Procurement still under-leveraged in US

Procura study shows US companies lagging Europe in procurement maturity

A recent Procura study of procurement maturity in companies in the US and Europe, indicates that, in terms of procurement maturity, US companies still lag behind their European counterparts.

Whilst US companies have focused on centralising procurement, the focus has been far more on the introduction of procurement systems and on centralising tactical buying processes, than on strategic sourcing.

Whilst US companies have invested in procurement systems, such as Coupa, and as a result, have centralised tactical buying operations, procurement’s influence on total spend still remains low compared to European companies.

Correspondingly, European companies have a far higher focus on strategic sourcing than US companies, addressing more spend categories, and using a wider range of approaches. The study showed a higher utilisation of cost and value techniques than more basic price-focused techniques such as tendering.

The study also highlighted a surprising number of US companies, where even basic procurement techniques were not being leveraged.

Key findings:

  • European companies have a far higher focus on strategic sourcing than US companies
  • US companies lag behind European companies in the percentage of total spend influenced by procurement
  • US companies least likely to be at Professional or Excellence level for Strategic Sourcing and Category Management
  • US companies have a higher focus on demand management than European counterparts
  • Higher investment in procurement systems in US companies with a corresponding centralisation of tactical buying.
  • Lack of sophistication in strategic sourcing techniques in US companies

In practical terms, it seems US companies are addressing the low-value, repeat purchase spend categories through the use of systems and catalogues, whilst the high-value, strategic categories remain outside the influence of professional procurement and, therefore, under-leveraged.

Interestingly, there is a far higher focus on demand management in US companies than in their European counterparts. It seems that procurement professionals are more likely to work internally with stakeholders than externally with suppliers, in order to drive savings.

Opportunity for profit-improvement in US companies

Overall, the study indicates that procurement in many US companies is still under-leveraged.

The findings are backed-up by experience from projects, where the application of strategic sourcing is resulting in the realisation of significant savings for US companies.

In terms of procurement maturity of the learnings are two-fold;

Firstly, addressing non-pay spend, comprehensively and in-depth, can deliver significant savings that materially impact EBITDA performance, and

Developing capability, as well as just systems, is needed to improve the overall performance of procurement and to make sure this is sustainable.

Procurement maturity; where are you?

Points to consider:

  1. Procurement in many US companies is under-leveraged
  2. Procurement is a key lever for profit improvement
  3. Less mature procurement organisations are leaving profit with their suppliers
  4. A Procurement Opportunity Assessment can rapidly determine both procurement maturity and savings potential

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