Critiscism of procurement performance : Can benchmarking provide answers?

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Department X (names have been changed to protect the innocent :))was very vocal in criticizing the prices a local Shared Services department achieved on a centrally negotiated supplier agreement.

This happened recently at a South African financial sector company where Purchasing Index had been providing benchmarking services to the Shared Services department for some years.
In response to this criticism the procurement manager shared with Department X managers reports benchmarking the spend category in question. The report demonstrated that the prices achieved were in fact very competitive relative to other South African organizations. Department X has been working more closely with Shared Services as a result.

"In this case independent benchmarking was able to show that Shared Services bought competitively. It effectively removed much of the emotion from the debate and neutralised any negative internal politics between the two departments. The outcome is that this formerly sceptical client department is now actively working with Shared Services to bring a high level of commercial input into the client department’s procurement decisions. ", says Alan Low, CEO of Purchasing Index

More and more central shared service departments are using benchmarking as a marketing tool within their own organizations.
An example of how this process works can be found in this month's benchmarking report on Stationary and specifically envelopes and paper.

Benchmaking assists with some of the key questions that procurement professionals are facing such as:
Colleagues questioning the prices you secure from suppliers.
How do you measure savings?
How do you ensure that the savings you achieve through better prices get to the bottom line of your organization?

This is the first in a series of articles by Alan Low, CEO of Purchasing Index (PI).
Over the coming months this series aims to answer questions procurement professionals often get asked.
This and the future articles in this series will provide you with insights into the benefits of benchmarking and also will deal with related questions and topics of importance to the procurement community and their management colleagues.

1 Comment

Need info on Labour rate benchmarking in RSA

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