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1What Good Looks Like

What Good Looks LikeThe 2016 Return on Supply Management Assets (ROSMASM) report sheds light on value-driven procurement and the need for more consistency and transparency in procurement performance.

This paper is the fourth in a series highlighting the need for more consistency and transparency in procurement performance. Following are descriptions of the publications in the series as well as a short synopsis of the fifth report slated for release in 2017.

What Good Looks Like (2016) highlights this year’s ROSMA Performance Check benchmarks, reports what customers say about their procurement team’s performance, discusses the momentum of first-generation performance management technologies, and predicts the coming impact of digital on procurement economics. The report also introduces a new level of strategic play (disruptive procurement) and shares the stories of practitioners who are applying branding practices to procurement.

Building a Bolder Legacy (2015) presents the cumulative and 2015 ROSMA Performance Check benchmarks and advances the argument that transparency and active performance management practices are necessary to attract and retain Millennials to the profession. This report also demonstrates the potential earnings improvement for organizations that apply active value management practices and shares the personal perspectives of several practitioners on their procurement leadership initiatives.1

Building the Brand of Procurement and Supply (2014) begins the CIPS–ISM–A.T. Kearney collaborative effort to adopt ROSMA as a common financial performance measurement framework for the profession. This report presents cumulative insights from more than 400 organizations and discusses CFOs’ perceptions about the procurement brand.

Procurement: The Last Best Place for Results Improvement (2011) is the foundational report on the ROSMA framework, explaining its origin, mechanics, and first wave of benchmarks. In collaboration with numerous CPOs and CFOs, this report is the early oracle that paved the way to more advanced procurement performance management practices.

In 2017, we will release Understanding Procurement Value, which is currently being co-developed with CFOs who have procurement experience. The report will clarify how, when, and where procurement achieves financial results and outline the ways in which CFOs can help deliver these results.

1 Throughout this report, earnings refers to EBITDA—earnings before interest, taxes, depreciation, and amortization.


At a recent CPO summit with participants from about 50 private equity portfolio companies, the usual plenary session included sharing of benchmarks and breakout sessions to build momentum for improving procurement performance. That evening, we heard a senior managing partner who had been observing the summit ask his operations team, “Don’t these guys know what good looks like?” From that came the title of this year’s publication—What Good Looks Like. Private equity firms are financially driven, and because their holding periods have lengthened over the past decade, they have been driving transformational programs beyond financial engineering. They go to procurement first, have high expectations, and understand what good procurement looks like, and some have very specific action-oriented profiles for their CPO candi-dates. We think it is important for everyone to understand what good procurement looks like.

Achieving excellence in procurement, building a strong brand, and securing a bolder legacy for talent are vital platforms for the many CPOs working collaboratively with the Chartered Institute of Procurement & Supply (CIPS), the Institute for Supply Management (ISM), and A.T. Kearney on our mission to raise awareness and recognition for the profession and its ability to deliver value.

Interest in the value of procurement is not a passing fad. In fact, by all indicators, its role is growing exponentially. An analysis of more than 96 million Google search results across a mix of searches about value in and from procurement reveals a 90 percent compound annual growth rate in such searches since 2010, and the rate has grown even faster over the past year. As the topic of value has become mainstream in virtually all major CPO forums, the time has come for more transparency into procurement performance.

Our journey to advance the need for and adoption of value management began in 2009 when we introduced the Return on Supply Management Assets (ROSMASM) framework. This report is the fourth in a series that advance the narrative on managing for both the delivery and recognition of procurement value.

This report includes the following sections:

2016 Research Insights presents current and cumulative benchmarks from the Return on Supply Management Assets (ROSMA) report and insights from the companion research, Voice of the Stakeholders

So, This Is What Good Looks Like profiles the top procurement performers—their attributes, achievements, and leadership agendas

Technology: Prepare for Impact sheds light on how emerging technologies and strategic moves to reset capabilities will redefine procurement

“Houston, We Have a Problem” offers a cure for procurement’s branding problem, specifically the inability to attract and retain top talent

Disruptive Procurement outlines the beginning of a new and exciting chapter that takes procurement beyond its borders and energizes the entire industry

Appendix. Additional data to support the study findings

To provide context for the benchmarking analytics, a summary of the ROSMA framework appears in the appendix (see figure A on page 13). For those new to ROSMA and the topic of value-driven procurement, the foundational details, previous research reports, and illustra-tions of best practices can be found at A.T. Kearney’s ROSMA website (www.atkearney.com/procurement/rosma). Here you can also submit a ROSMA Performance Check Benchmark report for your organization.

https://www.atkearney.com/procurement/rosma

https://www.atkearney.com/procurement/rosma


2016 Research Insights Two complementary research platforms provide an objective view of the value created by procurement: ROSMA Performance Check Benchmarking collects the financial performance of procurement as reported by CPO organizations, and Voice of the Stakeholders captures views of non-financial non-procurement executives about the performance of their procurement organizations.2 This section discusses the findings and analysis of both platforms.

