Efficient procurement functions save millions

23 October 2008
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24 October 2008 | Andy Allen

Cutting-edge procurement departments typically spend 22 per cent less of their company's overall budget on procurement operations than their average-performing counterparts, according to new research.

Business advisory firm the Hackett Group said the operation of procurement accounts for 0.64 per cent of overheads at world-class companies versus 0.82 per cent of spend for typical firms.

At an average-sized Global 1,000 company, with annual revenue of $22 billion and procurement-influenced spending of $8.9 billion (£5.8 billion), this difference represents more than $16 million (£10 million) in annual savings on procurement operations.

The research came from the Hackett Group's annual Book Of Numbers on Procurement. The most efficient companies also operate procurement functions with 37 per cent fewer staff - 48.4 staff per billion dollars of spend for world-class companies, versus 76.4 people for typical firms.

This would translate into 249 fewer procurement staff at a typical Global 1,000 company. Top-performing firms also generate 129 per cent higher spend cost savings, Hackett said.



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