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15.02.2005 14:32:00
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The Hackett Group: World-Class Procurement Spends 27 Percent More on T
The Hackett Group: World-Class Procurement Spends 27 Percent More on Technology While Dramatically Cutting Overall Costs
Business Editors/Photo Editors
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ATLANTA--(BUSINESS WIRE)--Feb. 15, 2005--
Increased Technology Investment is Key Strategy World-Class Use To Generate Improvements, Focus on Decision Support and Risk Management
World-class procurement executives spend 27 percent more than their peers on technology, despite the fact that they spend dramatically less on procurement operations overall, according to the latest Book of Numbers(C) research into procurement practices and performance metrics from The Hackett Group, a business process advisory firm and an Answerthink company (NASDAQ:ANSR).
According to Hackett's research, increased spending and improved leverage of existing technology investments are key strategies that enable world-class procurement executives to shift spending away from transactional activities and towards work that provides higher strategic value and improves effectiveness. For example, world-class procurement executives allocate 36 percent more of their overall procurement resources to decision support and risk management than typical companies. Technology also enables world-class procurement executives to improve efficiency, helping them reduce their cost per purchase order to $8.54, while typical companies spend 134 percent more. In addition, world-class procurement executives operate with 38 percent fewer staff than typical companies, show significantly improved cycle times, and reduced error rates.
The Hackett Group is a world leader in best practices research and process benchmarking, helping executives achieve significant and sustainable progress towards world-class performance through empirically based analysis and advisory services. Hackett's continuously updated knowledge repository is derived from 3,300 empirical studies over 13 years with more than 1,865 of the world's leading companies, including 93 percent of the Dow Jones Industrials.
According to Hackett's Book of Numbers research, which is produced as part of its Procurement Executive Advisory Program, world-class procurement executives spend 27 percent more than their peers on technology ($1.4 million versus $1.1 million/billion of spend). This is in spite of the fact that world-class executives spend 27 percent less than typical companies on total procurement operations than their peers (0.74 percent of expenditures versus 1.01 percent) and operate with 38 percent fewer staff.
Taken in context, world-class procurement executives leverage technology more effectively, and have created procurement organizations that are much less labor-intensive. World-class procurement executives dedicate 19 percent of their total operational spending to technology, compared to 11 percent at typical companies. The ratio of technology-to-labor cost further illuminates the dramatic disparity in technology spending levels, with world-class companies investing 94 percent more on technology per labor Dollar than the peer group.
NOTE TO EDITORS: A chart illustrating the findings described above is available on request, and will be distributed via BusinessWire. In Word, it appears here.
World-class procurement organizations also leverage and optimize their use of technology to an extent that typical companies do not. World-class procurement organizations are more than 2 times more likely than typical companies to make high use of sophisticated reporting tools for spending analysis. Staff at world-class procurement organizations also use online tools to communicate requests for information, proposals, or quotes (RFIs, RFPs, or RFQs) to suppliers 78 percent more often than their peers, and are twice as likely to offer access to online catalogues.
"Few back office functions have been more dramatically impacted by technology over the past decade than procurement," said Hackett Senior Business Advisor Christopher S. Sawchuk. "Technology has created tremendous opportunities to automate and streamline traditional processes, radically transform others, and create new ways of thinking about areas such as supply chain optimization. But there's still tremendous variation in the level of technology utilization in procurement, and how much value companies are generating.
"Our research clearly shows that world-class procurement executives have been much more successful than their peers at swapping out labor for technology," explained Sawchuk. "It's a key strategy that helps them provide greater strategic value while reducing their overall cost of procurement operations. The best procurement organizations utilize technology to help them deal with lower value-added activities, which frees up funds and staff time, some of which can then be invested elsewhere. Less time and money spent on transactional tasks means that world-class procurement executives can drive their organization to focus more intensively on leveraging their spending more effectively through supplier rationalization, spend visibility and analysis, aligning procurement with business strategy. All this can help turn procurement into a virtual profit center."
