2. Contents
Introduction 3
Executive Summary 4
Survey Demographics 6
Survey Insights 8
Bottom Line Impact 10
Procurement Decision Drivers 11
Trends and Innovations in Irish Procurement 12
The Dimensions of Procurement Mastery 14
Case Study 15
Strategy 16
Sourcing and Category Management 18
Requisition to Pay 19
Supplier Relationship Management 20
Workforce & Organization 21
Technology 22
Summary 23
Contacts 24
3. Introduction
Accenture has created the term—“procurement mastery”—and
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.
3
4. Executive Summary
Few corporate functions have for the lowest possible total cost of productivity are the hallmarks
evolved more dramatically than ownership. Increasingly however, the of procurement mastery. In this
procurement. As recently as the procurement function is becoming report, Accenture will benchmark
1970s, it was generally regarded as pivotal to fulfilling requirements Procurement practice in Ireland—to
a clerical, reactive position—a cost around Risk Management, define, understand and quantify
center. At many companies, the exact Sustainability and innovation. procurement mastery compared to
opposite is now true. Procurement the global database. In this way, we
has become a strategic, proactive In summary, processes and potential will help companies to understand
process that contributes as much or are what’s new about procurement— where they reside along the path to
more than other business functions new strategies, insights, partnerships mastery, and provide a framework for
to profitability, corporate growth and technologies applied to the improving performance regardless of
and competitive advantage. In the singular objective of acquiring low their current competence. Inputs from
National Procurement Survey 85% cost, high-quality products. The 77 senior procurement executives in
of procurement functions reported fact remains, however, that most Ireland, across many industries and
delivering 6% or more bottom line companies continue to undervalue government departments and agencies
savings to their company’s bottom line and under optimize their procurement are the basis for our insights.
in the past 12 months. But although functions. Accenture global
the strategic nature of procurement research indicates that the masters’ Irish Procurement masters excel
has changed completely, its core goals procurement organizations typically across the board.
have changed very little. Then, as now, cost half as much to run as those
procurement is all about obtaining who do not follow procurement They exceed the survey average in
high-quality goods and services best practice. Lower cost and higher strategy, sourcing and category
4
5. management, requisition to pay,
supplier relationship management,
In summary, processes and potential are
workforce & organization, and
technology. Ireland matches
what’s new about procurement—new
the Accenture global data base strategies, insights, partnerships and
distribution for procurement mastery;
with 14% achieving mastery across all technologies applied to the singular
dimensions.
objective of acquiring low cost, high-
Procurement mastery is a clear
predictor of high performance quality products and services.
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.
5
6. Survey Demographics
In Q3 and Q4 2010, Accenture Ireland Survey respondents and their
Supply Chain Practice requested organizations come from a wide mix
procurement-related input from of industries. As shown in Figure 2.
senior executives at leading companies Services, Public Sector, Healthcare
and public agencies across Ireland and Financial Services were most
through an online survey known as strongly represented (Figure 2).
the National Procurement Survey. The 40% of respondents to the National
aim of the research was to understand Procurement survey sourced 60%
the practices and perspectives or more of their total spend within
associated with procurement mastery Ireland (Figure 3). The UK and the rest
in Ireland and to make a comparison of Europe account for 69% of imports
between global norms documented with the US and Asia accounting for
in extensive research known as the 12% and 13% respectively of total
High Performance Procurement (HPP) imports by respondents (Figure 4).
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.
6
7. Figure 1. National Procurement Survey Size of Figure 2. Respondents to the first National
Enterprise by Headcount Procurement Survey came from diverse industries
and represented both public and private sectors
Figure 3. Local Spend of National Procurement Figure 4. Imports by region of respondents to the
Survey Respondents. 40% of respondents to the National Procurement Survey shows UK and Europe
first National Procurement Survey sourced more remaining as main trading partners
than 60% of spend locally
7
8. Survey Insights
The National Procurement Survey each dimension of procurement.
leveraged the Accenture High Masters were classified as those which
Performance (HPP) database to performance was 1 standard deviation
benchmark procurement performance or more above the mean, while low
in Ireland against global norms. performers were 1 standard deviation
The process began with Accenture’s or more below the mean. Those in the
definition of four procurement rage of + or – 1 standard deviation
processes (strategy, sourcing and from the mean value were classified
category management, requisition as mid-range performers (Figure6).
to pay, and supplier relationship Procurement masters were those
management) and two key enablers whose performance was more than 1
(workforce & organization and standard deviation above the mean
technology). These were then across all dimensions of procurement
grouped into the six characteristics mastery.
of procurement profiled later in the
report and illustrated in Figure 5.
