Don’t Forget the “R” in Procurement ROI

我无所畏惧的同事彼得史密斯花很重要的英国recently penned a piece titled “rosma.– a Flawed Measure of Procurement Performance。“rosma.基本上是A.T.Kearney的一个受欢迎的度量的版本，称为“采购投资回报率”，通过将年度花费储蓄从采购资源中的“投资”（成本）分开。如果您节省5％的费用，并且您的采购资源成本1％的费用，您的投资回报率为5.对于Rosma的更多分析和评论，请参阅本文底部的相关链接，当然确实退房Peter’s article.

免费研究报万博体育下载app告：实施成本节水措施需要什么

彼得认为，罗马（或采购投资回报率的任何化身）是有缺陷的，因为你可以拥有一个非常高的投资人的投资（即，一个小型采购部门），但对企业的经济影响非常少。这是一个公平的一点，并说明了如何单一度量标准通常不会捕获更广泛的问题的复杂性。我们做了一个entire webcaston the top 10 procurement benchmarks that procurement organizations should use, and procurement ROI came in at No. 3, whereas spend-normalized total economic value delivered to the organization came in as the No. 1 metric.

I have researched this topic and correlated procurement ROI with procurement savings (a major subset of the “R”) over hundreds of real life benchmarked firms, and what I found is that the correlation is expectedly very high…to a point. Once you exceed and ROI of about 3, the correlation weakens and then ends. In other words, some procurement organizations get very expensive and inefficient without seeing a commensurate return on that investment. Others, however, spend somewhat more, but do get disproportionately high payback from those investments. For example, the firm may be in the early stages of a major transformation where there are tons of savings being realized (especially if it has big spending areas with favorable market tailwinds).

Anyway, the bottom line is that you have to look at total economic impact as well as the relative payback against your investment. Think of it this way: Procurement is a big machine in a savings “factory.” If you have a small machine that is highly efficient and produces a highly profitable “product,” but is backlogged with additional product (i.e., savings) that could be made, you obviously would want to increase your capacity and your savings throughput. So, procurement ROI is like a machine efficiency rating (efficiency is output divided by input right?), so it’s about “savings efficiency” rather than effectiveness from a total economic impact. A smart enterprise, however, doesn’t measure its effectiveness on machine utilization and efficiency, but rather, throughput of value creating output (read Eli Goldratt’sThe Goalif you haven’t and you’ll understand). If you do so, you’ll want to start adding other “machines” in the areas of innovation, working capital improvements, tax expense reduction, asset variabilization, revenue uplift and other areas – and you’ll follow world class supply chain principles to add flex capacity to your “procurement factory.”

Returning to where we started, I do think Peter is being a little harsh on ROSMA (yes, I’m actually defending A.T. Kearney!), because if you had to pick a metric, albeit “defensive” and internally focused on a single function’s performance, that encapsulates how procurement is “earning its keep,” then procurement ROI is a good one. But, procurement ROI in any form (including the ROSMA incarnation), to quote Goldratt, is clearly “necessary, but definitely not sufficient.”