ROSMA Performance Check

ROSMA is the performance management standard developed and administered by A.T. Kearney with CIPS and ISM (see About the Research on page 3). This year’s findings, including cumulative insights from ongoing research since 2009, continue to reveal a profession with a top-tier group of standout performers, a middle tier that is delivering value but performing well below the top tier, and a large group of bottom-quartile performers that continue to add limited value.

With cumulative insights from more than 1,780 executives and an additional 367 executives participating in this year’s research, the findings are powerful:

• Top-quartile performers continue to deliver more than seven times their cost and invest-ment base in procurement. This elite group consistently delivers more than $1 million in financial benefits per procurement employee, and in 2016 the number grew to $1.7 million. This quartile is strong, typically leading across most or all procurement value drivers. This group has a low functional cost-to-serve and reports the highest levels of value creation from advanced sourcing methods. These leaders continue to strengthen and extend their productivity lead.

• Middle-tier performers deliver accretive results consistent with prior periods. They generate value three to five times their cost and investment base. There is no apparent shift in this segment in terms of its relative size, range in procurement as a driver of productivity, or overall results. Although stable, this group has yet to show an upward results trajectory that signals improving productivity.

• Bottom-quartile performers demonstrate some improvement over the prior periods, but the average team is marginally accretive and 50 percent are dilutive. Because a sizable portion of procurement teams lack the discipline or capability to report on their performance, the bottom quartile’s profile is likely to be indicative of a larger portion of procurement organizations.

• Earnings potential. As discussed in the 2015 report, improving procurement performance—outcomes and variability—can result in large percentage earnings gains. Indeed, lifting the bottom quartile to average can increase earnings 15 percent, and a mid-tier performer that reaches the top-quartile average can see up to 21 percent earnings improvement. There’s a reason why procurement synergies are the main source of value in a merger. As long as there is performance variability there will be opportunities for improvement, transformation, and consolidation.

2 Voice of the Stakeholder, similar to Voice of the CFO and Finance Community in the 2014 and 2015 reports, expands our effort to capture a 360-degree performance assessment of the procurement profession.


• Performance variance. Performance variance remains large across all seven value drivers regardless of industry, geography, or size. Most procurement organizations have weak or limited performance-reporting capabilities with two factors—variability and lack of transparency—creating ambiguity about the value of procurement and undermining the profession’s credibility.

• Metrics. Most procurement organizations have flawed metrics; they cannot measure well and the benefits cannot be found. Only 21 percent of stakeholders report that procurement has well-defined and respected performance metrics. (In last year’s research, 74 percent of CFOs said procurement lags most or all functions in performance tracking.) In addition, 68 percent of stakeholders say procurement’s reported results are sometimes, frequently, or widely questioned. And they believe that 78 percent of procurement organizations either realize less than 60 percent of the promised contracted savings or they don’t know the amount of savings realized. Contrast this with stakeholders’ views of leading procurement organizations—96 percent have clear and respected performance metrics, and 70 percent have reporting rigor and depth comparable to other functions, with their results accepted 69 percent of the time.

About the Research

ROSMA Performance Check Benchmarking

Cumulatively, more than 1,180 companies have started the ROSMA process, which A.T. Kearney launched in 2009 with dozens of co-development and concept review clients. Many others have adopted the framework, and we are monitoring their progress independently of the formal benchmarking mechanisms available from CIPS, ISM, and A.T. Kearney. When possible, we integrate their data into our platform.

Once initiated, not all surveys are completed. Our follow-up continues to reveal that many organizations do not know or track data about their performance. Our Voices of the Stakeholders executives research validates this to be true in a surprising number of cases: we estimate that up to 35 percent of procurement organizations do not have the ability to monitor and track the basic data needed to manage their productivity.

More than 950 companies have technically completed their benchmarking surveys. However, our thorough qualification process examines the submitted data to ensure that it makes sense. If responses are questionable, participants are contacted to verify the authenticity and accuracy of the data and given an opportunity to refine their answers, which are again validated. The data is accepted when it is within stretch ranges that we believe are rational and possible. Based on A.T. Kearney’s extensive client work, these ranges are consistent with other well-known research sources on metrics common to those within the ROSMA framework. Our cumulative database now has more than 672 completed, qualified, and accepted bench-marking surveys. For this report, insights are drawn from both the 150 completed, qualified, and accepted submissions received since the 2015 edition as well as the cumulative data providing substantial depth and coverage.