All together, 21measurable queries
were logged for each of the survey’s
77 executive participants. Average
values for respondents scores (on a
scale from 1-7) were measured for
8
9. • Vision, mission, core values • Performance management
1. Procurement strategy
• Operating model • Category strategic planning
• Strategic sourcing • Category management framework
2. Sourcing and category management
• Category policy setting • Compliance monitoring
• Transaction processing • Master data management
3. Requisition to pay
• Assisted buying • Fulfillment
• Supplier performance management • Supplier development and
4. Supplier relationship management
• Contract management integration
• Having the right network of • Organization that facilitates
5. Workforce & Organization
competent people working together
• Technology that delivers the right • Systems cover all functions:
6. Technology
information strategy to operations
Figure 5. The six procurement characteristics assessed for Accenture’s Procurement Mastery research and benchmarked with the National
Procurement Survey
Figure 6. Research-based distinctions among participants.
9
10. Bottom Line Impact
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.).
Figure 7. Annualised savings delivered by National
Procurement Survey Respondents in the past year
10
11. Procurement Decision Drivers
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 procurement’s 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 Figure 8. Decision drivers for Procurement functions in Ireland: primary and secondary.
citizenship requirements to comply
and differentiate in the market place.
After sustainability, Risk Management and supplier bankruptcy. 43% of those
was reported as the next highest who have no Risk management plan
“secondary” driver of procurement indicated that they sourced most of
decisions. The National Procurement their purchases within Ireland. This
Survey found that 34% of companies means that they have no currency
in Ireland had revised their risk risk from their suppliers, but they are
management strategy to anticipate, clearly still vulnerable to the 4 other
monitor and mitigate risk in the types of procurement risk cited.
past year (Figure 9.). A further 25% Risk management is often viewed
implemented a risk management as the responsibility of the finance
strategy for the first time in the function, instead of a cross functional
past year, indicating the increasing capability. A cross-functional
recognition of Risk Management approach to risk management is
Figure 9. Risk planning activity in the past as an indispensible way to protect needed to fully quantify the far
12 months by National Procurement Survey business from the prevailing turbulent reaching impact of volatility in
respondent economic conditions. However, 41% procurement. A recent Accenture
of survey respondents are still dealing survey of Risk Management** found
in an adhoc manner with the impact that 64% of market price increases
from price volatility due to currency cannot be passed on to the end user:
exchange rate fluctuations, raw these must instead be absorbed by the
material fluctuations, supplier quality corporate buyer or supplier.
problems, supply chain disruptions
**High Performance in Risk Management- Research & insights in collaboration with Massachusetts Institute of Technology
11
12. Trends and Innovations in Irish Procurement
The National Procurement Survey through centralising procurement Sustainable procurement was
demonstrated that Irish procurement process, rationalising suppliers and highlighted by a number of
practice compares strongly with negotiating contracts across business respondents citing regulatory and
international best practice across units and geographies. A number of corporate citizenship objectives. This
all dimensions of procurement. public sector responses highlighted highlights the developing nature of
Irish Procurement functions are, as inter departmental collaboration to this capability from both a compliance
expected delivering strategic direction increase value for money. and differentiation in the market
to their organizations and bottom line place as customers are increasingly
savings. In order to remain competitive At the heart of executing strategy is citing Green credentials as a deciding
and to continue to identify and deliver defining an operating model which factor in their choice of providers of
value in challenging and volatile recognises the mandate and strategic goods and services.
