New benchmarks by Sievo turn indirect sourcing into competitive advantage | by Lari Numminen

Lari NumminenIn today’s global economy, retail and consumer goods are among the most challenging industries for procurement performance management. In these competitive industries, margins are often razor-tight. Supply is dependent on fickle market prices and ever-changing tariffs. Faced with such adversity, how does procurement gain a competitive advantage?

While both industries are competitive, there are surprisingly large differences between consumer goods and retail procurement practices across the world. McKinsey’s recent Global Procurement Ex-cellence (GPE) survey analysed over 1100 organisations and found consumer goods businesses out-performed retail by an average of 11% across key business drivers. Digging deeper into the results, McKinsey point to indirect sourcing as one of the key areas of opportunity.

At Sievo, we’ve also seen consumer goods companies up their game in indirect sourcing by cleverly leveraging procurement spend data. One way in which leading procurement organisations gain an up-per hand is data-driven peer benchmarking. Much like top athletes training for the Olympics, peer benchmarks allow competitive procurement organisations to see how well other top performers are doing and what level needs to be reached for world-class performance.

How data-driven peer benchmarks work

Traditionally, procurement benchmarks have relied on data collected by hand through surveys of pro-curement practitioners. Because surveys are time-consuming to create, most benchmarks are infre-quently updated and often don’t contain enough fresh and actionable information to impact procure-ment performance.

Data-driven procurement benchmarking changed the game in 2018. Our benchmarks are based on over $1-trillion in realised procurement transactions that have been anonymised and categorised by machine-learning and big-data methodologies. The output is data-driven spend benchmarks that help you see the big picture, while allowing you to drill down to the details. Let’s have a look at some re-cent benchmark results.

Key new insights for consumer goods

The July 2019 Consumer Goods Procurement Benchmarks report highlighted a number of interesting insights for the consumer goods industry specifically related to indirect sourcing.

Benchmarks TurnFirstly, the indirect spend per employee for consumer goods companies decreased by 10.4% between 2016 and 2018. The key take is that if you are in the consumergoods space and you are have not de-creased indirect spend/employee by 10% over the past two years, you are below the competitive benchmarks.

When looking at another element in the consumer goods reports, we find that spend for marketing ser-vices has decreased from 4.9% average of company revenue to 4.1% of revenue between 2016 and 2018. If your marketing spend has not decreased at the benchmark rate over the past two years you can dig deeper in your procurement-spend reporting to identify potential areas for savings.

A third key insight from the most recent consumer goods benchmarks, relates to maintenance, repair and operations (MRO). Unsurprisingly, MRO is the category with the most individual suppliers for consumer-goods companies, with an average of 132 suppliers in 2018 across the benchmark peer set. Interestingly, MRO also saw the smallest decrease in indirect spend per employee from 2016 to 2018. In other words, a fragmented supplier base in MRO has made it most challenging for consumer-goods companies to achieve savings in that category.

The value of benchmarking procurement spend

While static benchmark reports can reveal many insights, the true value of peer benchmarking comes when you can link benchmarks to your own procurement-spend data through actionable analytics.

If you look back to the Olympic athlete example, there is a huge difference between training alone and using real-time data to compare performance to the leading competitors each week, month and quarter. For athletes as well as procurement, the freshness, frequency and depth of benchmarks make a real difference to performance.

Through partners like Bespoke, Sievo’s customers can get continuously updated benchmarks within their spend-analysis dashboards. Benchmark data is updated regularly and shown right where you need it. You also don’t need to worry about different categorisations and taxonomies across the hun-dreds of millions of dollars of benchmarked data. Our peer benchmarks are automatically anonymised and shown with your organisations category preferences in mind.

Here are a few of the KPIs you can track and improve over time with data-driven benchmarking with-in your Sievo Spend Analysis reports:
  • Average payment terms,
  • PO coverage by category,
  • Supplier count by category and key trends,
  • Invoice-to-due days by category,
  • Spend per headcount and revenue.

Furthermore, you can drill down to see the details of any of the benchmarks from your own spend reporting, to see which suppliers you should contact to shift the needle on these metrics.

For more information about Sievo's leading advanced spend analytics, benchmarking, savings tracking and savings forecasting solutions contact us a This email address is being protected from spambots. You need JavaScript enabled to view it.. Bespoke is Sievo's strategic partner in Sub-Saharan Africa.

Lari Numminen is the Chief Marketing Officer at Sievo -  - www.bespoke.co.za

CMS2019 Strip Banner 030719

Posted on September 19, 2019

Subscribe to our Bulletin

FREE-OF-CHARGE

Invalid Input
Invalid Input
Invalid Input
Invalid Input
Invalid Input
Invalid Input