Voice of the Stakeholders

In the 2014 and 2015 editions, we presented the Voice of the CFO and Finance Community. This year, we expanded the quest to build a 360-degree performance assessment of the procurement profession with the Voice of the Stakeholders. Third-party independent research in early November 2016 collected input from 217 non-financial non-procurement executives from across Australia, Canada, France, Germany, the United Kingdom, and the United States. They were asked the same 20 questions used in the CFO community surveys exploring value delivery and three additional questions: Do you view procurement as service providers, business partners, or as mandatory requirements? How and when do you engage procurement (such as early and often or only for tasks)? What three words come to mind when describing procurement?


• Raising the bar. Good-to-great teams are advancing a progressive agenda to raise the bar for—and brand of—procurement. These teams will be able to sustain a ROSMA score above 15 thanks to operations technology with robotic process automation (that reduces functional costs below 30 basis points) and a mix of talented professionals with analytics and supply market expertise. These professionals will act as trusted advisors and build partnerships with CFOs and stakeholders (see sidebar: Lead, Advise, and Counsel).

Voice of the StakeholdersThe view among stakeholders is mixed when asked about the value procurement delivers as well as why and when procurement is engaged. As established in our previous research, there are five well-defined and differentiated performance segments: Leaders, Leaners, Strugglers, Inconsequentials, and the Pack.

Leaders and Leaners

The good news is that some teams—the top 15 percent or Leaders and Leaners—have built strong brands with their procurement stakeholders. This finding is very similar to the verdict of CFO and finance stakeholders (as reported in our 2014 and 2015 reports) and in line with CPOs who report top-quartile ROSMA performance.

Procurement Leaders and Leaners have stakeholders who know what good looks like (evaluating by types of capabilities, mix, scale, and results), and have great procurement teams that match that profile and are recognized and celebrated. All said, top procurement teams have a wealth of capable and respected talent, who engage strongly and effectively across the organization

Lead, Advise, and Counsel

David Noble, CEO, Chartered Institute for Procurement and Supply

CIPS is proud once again to support the ROSMA Performance Check as we continue to focus on “professionalization” of the procurement function with this powerful aid.

There are many changes coming in the next two decades. Technology will impact us more as automation replaces many traditional transactional functions. Skill sets will change in favor of deal making and value creating. Global supply chains will be more resilient as professionals are quick to manage disruption. And to top

it all, the traditional procurement function will expand into other areas of business as lines of responsibility and expertise continue to blur.

The value of procurement continues to be a much-debated topic, as this year’s report confirms. The interest in and engagement on value has grown exponentially over the past six years as those in our procurement community will attest. The impact of digital is keenly felt and will attract millennials to the profession, as will a strong brand and an attractive profession that has everything—from big budgets, to travel, to making a difference in the world

through ethical behavior and eradicating modern-day slavery.

As the world continues to recover from the deepest recession in decades, and cope with the social-political events arising from Brexit and groups that are shaping the rejection of globalization, our profession has the responsibility to step in and lead, advise, and counsel. We must trust in the value that good procurement governance can bring.

I urge you to benchmark your performance against the ROSMA value management framework. In a changing and volatile world, we all need to learn from the best in order to make this uncertain world more certain.


and deliver value that is measured, reported, and substantive. The seven attributes of these strong performers are highlighted in So, This Is What Good Looks Like on page 8.

Alignment in the bottom quartile of Strugglers and Inconsequentials is also consistent across all assessment tools: largely dilutive, unaccountable, and disrespected by CFO and stakeholder communities alike. Those in the dominant middle, called the Pack, lack the satisfaction levels of Leaders and Leaners but are notably stronger than those in the bottom quartile.

The three independent views on procurement—CPOs in the ROSMA Performance Check, stakeholders in the Voice of the Stakeholders research, and CFOs in the Voice of the CFO and Finance Community research (2014 and 2015 reports)—are virtually identical (see figure 1).

Strugglers and Inconsequentials

Understanding the weak performers is also important. Inconsequentials have very distinct profiles in both the prior CFO and current stakeholder research; respondents say there is no identifiable leadership accountable for procurement’s performance, stakeholder satisfaction, or resource productivity. In the case of Strugglers, there is recognition that leaders exist and are named and accountable, but otherwise, the Inconsequentials and Strugglers receive identical reviews from stakeholders who view those in the bottom quartile as follows:

Notes: ROSMA data is cumulative 2011 to 2016; Voice of Finance research conducted in 2014 and 2015; Voice of Stakeholders research conducted in 2016

Source: Return on Supply Management Assets (ROSMA) study, A.T. Kearney, 2016

Figure 1 Three critical perspectives on procurement’s performance are similar

CPO’s self-reported performance

Bottom quartileROSMA ~1

Middle 50%ROSMA ~4

Top quartileROSMA >7

CFO’s/finance’s view of procurement

Incon-sequentials

11.9%

Strugglers11.5%

“The Pack”55.8%

Leaders8.8%

Leaners11.9%

Stakeholder’s view of procurement

Inconsequentials16.6%

Strugglers9.2%

“The Pack”59.4

Leaders6.5%

Leaners8.3%


• Procurement is a service function that is engaged when the business needs it for contracting, purchase orders, or assistance with negotiations, but is rarely involved early in the process.