Broader Operational Improvements
Hackett's research found that world-class procurement organizations also see an array of benefits tied in part to their increased use of technology. Technology plays a key role in helping world-class procurement organizations shift their focus to more high-value activities. For example, world-class companies allocate 34 percent of their overall procurement activities to decision support and risk management activities such as sourcing and supply management, while typical companies allocate only 25 percent of their activities in this area. This represents a 36 percent increase which has a significant impact on procurement's ability to generate strategic business value.
World-class procurement organizations also operate at a cost per purchase order of $8.54, while typical companies spend 134 percent more, or $19.99 per purchase order. Cost per receipt is also significantly lower at world-class procurement organizations.
World-class procurement organizations are able to increase investments in analytical activities, with 47 percent fewer staff dedicated to operational support than at typical companies and a larger percentage of their staff dedicated to decision support functions. They also process more than 3 times the number of purchase orders and material receipts per procurement staff person. Cycle times for requisitions and purchase orders are 34 percent faster at world-class procurement organizations, and error rates are lower, particularly for wrong item correction after issuance (64 percent fewer) and pricing corrections after issuance (47 percent fewer).
Hackett's Book of Numbers Series
The Hackett Group's research into world-class performance is compiled in its Book of Numbers(C) Research Series, which provides senior executives empirically-derived performance metrics and insights based on Hackett's extensive database of best practices and process metrics in HR, IT, finance, procurement, and other areas. The Hackett Group 2004 Book of Numbers Research Series: Performance Metrics and Practices of World-Class Procurement Organizations is offered as part of Hackett's Procurement Executive Advisory Program, one of nearly a dozen Advisory Services -- premium-value, membership-based services providing confidential advisor inquiry, best practices research, and peer learning opportunities.
To achieve Hackett's world-class designation, an organization must score in the top 25 percent of Hackett's current database in both efficiency (cost and productivity) and effectiveness (quality and business value) output metrics in a given functional area. For comparison purposes, Hackett also calculates the median results for all non-world-class companies, which are identified as "typical" or "peers." In this way, Hackett defines "world-class" with empirical data, isolating the characteristics shared by today's world-class organizations.
More information on The Hackett Group's Book of Numbers series and its Executive Advisory Program offerings is available: by phone at (404) 682-2500; by e-mail at info@thehackettgroup.com; or on the Web at http://www.thehackettgroup.com.
About The Hackett Group
The Hackett Group (http://www.thehackettgroup.com), an Answerthink company, is a business process advisory firm providing empirically based advice and best practices research to executives seeking to drive world-class performance in areas such as finance, IT, human resources, and procurement. Hackett's functional and process-specific benchmarks and its confidential, on-demand, membership-based advisory services are backed by an ongoing database of best practices in processes, technology, and organization. Hackett's continuously updated knowledge repository is derived from 3,300 empirical studies over 13 years with more than 1,865 of the world's leading companies, including 93 percent of the Dow Jones Industrials, 80 percent of the Fortune 100, and 90 percent of the Dow Jones Global Titans Index. This knowledge repository allows Hackett business advisors to provide data, advice, and strategic insight with a level of integrity and authority available nowhere else.
About Answerthink
Answerthink, Inc. (http://www.answerthink.com) is a strategic business advisory and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive database of The Hackett Group, the world's leading repository of enterprise best practice metrics and business process knowledge, Answerthink's business and technology solutions help clients significantly improve performance and maximize returns on technology investments. Answerthink's capabilities include benchmarking, business transformation, business applications, business intelligence, and offshore application development and support. Founded in 1997, Answerthink has offices throughout the United States and in Europe and India.
Certain statements in this press release are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward looking statements. Factors that impact such forward looking statements include the ability of the Company to attract additional business, changes in expectations regarding the information technology industry, the ability of the Company to attract skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, changes in general economic conditions and interest rates as well as other risks detailed in the Company's reports filed with the Securities and Exchange Commission.