markets there is a need to constantly importance of the procurement
innovate and identify new trends function and sets key objectives Technology is a key enabler for
in the market. There are a number and documents responsibilities procurement performance by
of areas where Irish companies are for delivering on key performance automating manual tasks, improving
identifying and expanding their indicators for the organisation. visibility of spend and standardising
procurement capability. Many respondents reported that process. In support of sourcing a
their organisations were realigning number of respondents highlighted
In terms of strategy Collaborative to meet their organisations strategic the use of eProcurement including
Procurement for effective sourcing objectives by centralising process, Procure to Pay implementation,
and category management was developing procurement capability eAuctions as well as Supplier Portals
highlighted by a number of in their workforce through training, and the use of eRFx as initiatives
respondents as a way of delivering technology and through process which they were investigating or
value to their organisations either standardisation. implementing over the past 12
12
13. months. But as well as investing in buy decisions are key contributors to
the latest trends in technology there competitive advantage and need to be
respondents were also looking to constantly evaluated, monitored and
their current ERP systems to improve reassessed with an appropriate risk
performance through enablement of management framework.
existing functionality not previously
deployed. This is especially relevant
in terms of real time reporting of
benefits and highlighting of potential
issues.
Supplier Relationship Management
trends indicated by respondents
include supplier segmentation.
Proactive management of contracts
and where possible aggregation
of spend and centralising contract
negotiation. The National Procurement
Survey identified low cost country
sourcing from Asia as well as areas
within Europe as a way to source
competitive inputs for their value
add goods and services. Make versus
13
14. The Dimensions of
Procurement Mastery
Procurement masters are different. procurement masters are technology Procurement masters excel across
They approach the function more leaders. They use processing power all six of the functional components
strategically and holistically. They to increase efficiency; make better to form an integrated value chain.
engage more fully with suppliers and or faster decisions. They also leverage Accenture’s has shown through
frequently work to partner rather than and focus internal skills; and connect research that companies excelling in
bargain. Perhaps most importantly, with suppliers and third parties. procurement operate more efficiently
and effectively than companies that
do not.
The National Procurement Survey
showed that procurement in
Ireland performs well across all six
dimensions of the Accenture High
Performance Procurement model.
This is encouraging as we are clearly
adopting and practicing best global
procurement practice. However, as
can be seen in Figure 10 there is still
opportunity to enhance performance
and as a result increase effectiveness
through procurement mastery.
Figure 10. Overall Mastery Scores from National Procurement Survey show Ireland’s
performance relative to Accenture Global database
14
15. Case Study*
How procurement masters cost less and contribute
more to their organizations
Consider the following illustration of deliver a ratio of about three to four
procurement mastery’s performance times. In effect, masters spend half as
improvement potential. In previous much as low performers, yet they save
Accenture research it was determined 30 percent more.
that procurement masters achieve
significantly higher savings than the Example: For a company with US$1
balance of the survey population. billion in controlled spend, this means
Based on controlled normalized a procurement master would incur
spend from one year to the next, costs of US$8 million and savings of
masters save almost 10 times as much US$82 million, while a procurement
as it costs them to operate their low performer would incur costs of
procurement organizations. According US$16 million and savings of only
to our experience, the very best US$63 million (Figure 11).
companies deliver a ratio of eight to
10 times the cost of running their
procurement organizations. Ineffective
organizations, on the other hand,
Figure 11*. On US$1 billion of controlled, normalized spend, procurement
masters achieve 30 percent higher savings with costs that are 50 percent lower.
*Source “High Performance through procurement: Accenture research and insights into procurement performance mastery,” 2007
15
16. Strategy
Compared to midrange performers and Lastly, procurement masters do a areas. Strategic planning is
low performers, procurement masters better and often more innovative typically executed every three to
think, plan, operate and interact job of measuring procurement five years and revised yearly.
more strategically. For example, they performance. Most use a balanced • Proactive planning of Value Add
look and think three to five years scorecard approach and apply a clear indicates the level to which
out when planning purchases for definition of value across the company. Procurement proactively seeks
critical business categories. By closely to add value to the organization
examining future business needs and The National Procurement Survey rather than being reactive to
market trends, masters are better compared the Strategic importance of requests external to procurement.
positioned to acquire the right items Procurement to enterprises in Ireland
at the right cost at the right time. by benchmarking the responses to 3 One clear trend identified in the
Procurement masters also have a questions regarding their mandate National Procurement Survey
clear mandate from top management. within the organization, strategic was Collaborative Procurement.