• Procurement does not have a seat at the table.

• Performance metrics are either not well-defined or limited in scope.

• Finance evaluates procurement performance only about 35 percent of the time, and about one-third of stakeholders are unsure if performance is tracked at all.

• Reported results are challenged about 90 percent of the time, while 10 percent of stakeholders are unaware of routine or ongoing performance reporting.

• Stakeholders believe that only about 10 percent of reported savings are realized.

• Most stakeholders do not know what the industry benchmarks are (for example, return on investment) for either good or weak procurement performance levels.

• All stakeholders either know what world-class procurement looks like and acknowledge they do not have it, or are unsure what world-class procurement looks like and believe it is worthwhile to know.

The bottom quartile self-reports very weak productivity through the 2016 ROSMA bench-marking platform, with 80 percent delivering less than $1.90 in return for every $1 incurred in the function. Most are barely trading dollars or are dilutive. The 2016 reporting population is marginally better than the cumulative view, which reports an average ROSMA of 0.98. All of the underlying value-driver metrics lag for this segment, validating the narrative from the Voice of the Stakeholders research as well as the exhaustive voices of the CFO research reported in 2014 and 2015.

The Pack

The mainstream of the procurement profession resides in the Pack and are among the 50 percent of organizations that constitute ROSMA middle-tier performers.3 They consistently deliver about four times their return on investment in procurement activities. In 2016, the ROSMA drifted up to 4.37, lifting the cumulative average to 4.18 and surpassing the prior peak of 4.14 achieved in 2014. What do these numbers mean? Over the course of eight years of ROSMA benchmarking, we have not seen any multi-period trend in which performance gains or improvement initiatives have been effective. Despite the increased interest in the value of procurement and the growing evidence that top-quartile performance is twice as high or more (and widening), the Pack has not demonstrated a competitive upward drift.

The Voice of the Stakeholders research for the Pack offers mixed insights across more than 20 assessment questions consistent with the CPOs’ reported ROSMA value-driver data. Fifty-eight percent of stakeholders perceive procurement as a business service function rather than a business partner. Depth and breadth of performance metrics and reporting practices are stronger than the bottom quartile segments but are notably lagging the Leaders. Yet with some modest shift toward active value management and performance reporting visibility, this group could dramatically improve.

In our 2015 report we said that variability is synonymous with procurement performance. This year’s benchmarks do not signal any changes (see Appendix: figure G). The overall

3 The Pack is determined by Voice of the Stakeholders research; the mid-tier is determined by ROSMA Performance Benchmarking research.


performance variability by value driver continues to be significant, even though there is less variability among the top-quartile performers.

Finally, as procurement continues to search for better performance, improved consistency, and more predictable results, we asked stakeholders to share up to three words that describe their perception of procurement (see figure 2). Even this qualitative assessment highlights the variability issue. While descriptions of Leaders and Leaners is overwhelmingly positive, the sentiment toward Inconsequentials and Strugglers is intensely negative with 66 percent of stakeholders using words that describe underperformance. The Pack registered a neutral to slightly positive sentiment.

So, This Is What Good Looks LikeThe ROSMA Performance Check Benchmarking and the Voice of the Stakeholders research illustrate what good looks like for stronger teams. The seven attributes of good procurement tell a compelling story:

1. Strong procurement teams are recognized by their stakeholders as integral business partners with a seat at the business leadership table; they consistently work together on most or all projects and are brought in early in the process.

Notes: Voice of Stakeholders research conducted in 2016; font size proportional to frequency of word count.

Source: Return on Supply Management Assets study, A.T. Kearney, 2016

Figure 2 Top 25 words used to describe procurement

The inconsequentials and strugglersare overwhelmingly negative

The leaders and leaners aredecidedly positive

painful serviceoperationalautomatedcumbersome knowledgeablebureaucratic qualitypartnership measurable protecting

slownot engaged

questionablesecurity

reliable

consistenttimelyengagementunderleveraged

reactive

old fashioned

confusing

necessarye�icient results-driven

innovative

e�ectivee�icient

opportunity

developingobstructive necessary growthmarket-facing

flexible

proactiveindependentnegotiation annoying quantitativestrategic

usefulessential

collaborativesavings

process orientedcomplexlean

Negative Neutral PositiveSentiment:


2. All stakeholders, from both business and finance, say that procurement leaders are accountable for results, stakeholder satisfaction, and team productivity.