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Business Editors/Photo Editors
MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=4822089
ATLANTA--(BUSINESS WIRE)--Feb. 15, 2005--
Increased Technology Investment is Key Strategy World-Class Use To Generate Improvements, Focus on Decision Support and Risk Management
World-class procurement executives spend 27 percent more than their peers on technology, despite the fact that they spend dramatically less on procurement operations overall, according to the latest Book of Numbers(C) research into procurement practices and performance metrics from The Hackett Group, a business process advisory firm and an Answerthink company (NASDAQ:ANSR).
According to Hackett's research, increased spending and improved leverage of existing technology investments are key strategies that enable world-class procurement executives to shift spending away from transactional activities and towards work that provides higher strategic value and improves effectiveness. For example, world-class procurement executives allocate 36 percent more of their overall procurement resources to decision support and risk management than typical companies. Technology also enables world-class procurement executives to improve efficiency, helping them reduce their cost per purchase order to $8.54, while typical companies spend 134 percent more. In addition, world-class procurement executives operate with 38 percent fewer staff than typical companies, show significantly improved cycle times, and reduced error rates.
The Hackett Group is a world leader in best practices research and process benchmarking, helping executives achieve significant and sustainable progress towards world-class performance through empirically based analysis and advisory services. Hackett's continuously updated knowledge repository is derived from 3,300 empirical studies over 13 years with more than 1,865 of the world's leading companies, including 93 percent of the Dow Jones Industrials.
According to Hackett's Book of Numbers research, which is produced as part of its Procurement Executive Advisory Program, world-class procurement executives spend 27 percent more than their peers on technology ($1.4 million versus $1.1 million/billion of spend). This is in spite of the fact that world-class executives spend 27 percent less than typical companies on total procurement operations than their peers (0.74 percent of expenditures versus 1.01 percent) and operate with 38 percent fewer staff.
Taken in context, world-class procurement executives leverage technology more effectively, and have created procurement organizations that are much less labor-intensive. World-class procurement executives dedicate 19 percent of their total operational spending to technology, compared to 11 percent at typical companies. The ratio of technology-to-labor cost further illuminates the dramatic disparity in technology spending levels, with world-class companies investing 94 percent more on technology per labor Dollar than the peer group.
NOTE TO EDITORS: A chart illustrating the findings described above is available on request, and will be distributed via BusinessWire. In Word, it appears here.
World-class procurement organizations also leverage and optimize their use of technology to an extent that typical companies do not. World-class procurement organizations are more than 2 times more likely than typical companies to make high use of sophisticated reporting tools for spending analysis. Staff at world-class procurement organizations also use online tools to communicate requests for information, proposals, or quotes (RFIs, RFPs, or RFQs) to suppliers 78 percent more often than their peers, and are twice as likely to offer access to online catalogues.
"Few back office functions have been more dramatically impacted by technology over the past decade than procurement," said Hackett Senior Business Advisor Christopher S. Sawchuk. "Technology has created tremendous opportunities to automate and streamline traditional processes, radically transform others, and create new ways of thinking about areas such as supply chain optimization. But there's still tremendous variation in the level of technology utilization in procurement, and how much value companies are generating.
"Our research clearly shows that world-class procurement executives have been much more successful than their peers at swapping out labor for technology," explained Sawchuk. "It's a key strategy that helps them provide greater strategic value while reducing their overall cost of procurement operations. The best procurement organizations utilize technology to help them deal with lower value-added activities, which frees up funds and staff time, some of which can then be invested elsewhere. Less time and money spent on transactional tasks means that world-class procurement executives can drive their organization to focus more intensively on leveraging their spending more effectively through supplier rationalization, spend visibility and analysis, aligning procurement with business strategy. All this can help turn procurement into a virtual profit center."
Broader Operational Improvements
Hackett's research found that world-class procurement organizations also see an array of benefits tied in part to their increased use of technology. Technology plays a key role in helping world-class procurement organizations shift their focus to more high-value activities. For example, world-class companies allocate 34 percent of their overall procurement activities to decision support and risk management activities such as sourcing and supply management, while typical companies allocate only 25 percent of their activities in this area. This represents a 36 percent increase which has a significant impact on procurement's ability to generate strategic business value.