Masters’ strategies enjoy boardroom focus and how they proactively seek Respondents indicated that they
awareness and support. In return, they value add for their organizations to were pooling spend and collaborating
frequently implement mechanisms global norms. across public sector departments and
(for example, shared services or • Clear mandate means that across business units and geography
outsourcing business models) that procurement is supported by in the private sector. Supplier
promote accountability across the a formal operating model that segmentation and risk management
purchasing cycle and in relationships allows the organization to are also strategies highlighted in the
with related business areas such as implement meaningful and lasting survey; proactively targeting and
engineering, manufacturing and field change. engaging with suppliers to create
service. • Strategic focus refers to the savings and to minimize supplier and
ability to drive a formal process price volatility, particularly with key
in collaboration with key business suppliers and raw materials.
owners for all primary spend
Figure 12. National Procurement Survey Strategic performance: relative to global norms
16
17. From the HPP Research Accenture
demonstrated that many procurement
organizations achieve more strategic
focus through contracting or
outsourcing more transactional
activity. Figure 13 shows that
procurement masters are 3 times
more likely to contract or outsource
transactional activity compared to
low performers. Figure 9 shows in
detail which operational processes are
typically contracted or outsourced.
Figure 13*. Operational Processes typically outsourced or contracted out by Procurement
masters.
* Source: High Performance through Procurement: Accenture research and insights into procurement performance mastery
17
18. Sourcing and Category Management
All companies classified as The National procurement survey categories. Masters reengineer
procurement masters have showed that 36% of Irish enterprises processes, cutting the lead times for
implemented a centrally guided had a centrally led category switching suppliers and ensuring
category management structure that management structure which that logistics, quality, purchasing
cuts across organizational entities. compared favorably to the global and engineering all cooperate
Almost all masters have a “leading survey responses. For masters, global effectively. They work closely with
practice” strategic sourcing process sourcing is an ongoing, flexible and the new suppliers to make them fully
and structure in place— one that constantly shifting activity. But it is aware of requirements and how to
emphasizes: guided by a formal mechanism whose fulfill them and, when necessary,
• Common processes across the mission is to constantly seek new they invest in supplier development
company. opportunities to reduce total cost programs. Companies must therefore
• Widespread use of cross-functional of ownership. Investing in and using take a more integrated view, bringing
sourcing teams for managing e-sourcing tools is a key enabler to together their processes and practices,
projects, formulating strategies, reduce total cost of ownership for combining cultures and skills with
managing supplier selection and masters in sourcing and category well-defined roles and responsibilities.
implementing contracts. management. Ireland again compared Clearly, what separates the masters
• Activities that are formally tracked. favorably to the global database with from the rest is their ability to do so
• A tight focus on total cost of 33% citing master’s level. by executing a global sourcing plan.
ownership. By using a network of international
• An end-to-end, supply chain- Masters review their complete spend procurement offices in key low-cost
wide orientation, with top-down profile in a systematic way, making country markets, masters are able to
administration from a procurement sure they understand the cost implement and maintain local supplier
or category board. structure of each of their key relationships and achieve excellence in
execution.
Figure 14. Best Practice in Sourcing and Category Management
18
19. Requisition to Pay
Requisition to pay is shorthand best practice level. 56% of Irish
for an integrated procurement respondents also cited masters level
process. Defined and practiced by in the efficiency and transparency of
procurement masters, it implies their procurement approval processes.