3. Procurement has well-defined and respected performance metrics that all stakeholders understand and support. What counts gets measured, and what’s measured gets done.

4. Finance and procurement jointly (or finance independently) routinely and thoroughly evaluate procurement performance; results are shared with stakeholders and are widely accepted and only occasionally challenged.

5. Principal stakeholders (the C suite, finance, and the businesses) are aware of and understand procurement value drivers, including the concepts of coverage, velocity, yield, and compliance, and they know the desired performance ranges for each.

6. Principal stakeholders have a rich understanding of how procurement creates and delivers hard value to the business’s financial results and thus are considered effective in the spend-management process.

7. Top-quartile performers deliver a minimum ROSMA score of 7 or higher and again reported an average score of 12. Despite this strong performance, if this quartile sustained 75th percentile performance across main results drivers, productivity would increase another 50 percent.

Technology: Prepare for Impact Technology has accelerated the evolution of procurement over the past 20 years and will continue to do so over the next 20. (The sidebar discussion on page 9 discusses technology as the Next imperative.) Technology is expected to transform the profession and is already advancing how procurement engages and executes. We expect two emerging areas to fundamentally change the performance equation: performance management solutions, and advanced digital technologies (specifically robotic process automation (RPA), artificial intelligence, and machine learning).

Performance management solutions

In 2011 in our first ROSMA report, we introduced the notion of performance-driven procurement. That discussion continued in the 2014 study as value-driven procurement and identified several management practices of the top-quartile performers, including pipeline reporting and status, three-way validation of results, transparent productivity reporting, and scorecards.

Responding to the need to raise procurement performance visibility to levels seen in other functions, we worked with CPOs to design a performance management platform. In 2013 we released a prototype that has since been scaled to serve one of the world’s largest and most recognized global procurement organizations. This technology was transferred to a leading provider of business process management tools and continues to evolve. Procurement performance management (PPM) technology is no longer a new idea but a rapidly growing segment.

As of this writing, at least nine technology vendors are supporting CPOs with solutions that provide at least some functionality and features that enable some of the management practices necessary to drive stronger and more consistent value-driven performance. The top four solution providers already have more than 300 customer organizations using at least some PPM features.


By 2020 we expect technology providers to offer fully featured and proven procurement performance management solutions, which will be mainstream by 2023. It is not yet clear whether a dominant player will emerge in this space, but we believe the impact on procurement will be similar to what Salesforce brought to sales resource management in 1999—only much faster. In time, the profession will broadly adopt PPM technology. For those that establish and sustain strong PPM practices, their teams are likely to realize at least 2 to 4 point gains in their ROSMA scores.

Advanced digital technologies

Adoption of robotic process automation (RPA) has entered the rapid growth phase, particularly in transactional process applications thanks to its compelling value proposition: improved accuracy, 24/365 uptime, and strong economics. Already proven in accounts payable, repetitive customer service transactions, and select finance activities, the technology will quickly penetrate procure-to-pay. And when combined with natural language processing, select buying functions within procurement will also migrate.

There are already “people-less” business process outsourcing (BPO) providers taking advantage of technology. Even with today’s vendors earning value-based premium pricing models, the

Three Imperatives: Now, Next, and New

Thomas W. Derry, CEO, Institute for Supply Management

Three themes stand out in this year’s report on the cross-industry performance of procurement as a driver of corporate value. I would label the three themes as the Now imperative, the Next imperative, and the New imperative. Over its history, and again this year, the report demonstrates remarkable (and disappointing when you consider it) stability in the five segments that characterize overall performance. Leaners and Leaders continue to deliver on average four times the value to their organizations as the next best segment (the Pack). The Pack, in turn, delivers about four times the value of the Strugglers and Inconsequentials.

This leads me to my first theme, the Now imperative. Top-quartile procurement organizations embrace transparency and report on their results in metrics that are widely accepted across

the organization as measuring the tangible value delivered. If your team is still leaning on long-outmoded metrics such as PPV and cost avoidance, if your team is focusing on negotiated savings but not on compliance with the new contract, then it’s imperative that you act Now to put that scorecard in place or risk being left behind.

The Next imperative applies to those teams already in the top quartile. Consider this statement from the report: “if this quartile sustained 75th percentile performance across main results drivers, productivity would increase another 50 percent.” Even the best among us have ample opportunity to improve. You may excel at coverage but frequently lag in addressing spend (velocity). Or you may have an opportunity to improve compliance. The point is that even the top-quartile performers must address the Next items on their agenda.

