It is interesting valuating views of different types of procurement. Often we say “procurement” although there is a huge difference if we mean direct or indirect spend, public or private sector, services, goods or manufacturing etc. At least we need to know if we are talking about direct or indirect spend.
This article reasons about procurement functions and ROI as a way to estimate the departements value or perormance. Especially interesting to consider as there are many CPOs who think they should be in the management team but are not. Truly buying in to these sentences that say:
“…it’s not a lack of available funds that’s at the heart of it – other functions receive their funding, despite generating a lesser return (the irony is that procurement projects are often self-funding within the financial year).
The answer partly lies in businesses’ misguided obsession with savings (which we covered in this previous post). But it goes deeper than this. I think procurement is failing to make its case as successfully as other functions. It is not ‘selling’ what it can do to senior executives. What’s more, business leaders themselves fail to realize the importance of managing their cost base as they don’t recognize the sheer scale of their cost base relative to their labor costs – as our recent research around cost management nicely demonstrates.”
Read the full article here: Be wary of very high ROIs in procurement
Group: eProcurement and procurement
Discussion: Should procurement be delivering very high ROIs?