New tool helps SCM demonstrate its financial impact on the bottom line



FinancialImpact.jpgA performance assessment that helps supply chain management (SCM) organisations quantify their financial contributions to organisations was launched in January.

Return on Supply Management Assets Performance Check (ROSMAPC) assesses SCM’s value to an enterprise and helps SCM executives demonstrate the function’s financial impact on the bottom line.

In order to measure performance the tool captures hard savings benefits and the tangible value created from advanced practices, supplier innovation, and the financial re-engineering of the supply chain by indicating the overall financial productivity of SCM assets.

Derived from classic financial frameworks (such as DuPont’s investment performance measures) and shareholder value methods (such as economic value added), ROSMAPC helps SCM executives demonstrate the function’s financial impact on the bottom line.

SCM functions are able to benchmark their performance against their respective markets and industries. CPOs can use the results to establish priorities around financial results improvement, talent capability building, and organisational development.

Importantly, performance measurement is based on metrics that the financial community understands and endorses and, therefore, reflects the mindset of CFOs, encouraging their buy-in to support the SCM function.

ROSMAPC is the first initiative from an alliance to increase professional recognition for SCM professionals.

A.T. Kearney, the Institute for Supply Management (ISM), and the Chartered Institute of Purchasing and Supply (CIPS) formed the alliance to increase recognition of the discipline as a key driver of strategic business value.

“This alliance is key for SCM as we raise the profession’s profile and demonstrate its value to organisational growth,” said David Noble, CIPS group CEO. “ROSMAPC offers SCM professionals another component in their toolkit and provides a robust demonstration of their function’s financial value.”

For the past five years, A.T. Kearney has worked with dozens of CPOs and CFOs around the world to co-develop, test, validate, and benchmark this performance-measurement approach for SCM.

“Procurement’s responsibilities, specifically, have radically changed during the past 20 years, from a tactical service function to a proactive, strategic partner to the rest of the business,” said Thomas W. Derry, ISM CEO. “To meet the intricate mandates now required, the profession needs a mechanism for communication with the C-suite to increase its recognition, connect to shareholder value, and to consistently and universally track and measure its contribution and performance. ROSMAPC is the entry point.”

On a broader level, CIPS, ISM, and A.T. Kearney created the alliance to elevate the SCM profession’s stature and positioning in the boardroom and C-suite, on Wall Street, and even on higher education college campuses to attract the best talent in the years ahead.

SCM organisations can participate in ROSMAPC online via the CIPS and ISM websites.

SCM organisations can take the assessment at the enterprise level or within business units and divisions. Completion takes approximately 30 to 45 minutes. Information provided is kept strictly confidential.

Immediately upon completion, participants receive their organization’s complimentary Return-on-Supply-Management-Assets score and a customized report that assesses their procurement performance, compares it with leaders and followers, and identifies improvement opportunities.

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