Australian procurement teams lag behind global peers

8 March 2016

Australian procurement organisations lag behind their global counterparts when it comes to how much spend they influence and how frequently this is reviewed.

According to a report developed by AT Kearney with CIPS and the Institute for Supply Management, Australian organisations were currently deploying their “limited procurement talent” to pick the “lowest hanging fruit”, for example by sourcing IT equipment.

“It’s imperative to move up the complexity chain... increase spend coverage while maintaining high category yields,” said Mohit Khandelwal, AT Kearney senior manager.

However he added this was a challenge, given Australian organisations had lower category spends than most global counterparts.

The 2015 global ROSMA (Return on Supply Management Assets) study, found Australian procurement functions influence 62% of spend, while their global counterparts influence 73%.

Australian companies also source less frequently, with 57% of influenced spend addressed annually, compared to a global average of 71%. And procurement organisations in Australia deliver 4.5 times the return on supply management investment, compared to global counterparts who average 5.4.

Australian businesses are also investing roughly half in their procurement functions of that which global organisations invest (0.73%). But Australian companies are delivering similar yields to their global counterparts in sourced categories

“The results of ROSMA survey indicates that Australian procurement still lags North America and Europe in terms of its maturity and capability,” said the report.

“High category yields generated in combination with relatively low procurement costs, spend coverage and velocity, could lead to a view that sourcing specialists are cherry picking easy-to-source categories with potentially high yields.”

The report suggested Australian procurement organisations should address more complex and indirect categories and this would require additional investment in employees and technology.

“Tackling more complex categories may initially lead to diminishing returns on supply management assets invested, but organisations will enjoy an increase in absolute dollars saved,” it said.

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