Please forgive us this week for purely providing two exerpts from a fascinating survey done recently by Accenture. Because of the slightly longer post we thought it better just to let you read!!!

The Art of Procurement Mastery By Gregory Spray -- Supply Chain Management Review, 1/1/2009

Now more than ever, procurement leaders have enormous responsibilities on their shoulders. Not only are they expected to drive even larger cuts in costs of goods sold but they are under fierce pressure to make every business process as efficient as it can possibly be.

Last summer, even before the Institute for Supply Management's PMI index reached lows not seen for 26 years, Accenture advised that procurement chiefs needed to prepare for downturn in the right ways.¹ Speaking to the Procurement Leaders Network, an Accenture colleague noted that many companies were falling back on the same traditional cost-cutting practices, with just a handful viewing the downturn as an opportunity to radically rethink their activities and their strategies. Among the best practices:

Using the downturn to snap up top talent, applying business analytics to develop sharper insights, and collaborating closely with suppliers to drive product innovation. Now, with the benefit of recent research, we would add another best practice: Effective outsourcing.

Collectively, those practices comprise what Accenture calls "procurement mastery"—the collection of purchasing traits exhibited by the roughly 10 percent of companies that consistently outperform their peers or, in other words, that consistently attain high performance.

So what does it mean to achieve mastery in the various dimensions of the procurement function? How many companies have achieved procurement mastery and what effect has it had on their business performance? And has the trend toward greater reliance on outsourcing providers affected the strategies and operations of corporate procurement? Those are a few of the key questions that drove an Accenture research initiative that included survey results from more than 600 procurement executives from Europe, Asia and North America, as well as detailed analysis of more than 200 of those responses.

This article uses the survey's results to examine the performance gap between the procurement masters and their industry peers and to explore the factors that create and sustain that gap.

4. More Assertive Supplier Relationship Management

The disparities between procurement masters and low performers were readily apparent when our analysis compared supplier relationship management capabilities. (See Exhibit 3.)

In fact, the size of the gap alone suggests that supplier relationship management is a leading practice in itself—that the intelligent, assertive practice of supplier relationship management is a tell-tale for high performance through procurement. As previous Accenture research has shown, there is a tangible prize for supplier relationship management leaders: They achieve 5 percent savings from both sourcing and post-contract activities against total procurement operating spend, compared to 3 percent savings for the remaining survey respondents. Masters also realize a threefold increase in benefits. Looking closely at four of the most striking differences, masters excel by using a supply-base segmentation strategy that aligns approaches and types of relationships with specific supply markets and supplier characteristics—including relevant strengths and weaknesses, product complexities and geographies.

It is this proficiency that supports other capabilities, such as forging deeper relationships with key suppliers, establishing long-term partnering agreements, and even developing joint operations based on knowledge sharing, seamless processes and mutually beneficial product improvements. Procurement executives with whom we have spoken clearly point to the need for deepening relationships with suppliers. The traditional "us vs. them" mentality between a company and its suppliers stands today as a serious impediment to procurement transformation—and is, emphatically, not typical of the mindsets of the procurement masters.

Changing the mindset at the heart of supplier relationships is not easily done in many cases, however. It will take time. Kevin Smith, who runs the indirect procurement organization for mobile electronics and transportation systems company Delphi, notes that many organizations are now in a difficult situation as they approach suppliers with a collaborative mindset, asking them to work together to create business value. "Now that companies have wrung out all the price concessions they can from their suppliers, they say they want to collaborate. But, with some justification, suppliers don't trust their buyers."
Procurement masters can look to outsourcing to help get better performance from—and forge better relationships with—their suppliers. Often an outsourcing buyer has a more comparative, multi-client view of how a supplier's performance stacks up in terms of pricing, technology, delivery, and reliability. This knowledge can lead to more realistic expectations (and a more realistic action plan) on the part of a supplier.