Finally, there’s the New imperative: the disruptive impact that technology promises for our profession. If procurement is merely the steward of a process then it is about to become obsolete. As we have seen in recent years in many adjacent corporate disciplines, process is ripe for automation. Yes, this trend likely portends a reduction in headcount, where simply processing transactions probably subtracts rather than adds to total value. In the ROSMA methodology, a reduction in headcount is a reduction in the fixed-cost component of the ratio denominator. All else being equal, process automation by itself will increase the ROSMA scores of organizations that deploy technology to automate processes. This creates an opportunity for the best organizations to redeploy talent or, alternatively, to create new roles focused on strategic value creation.


savings delivered from replacing operational headcount from emerging market BPO operations with RPA are typically 50 to 75 percent—or even higher when applied in developed economies. Coupled with advances in machine learning, RPA will also quickly bring more insight to strategic activities in procurement, but perhaps not as quickly as the change to operational procurement. By 2025, RPA will reset the operating models, processes, and resources of most Global 1000 procurement organizations.

We anticipate that by 2025 both technology trends—PPM and RPA—will also profoundly shift the ROSMA benchmarking story. Already, value-driven practitioners are delivering exceptional results and increasing their lead over those that are not. PPM solutions will bring more focus and discipline to procurement staff and their activities, improving today’s elite players and dramatically lifting others. PPM solutions will create a performance culture that accelerates partnerships with finance and stakeholders, increases recognition of top performers, and strengthens the talent pool.

Disruptive procurement begins a new chapter—taking us beyond our borders and energizing the entire company.RPA-enabled services will redesign operational procurement activities—with leaner, more effective, and very high compliance becoming the norm. RPA data richness and visibility will be far reaching. Those on the leading edge will be advantaged analytically and able to engage even more spending. The variance of procurement value drivers will narrow, and ROSMA outcomes will rise well above today’s benchmarks. The RPA impact from compliance improvement and operational procurement efficiencies alone could drive ROSMA up by at least 25 percent for today’s top-quartile performers and 80 percent for the middle tier. And the patience that has protected the bottom quartile will disappear.

“Houston, We Have a Problem” Procurement has a branding problem. If the earlier 360° assessment is not sufficient evidence, the chorus of CPOs lamenting their inability to attract and retain talent says it all. What people think about our procurement profession is typically not in line with our aspirations. About 18 months ago, an executive at a CPO forum shared her campus recruiting experiences. She showed a few slides from the company’s recruiting presentations, which they used in 2000, 2004, 2008, and 2014. In the early years, the company’s success was abysmal, with essentially no one signing up for interviews. Today they have scores of applicants and full interview schedules. What happened? Why the new interest in procurement careers? The answer is clear: The procurement group learned to tell a much better story about the opportunities in procure-ment. What was boring in 2000 had become an exciting and inspiring story by 2014 as this executive began applying the principles of brand marketing to the procurement profession.

Today, more than 30 procurement professionals are working with brand marketing experts to develop a better message and stronger management practices. We are asking and answering the pertinent questions: Who are our primary audiences? What needs can our team satisfy?


What voice and style will communicate our team’s distinct value proposition to meet the needs of our audience? What actions will demonstrate our ability to deliver this value proposition? What is inspirational and aspirational enough to motivate people to want to be part of our brand? From these discussions, a road map and tool kit were developed to unify and mobilize the organization with a greater sense of purpose, and to project a consistent level of service and engagement to stakeholders.

One of the more compelling efforts is focused on attracting great talent. Imagine competing for talent at the world’s leading business schools, trying to sell MBAs on procurement roles. These brand-wise leaders have sharpened their storytelling skills and can articulate why people should consider procurement, how procurement offers an accelerated path to success and leadership, and the ways in which the profession is transformational, entrepreneurial, and offers unique opportunities. From here, the storytellers talk about their own accomplishments, where they have affected transformational outcomes or seized opportunities to drive entrepreneurship. Armed with a better message, procurement is becoming sexy and exciting and attracting stronger talent.

Good procurement teams do things well. Great procurement teams do things well and project a consistent voice, actions, and style that secures the attention and respect of their audiences.

Disruptive ProcurementLet’s assume practitioners have mastered value-driven procurement and implemented all of the above. Is this the end of the story? Far from it. It is the beginning of a new and exciting chapter that takes procurement beyond its borders and energizes the entire company. We call this new chapter disruptive procurement.

