How Achilles can help procurement teams deliver financial benefit

20 Jan 2016
Article by Achilles

How much financial benefit does your procurement team deliver to the wider organisation?

According to new research, buying teams that are at the top of their game can add as much as seven-and-a-half times more value to their businesses than those that are under-performing or working in an outdated fashion.

Joe Raudabaugh, a partner at AT Kearney, one of the firms behind the research, explained that procurement teams are currently undergoing a transitional period in which chief executives are looking at how exactly they can add financial value to their organisation – something they have also done with marketing, research and supply chain departments in recent years.

“The mission for procurement organisations is underway – whether procurement is ready or not,” he stated.

But what exactly does this mean? How can procurement teams make sure they’re performing at the best of their ability to add the greatest value possible to their organisations?

What can the best procurement teams do?

Along with the Chartered Institute of Purchasing and Supply and the Institute for Supply Management, AT Kearney carried out a survey involving 226 senior finance managers at companies across the UK, the US, Germany, France and Australia for a study entitled ‘Building a Bolder Legacy: The Procurement Mission is Underway’.

They found that the world’s top-performing procurement departments are able to deliver financial benefits worth more than 7.5 times the spend that has been invested in them.

In contrast, it was found that the worst-performing procurement teams only added financial benefits worth less than 1.5 times the sum invested in them, indicating that some buying departments need to take action.

The survey also led to the discovery that almost three-quarters (71 per cent) of finance managers believed procurement was typically not as valued as other departments, as it tended to lag behind in terms of performance tracking, indicating that procurement staff themselves do not always know how their teams are adding value to a business.

Overall, it was found that just 20 per cent of procurement teams had clearly defined performance metrics and strong supply chain management strategies in place, meaning they could unintentionally be placing their businesses at greater risk of suffering from lasting reputational, financial and even legal damage.

How can Achilles help improve your procurement team’s performance?

To prevent this from happening at your organisation, you need to take action to make sure your procurement department is the best it can be and is in a good position to add financial benefit to the organisation it’s a part of.

By becoming a buyer member on one of Achilles’ communities, procurement staff are able to make sure all of the suppliers they work with have been validated via our pre-qualification questionnaire, meaning not only will this help with cost savings but also they can decide for themselves which contractors are most likely to bring additional risk to a supply chain.

Since joining the Achilles BuildingConfidence community, construction firm Skanska has seen a 74 per cent reduction in supplier non-compliance in its supply chains, enabling its procurement department to be in a better position to deliver financial benefit to the wider organisation.

To find out more about how Achilles can help your procurement team to add financial benefits to a business, contact our team today.


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