World-class procurement organizations also operate at a cost per purchase order of $8.54, while typical companies spend 134 percent more, or $19.99 per purchase order. Cost per receipt is also significantly lower at world-class procurement organizations.
World-class procurement organizations are able to increase investments in analytical activities, with 47 percent fewer staff dedicated to operational support than at typical companies and a larger percentage of their staff dedicated to decision support functions. They also process more than 3 times the number of purchase orders and material receipts per procurement staff person. Cycle times for requisitions and purchase orders are 34 percent faster at world-class procurement organizations, and error rates are lower, particularly for wrong item correction after issuance (64 percent fewer) and pricing corrections after issuance (47 percent fewer).
Hackett's Book of Numbers Series
The Hackett Group's research into world-class performance is compiled in its Book of Numbers(C) Research Series, which provides senior executives empirically-derived performance metrics and insights based on Hackett's extensive database of best practices and process metrics in HR, IT, finance, procurement, and other areas. The Hackett Group 2004 Book of Numbers Research Series: Performance Metrics and Practices of World-Class Procurement Organizations is offered as part of Hackett's Procurement Executive Advisory Program, one of nearly a dozen Advisory Services -- premium-value, membership-based services providing confidential advisor inquiry, best practices research, and peer learning opportunities.
To achieve Hackett's world-class designation, an organization must score in the top 25 percent of Hackett's current database in both efficiency (cost and productivity) and effectiveness (quality and business value) output metrics in a given functional area. For comparison purposes, Hackett also calculates the median results for all non-world-class companies, which are identified as "typical" or "peers." In this way, Hackett defines "world-class" with empirical data, isolating the characteristics shared by today's world-class organizations.
More information on The Hackett Group's Book of Numbers series and its Executive Advisory Program offerings is available: by phone at (404) 682-2500; by e-mail at info@thehackettgroup.com; or on the Web at http://www.thehackettgroup.com.
About The Hackett Group
The Hackett Group (http://www.thehackettgroup.com), an Answerthink company, is a business process advisory firm providing empirically based advice and best practices research to executives seeking to drive world-class performance in areas such as finance, IT, human resources, and procurement. Hackett's functional and process-specific benchmarks and its confidential, on-demand, membership-based advisory services are backed by an ongoing database of best practices in processes, technology, and organization. Hackett's continuously updated knowledge repository is derived from 3,300 empirical studies over 13 years with more than 1,865 of the world's leading companies, including 93 percent of the Dow Jones Industrials, 80 percent of the Fortune 100, and 90 percent of the Dow Jones Global Titans Index. This knowledge repository allows Hackett business advisors to provide data, advice, and strategic insight with a level of integrity and authority available nowhere else.
About Answerthink
Answerthink, Inc. (http://www.answerthink.com) is a strategic business advisory and technology consulting firm that enables companies to achieve world-class business performance. By leveraging the comprehensive database of The Hackett Group, the world's leading repository of enterprise best practice metrics and business process knowledge, Answerthink's business and technology solutions help clients significantly improve performance and maximize returns on technology investments. Answerthink's capabilities include benchmarking, business transformation, business applications, business intelligence, and offshore application development and support. Founded in 1997, Answerthink has offices throughout the United States and in Europe and India.
Certain statements in this press release are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward looking statements. Factors that impact such forward looking statements include the ability of the Company to attract additional business, changes in expectations regarding the information technology industry, the ability of the Company to attract skilled employees, possible changes in collections of accounts receivable, risks of competition, price and margin trends, changes in general economic conditions and interest rates as well as other risks detailed in the Company's reports filed with the Securities and Exchange Commission.
MULTIMEDIA AVAILABLE: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=4822089
--30--JAR/mi*
CONTACT: The Hackett Group, Atlanta Gary Baker, 610-234-5900 gbaker@thehackettgroup.com
KEYWORD: GEORGIA INDUSTRY KEYWORD: HARDWARE INSURANCE BANKING INTERNET E-COMMERCE PHOTO PHOTOWIRE SOURCE: The Hackett Group PHOTO: 39530
Copyright Business Wire 2005
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