Power to the procurement people
To get the most out of the purchasing function, top-performing companies redefine its role and ensure that its goals align with corporate strategy.
McKinsey’s global survey of chief procurement officers (CPOs) suggests that the role of purchasing at many companies hasn’t evolved much beyond the function’s narrow, transactional roots as a buyer of materials, components, and services. But some purchasing and supply-management organizations are attracting the attention of CEOs by taking the function to the next level. By integrating their activities more closely with those of their internal customers, some purchasing units have gained sustainable cost reductions in nontraditional areas (marketing or health benefits, for example) where previous optimization efforts have fizzled. Others go further still, using their insights to challenge and enhance.
At the best purchasing departments, a high percentage of employees are professionals who take a strategic view of the operation, recent research finds. As for results, the best departments have operations costs that are 20 percent lower than typical companies, and they operate with little more than half the staff. And for every $1 million spent on purchasing operations, these top-notch outfits generate $6.3 million in savings; average companies realized savings totaling only $2.7 million.
Top purchasing departments are more involved in such strategic activities as enterprise-level planning, budgeting, new-product development, and the use of cross-functional teams for purchasing activities. Rather than focusing only on purchase price, top departments take a big-picture view and devote time enough to grasp the meaning of their policies for suppliers, customers, and shareholders.
In addition to hiring and retaining highly skilled employees, the best purchasing departments drive value by aligning their goals with those of the company as a whole — financial goals, especially.
read more >>
McKinsey’s global survey of chief procurement officers (CPOs) suggests that the role of purchasing at many companies hasn’t evolved much beyond the function’s narrow, transactional roots as a buyer of materials, components, and services. But some purchasing and supply-management organizations are attracting the attention of CEOs by taking the function to the next level. By integrating their activities more closely with those of their internal customers, some purchasing units have gained sustainable cost reductions in nontraditional areas (marketing or health benefits, for example) where previous optimization efforts have fizzled. Others go further still, using their insights to challenge and enhance.
At the best purchasing departments, a high percentage of employees are professionals who take a strategic view of the operation, recent research finds. As for results, the best departments have operations costs that are 20 percent lower than typical companies, and they operate with little more than half the staff. And for every $1 million spent on purchasing operations, these top-notch outfits generate $6.3 million in savings; average companies realized savings totaling only $2.7 million.
Top purchasing departments are more involved in such strategic activities as enterprise-level planning, budgeting, new-product development, and the use of cross-functional teams for purchasing activities. Rather than focusing only on purchase price, top departments take a big-picture view and devote time enough to grasp the meaning of their policies for suppliers, customers, and shareholders.
In addition to hiring and retaining highly skilled employees, the best purchasing departments drive value by aligning their goals with those of the company as a whole — financial goals, especially.
read more >>