Rather than leaning back and enjoying the fruits of their work, CPOs who reach this stage are as curious and open minded as beginners. “In the beginner’s mind, there are many possibilities,” explains Shunryū Suzuki, a Zen monk and teacher. “In the expert’s mind, there are few.” These CPOs encourage their people to get out from behind their desks and visit suppliers to better understand how procurement is creating value for the company. The more time spent with suppliers (with open eyes and a curious mind) the more shortcomings can be identified in the value creation process. There are several stages to this, beginning with visiting many suppliers and taking what is good and works well at one supplier to another. And while this type of benchmarking can be widely applied, it has its dangers as entire industry clusters with similar performance problems perceive the problems as good practice simply because everybody does it the same way. To overcome this requires bringing in insights from other industries. For example, in discrete manufacturing we would look at how Toyota produces a part as our role model. Helping the supplier identify and realize opportunities in its value-creation process can lead to additional savings and other benefits.

Forward-thinking CPOs also expect their people to understand how the company is creating value for customers. Products and services are often specified in a way that ensures performance, quality, and other considerations but ignores the effort required to deliver them. Think of all the products that are close to impossible to assemble and that have over-specified or redundant components. Helping a supplier either relax or optimize specifications will not only reduce costs but also allow the supplier to pass on the savings without eating into profits.

The further the procurement team progresses, the more dramatic the results will be. The most knowledgeable teams will challenge industry beliefs to define breakthrough products and


services delivered with breakthrough processes at a radical cost advantage for both customers and suppliers.

The trajectory to disruptive procurement will differ by division, region, and product or service line. However, what is common to all successful trajectories are the procurement professionals who spend less time at their desks and more time with suppliers and internal stakeholders.

What Good Will Look Like TomorrowIn the future, good procurement is destined to be even bolder and more daring than today, spurred by a wealth of opportunities to manage the value and brand of procurement. Either by choice and leadership or through interventions, the performance variance within the profession will shrink, transparency will increase, and the negative stakeholder voices will join to become a single positive declaration of success. In the eye of disruption, the bar for leadership performance gets even higher.

Authors

Joe Raudabaugh, partner, Chicago [email protected]

John Blascovich, partner, London [email protected]

Christian Schuh, partner, Vienna [email protected]

Mark Clouse, partner, New York [email protected]

Enrico Rizzon, partner, Melbourne [email protected]

Rosanna Yang, director, Chicago [email protected]


Appendix

Source: ROSMA developed by A.T. Kearney with leading industry practitioners

Figure ASeven value drivers of procurement’s financial productivity

Financial resultsdelivered

Spendcoverage

Velocity Categoryyields

Compliance Additionalbenefits

Periodcosts

Structuralinvestment

Do we coverall spending?

Can wesource morefrequently?

Can we savemore?

Do we captureall potential?

Can weimpact the full value agenda,includinginnovationand workingcapital?

What runningcosts do wehave?

Do we havethe rightenablers?

Addresses thetotal third-partyspending thatprocurementinfluences,along with con-sideration forthe visibility andgovernance ofthat spending

Evaluatesthe speedand volumeaddressedunder procure-ment’s influence

Encapsulatesthe hard savingsbenefits gainedfrom the spend-ing addressed

Evaluateshow well thenegotiatedagreementsand policiesare followedand enforced

Includes otherfinancial bene-fits not capturedalready in yield

Captures allthe periodiccosts, such aspeople costsand externalsupport costs

Captures thecost of theprocurementinfrastructureand capabilitiesdevelopment

Invested supplymanagement assets

Return on Supply Management Assets (ROSMASM)

Figure BProfile of participants in the 2016 ROSMASM report

Number of study participants

55


Revenue

25

Less than $1 billion $1 billion to $10 billion Greater than $10 billion

54%

60%

42%

22%

36% 20%

26%

70

Top 25%

Middle 50%

Bottom 25%

ROSMAperformance quartile

28%

12%


1 “Consistently Better Performer” is developed from the 75% percentile value on each of the financial results drivers and only average on procurement cost as a % of total spend2 Additional benefits per full-time equivalents for those participants that submitted some additional benefits


Figure CProductivity gains for improved consistency

ROSMASM

scoreThe Possible:“ConsistentlyBetter Performer”1

18.51.2

Bottom 25%

Top-quartile performer on ROSMA

Di�erence between top- and bottom-quartile performers

Top 25%

Financial resultsdelivered

Spendcoverage

Velocity Categoryyields

Compliance Additionalbenefits

Periodcosts

Structuralinvestment

Invested supplymanagement assets

ROSMA

12.0

69.2% 74.7% 8.7% 91.6% $0.20million 0.5%

of spend isinfluenced

of influencedspend is

addressed in year

savings compliance perprocurement

FTE2

procurementcost as a % of

total spend

14.7% 31.9% 67.9% 19.0% 392% –47.4%

Figure DValue driver performance by benchmark groups

Notes: ROSMA is Return on Supply Management Assets. FTE is full-time equivalent.


