The key takeaway from the results of Protiviti’s 2017 Procurement Survey is clear: Procurement functions need to focus on how they drive value and how they quantify and communicate their performance. In what is arguably the most notable finding in the survey, close to half of finance leaders say 20 percent or less of procurement savings drop to the bottom line. Just one in five finance leaders say their procurement functions effectively manage both direct and indirect costs. Overall, only a small percentage of bottom lines actually realize the savings that procurement functions have achieved. These and other issues identified in the study need to change.
In our report, we share key findings from the survey, examine the perceptual gap between finance and procurement regarding procurement’s objectives and value, identify traits commonly displayed by leading procurement functions, and present some action items for procurement and finance leaders to consider as they seek to get on the same page while increasing the value that the procurement function delivers to the bottom line.
Sample questions addressed include:
- What would you estimate to be the percentage of savings achieved by the procurement function that is dropping to the bottom line?
- How effective is your sourcing process in delivering value and cost savings?
- How would you rate the effectiveness of the procurement function in reporting and promoting the savings being delivered in the organization?
- For claimed savings that are not dropping to the bottom line, what do you believe are the primary causes?
Key characteristics of a procurement function that drive financial results include:
- Utilize spend data within budgeting and planning functions
- Use third-party systems to conduct spend analysis
- Have centralized finance and procurement teams
- Track and communicate savings generated by procurement
- Include cash flow and working capital as key elements or procurements savings goal