Above and beyond: Hackett procurement model offers 12 key dimensions
By Manufacturing Business Technology Staff -- Manufacturing Business Technology, 10/29/2008 11:03:00 AM
What capabilities do procurement organizations need to develop that will extend their value proposition from simply assuring supply to truly harnessing the power of supply markets and influencing business strategy and tactics?
A new Procurement Capabilities Model from Atlanta-based Hackett Group details the specific changes companies need to make as they mature. The model is detailed in Hackett’s latest Book of Numbers,2020 Vision: Delivering on the Evolving Value Proposition of Procurement.”
The Hackett Procurement Capability Model expands on Hackett best practices correlated with world-class performance, and organizes these practices by capability rather than tying them strictly to business processes. It also supports practical solutions by helping companies identify weaknesses, predict future staffing needs, prioritize investments in tools and technology, and establish better strategic alignment among all parts of the enterprise.
Hackett’s 2008 Book of Numbers research also reports that world-class organizations now spend 22 percent less than typical companies on procurement operations and operate with 37 percent fewer staff (48.4 per billion US$ of spend for world-class companies versus 76.4 for typical). They also generate 129 percent higher spend cost savings, including reduction and avoidance while also delivering great stakeholder satisfaction and support for initiatives in sustainability, innovation, and working capital improvement.
At a typical Global 1000 company—with annual revenue of $22 billion and annual sourceable procurement spending of $8.9 billion—this represents more than $16 million in annual savings on procurement operations, 249 fewer procurement staff, and more than $263 million in additional annual spend cost savings.
According to Hackett Procurement Practice Leader Chris Sawchuk, “The model shows how to broaden and clarify procurement’s vision and strategy, while articulating the operating model and resources that need to be in place. For example, a procurement organization focused on reducing purchased costs will have different operating and resourcing models than those of an organization focused on supporting rapid growth. Additionally, if the operating model and resources are not moving in lockstep with the strategy, short-term execution and long-term transformations are doomed to fail. The correct approach and sequence for improving these capabilities will be different for each organization.”