an end-to-end perspective, with
activities bound to each other by
transparency, common goals and
common metrics. Requisition to pay
is all about integration, visibility
and standardization. Superior
practitioners in requisition to pay
were found to share numerous
characteristics. First and foremost, 83
percent of procurement masters and
only 8 percent of procurement low
performers excel at providing clear and
documented buying channels to the
end user. In the National Procurement
Survey Ireland showed almost half
of the respondents operated at
Figure 15. Best Practice in Requisition to pay
19
20. Supplier Relationship Management
Accenture research has shown that markets and supplier characteristics—
procurement masters are three times including relevant strengths and
more likely than low performers to weaknesses, product complexities,
have a formal program for managing and geographies. It is this proficiency
their supply base. In no other category that enables other capabilities, such
are the disparities between master as forging deeper relationships with
and low performer greater than in key suppliers, establishing long-term
supplier relationship management. partnering agreements, and even
In fact, the simple size of the gap developing joint operations based
suggests that supplier relationship on knowledge sharing, seamless
management is a leading practice in processes and mutually beneficial
itself—that the intelligent, aggressive product improvements. 43% of
practice of supplier relationship Irish respondents to the National
management is readily indicative Procurement Survey segment their
of high performance through supply base and 40% are collaborating
procurement. Masters excel by using to continuously innovate process and
a supply base segmentation strategy products for mutual gain.
that aligns approaches and types of
relationships with specific supply
Figure 16: Supplier Relationship Management of masters means segmenting
suppliers and partnering with key suppliers
20
21. Workforce & Organization
According to Accenture research, company goals and the contributions • Emphasizing ongoing training and
procurement masters excel at they make to those goals. One linking it to performance metrics.
building results-focused procurement hundred percent of procurement • Blanketing competency development
processes, as well as results-oriented masters have implemented a structure strategies across the procurement
procurement organizations. The of centrally led category management. network of users, technical people,
clearest evidence is the first item In procurement, buyer skills are suppliers and partners.
in Figure 17, which shows that particularly important. Recognizing
100 percent of masters follow a this fact, Accenture researchers
management-by-objective approach, looked closely at the principals of
compared to only 15 percent of low competency development. As Figure
performers. 53% of respondents to 17 shows, we found that 78 percent
the National Procurement Survey of masters but only 3 percent of low
manage their procurement workforce performers excel in this area by:
by objectives; assigning clear targets
and responsibilities for procurement • Objectively measuring existing
function performance. Clearly, competencies.
procurement masters are more • Making frequent adjustments to
committed than most to improving organizational skills so that they
communication and visibility, and always align with procurement
to helping employees understand strategy.
Figure 17. Masters manage exclusively by objective to give value to their organizations and
add value to the workforce through competency development
21
22. Technology
Procurement technologies have enhancing supplier relationships, common and automated Requisition
progressed considerably. New Web- this is a logical spot for procurement to Pay platform. Developing user-
based tools are adding significant masters to focus their efforts. friendly ad-hoc reporting capabilities
capability and productivity Almost as common is masters’ use is, in Accenture’s view, one of the
enhancements in gathering, of common technologies to support most fundamental ways to increase
interpreting and sharing procurement- their requisition to pay processes, buy-in, raise entity-wide transparency,
related information; purchasing followed by tools for harmonizing and capture the information needed
services; and connecting with other master data— creating a central to discover and drive improvement
parts of the business, to name just a corporate repository to ensure opportunities.
few. Even more than before, the name that information about materials,
of the game is about integration. products, customers, suppliers and
Consistent with other principles of assets is current, consistent and
mastery, huge disparities exist in the accurate. More than 1/3 of National
degree to which leaders leverage Procurement survey respondents have
tools. As shown in Figure 18, the use implemented technology to better
of technology to support sourcing integrate with their suppliers and
programs is most prevalent among harmonize procurement master data
masters. Given the rewards associated at the level of Master. However, only
with regularly rationalizing and 17% are using technology to drive a
Figure 18. Percentage of survey respondents (masters versus low performers)
that leverage various technology-based capabilities.
22
23. Summary
In the first National Procurement Survey we have shown that
levels of Procurement Mastery in Ireland compare well with
global norms. Mastery in Procurement is a key indicator of
high performing companies in terms of key efficiency metrics
such as savings on addressable spend. We found in the research,
that trends in Procurement in Ireland show a move away from
transactional activity to a more strategic focus which adds value.
Using the “High Performance through Procurement” framework
we have identified where on the Mastery continuum Ireland
resides as a country. It is key to maintain the momentum of
Procurement Mastery and Procurement Innovation as reported in
the first National Procurement Survey as a means to increase the
competitiveness of individual enterprises and of the country in
general.
23
