation or more below the mean. Those in the rage of + or 1 standard deviation from the mean value were classified as mid-range performers (Figure6). Procurement masters were those whose performance was more than 1 standard deviation above the mean across all dimensions of procurement mastery.
91. Procurement strategy Vision, mission, core values
Category strategic planning
2. Sourcing and category management Strategic sourcing
Category policy setting
Category management framework
3. Requisition to pay Transaction processing
Master data management
4. Supplier relationship management Supplier performance management
Contract management Supplier development and
5. Workforce & Organization Having the right network of
competent people Organization that facilitates
6. Technology Technology that delivers the right
information Systems cover all functions:
strategy to operations
Figure 5. The six procurement characteristics assessed for Accentures Procurement Mastery research and benchmarked with the National Procurement Survey
Figure 6. Research-based distinctions among participants.
Most striking about the results of the National Procurement Survey is the level of savings delivered by Procurement functions to their organizations over the past 12 months in Ireland. 85% of procurement organizations delivered 6% or more in savings on addressable spend to their organizations in the past 12 months (Figure 7.).
Bottom Line Impact
Figure 7. Annualised savings delivered by National Procurement Survey Respondents in the past year
The Survey explored the decision drivers of the procurement function; respondents were asked what are the primary and secondary drivers for their procurement decisions? Traditionally procurements function was seen to provide the lowest total cost of ownership with highest quality. It is not surprising therefore to see that Cost is the single largest driver of procurement decisions, closely followed by Service. However, Sustainability and Green Procurement is now top of mind for CPOs and is the leading secondary driver of procurement decisions; driven by regulatory, competitive and corporate citizenship requirements to comply and differentiate in the market place.
Procurement Decision Drivers
Figure 8. Decision drivers for Procurement functions in Ireland: prim