November 14, 2011 at 8:13 AM

“Ultimately, I don’t think sourcing and procurement teams will get away from using savings as a metric,” says Andrew Bartolini, Managing Partner and Chief Research Officer at Ardent Partners. “But I do think there is an opportunity for management to take a more balanced view of the value procurement delivers.” 

Bartolini was responding to a question on key performance metrics submitted by a procurement professional attending a new online Expert Access event, Strategic Imperatives of Procurement: People, Process and Technology, hosted by My Purchasing Center. The event, presented in a live question-and-answer format, is the first in a new series sponsored by Zycus.

The next event in the Expert Access series, Supplier Management: The Need of the Hour, is scheduled for December 7 at 1 pm ET. Dr. Robert Handfield, Bank of America University Distinguished Professor, North Carolina State University, and owner, Supply Chain Redesign, will respond to procurement attendee questions on risk and supply management.  

In the first event, Bartolini, who also publishes the popular blog CPO Rising, explained that procurement operations may never get away from having to use cost as a performance metric. In his experience, he said negotiated savings, implemented savings, cost avoidance and spend under management are the most popular metrics used for measuring performance of procurement organizations.

But, he said, there are several problems with using savings as a metric. One is that while procurement may have identified a supplier as low cost, the supplier may not be highest value. Another is that savings may not be within procurement’s control: Requirements may be firm and procurement may be able to help rationalize and find additional benefits, but ultimately the team is responsive to what’s happening in the marketplace. And then there’s the challenge of defining savings.

“I’ve benchmarked thousands of procurement organizations and looked at how they perform in different areas,” Bartolini said. “The metric that stands out as being critically important, resulting in high performance in other areas, is spend under management.

“Today, the average procurement organization manages 60% of the company’s spend and this figure has grown over the past 4-5 years,” he said. “The best in class manage close to 90%. These organizations have greater opportunity to drive value and they save more money. They have high compliance rates, enabled more of their suppliers and have less maverick spend.

“Leaders of procurement are wise to expand the performance discussion and highlight all the other areas where value has been delivered beyond savings,” he added. 

Bartolini also responded to an attendee question on obtaining information on best practices. “The best place to start if you don’t know too much about the category but have a general sense of the key suppliers is to put together a fairly straightforward high-level RFI (Request For Information),” he said, explaining that this strategy is fairly low cost. “Ask suppliers if they can recommend best practices for how they deliver their services.” He also suggested procurement query current suppliers during the quarterly review process. 

On a question on training procurement to ensure performance, Bartolini responded, “It’s challenging in today’s environment to find training budgets. It’s going to remain under pressure and probably won’t change even when we get back to more flush times.” 

He suggested procurement “Look to your functional neighbors and borrow a cup of sugar. Get finance to develop a short training on financial analysis, or someone from sales to talk about the keys to a successful presentation. Get folks from marketing and business development to provide industry overviews. Procurement teams are doing this today.” 

To listen to the full recording of the first Expert Access event, Strategic Imperatives of Procurement: People, Process and Technology, please click here. 

To register for the next event in the Expert Access series, Supplier Management: The Need of the Hour, with Dr. Robert Handfield, please click here. This event is scheduled for December 7 at 1 pm ET. 

Susan Avery

Susan has 25 years experience covering the purchasing function for Purchasing magazine and Purchasing.com. In that role, she led editorial coverage of supply management at manufacturing and services companies and managed coverage of indirect sourcing, developing expertise in industrial MRO, corporate travel, services and IT markets, as well as e-procurement, procurement cards and software. She created content for Purchasing.com, a Media Business magazine Top 10 Great Website, and blogged on compensation and professional development for PurchasingBizConnect, the first social networking website for purchasing professionals.

Susan received the National Business Travel Association Business Travel Journalism Award in 2008 and has a B.A. in Business and Economics from Saint Anselm College.

As chief editor for My Purchasing Center, Susan is responsible for creating content--writing news and feature stories and blogging--on issues important to purchasing professionals as well as managing and editing content contributed to the site.