Procurement value driver

ROSMASM driver averages

Bottom25%

Middle50%

Top25% Overall

60.3%

56.6%

5.2%

77.0%

Spend influence

Velocity

Yield

Compliance

Benefits (savings + additional benefits)per FTE

71.4%

58.6%

7.0%

88.7%

69.2%

74.7%

8.7%

91.6%

68.1%

62.1%

6.9%

86.5%

$0.17 $0.65 $1.67 $0.65


Note: FTE is full-time equivalent.


Figure EOrganizational performance

Americas Asia PacificEurope, Middle East,and Africa

FTE per $1 million of spend

Total spendper FTE

Spendinfluenced

per FTE

Spendsourcedper FTE


Total spendper FTE

Spendinfluenced

per FTE

Spendsourcedper FTE


Total spendper FTE

Spendinfluenced

per FTE

Spendsourcedper FTE

Top 25% Middle 50% Bottom 25%

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Figure FProcurement’s financial productivity

Note: ROSMA is Return on Supply Management Assets.

Source: Return on Supply Management Assets study, A.T. Kearney, cumulative data 2011-2016

0

2

4

6

8

10

12

14

2014 ROSMA report 2015 ROSMA report Cumulative data from 2011–2016 reports

0.8

Bottom 25%

0.8 1.2 1.0

Overall

5.1 5.3 5.4 5.4

Middle 50%

4.53.7

4.4 4.2

Top 25%ROSMASM averages

12.712.0 12.4

11.4

75% point

7.6 7.3 7.47.5

2016 ROSMA report


ROSMASM average and std dev by industry

Information-intensiveservicesAverage score:4.90

Asset-intensiveservicesAverage score:6.44

ConsumerproductsAverage score:5.11

Massmfg.Average score:5.36

Raw materialprocessingAverage score:4.43

ProjectindustriesAverage score:3.80

16

14

12

10

8

6

4

2

0

–2

Notes: ROSMA is Return on Supply Management Assets. Average scores by industry group include scores not present on this chart.


Figure G All industries have room to increase value

Fina

ncia

l ins

titut

ions

– b

anki

ng

Reta

il

Educ

atio

n

Hea

lthca

re s

ervi

ces

Fina

ncia

l ins

titut

ions

– in

sura

nce

Tele

com

mun

icat

ions

ser

vice

s

Tran

spor

tatio

n se

rvic

es

Util

ities

Food

, bev

erag

e, a

nd n

utri

tion

Phar

mac

eutic

als

Aut

omot

ive

Hig

h-te

ch

Che

mic

als,

oil,

and

gas

Min

ing

Build

ing

mat

eria

ls

Pack

agin

g

Indu

stri

al e

quip

men

t

Con

stru

ctio

n se

rvic

es

Aer

ospa

ce a

nd d

efen

se

Average ROSMA score +/– 1 std dev

3.2

9.4

7.5

4.3

7.6

4.8 4.8 4.8

3.53.9

5.0

3.9

5.05.5 5.3

6.4

3.34.0

2.4


Figure HCumulative profile of ROSMASM data


Region(number of respondents)

Revenue(number of respondents)

Greater than$10 billion

$1–$10 billion

Less than$1 billion

Industries(number of respondents)

ConglomerateOther

Manufacturing

Process industries

Services

672 672 672

Asia Pacific

Americas

Europe,Middle East,and Africa

45%

36%

19% 21%

2%

31%

46%

N/A

22%

31%

39%

7%1%

Figure IProfile of senior business stakeholders

Note: Numbers may not resolve due to rounding.


Country(number of respondents)

Revenue(number of respondents)

$0.5 billion to$1 billion

Greater than$2 billion

$1 billion to$2 billion

Position(number of respondents)

CXO

Executive vicepresident, seniorvice president

Director

217 217 217

Canada

Australia

United States 43%

12%

19%

22%

59%

18%

33%

49%

12%

United Kingdom 12%

France 11%

Germany 11%

For more information, permission to reprint or translate this work, and all other correspondence, please email: [email protected].

© 2016, A.T. Kearney, Inc. All rights reserved.

About A.T. Kearney

A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world's foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues. For more information, visit www.atkearney.com.

About the Chartered Institute of Procurement & Supply

The Chartered Institute of Procurement & Supply (CIPS) is the world’s largest procurement and supply professional organisation. It is the worldwide centre of excellence on procurement and supply management issues. For more information, please visit: www.cips.org.

About the Institute for Supply Management

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 48,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the newly launched ISM Mastery Model.™ For more information, please visit: www.instituteforsupplymanagement.org.

http://www.atkearney.com

http://www.cips.org

http://www.instituteforsupplymanagement.org

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