Ardent’s analysis in this report determined Best-in-Class procurement performance by identifying the top 20% of performers in the spend under management metric. As a group, they have placed, on average, 89.8% of spend under the management of the procurement organization, nearly 60% more than their peers. Ardent uses spend under management as a starting point in the development of its Best-in-Class Framework and to drive additional discussion and deeper analysis of strategies, capabilities, and results.
The other 2021 Procurement Benchmarks resemble their prior year predecessors. Sourcing programs, on average, continue to show consistent activity, with 47.9% of addressable spend sourced last year. Only a few years ago, sourcing was consistently a top strategic priority for CPOs; but with sourcing pipelines generally flush and teams engaged and executing consistently, CPOs have turned their focus to other areas. Ardent Partners expects that sourcing activity will increase sharply when the post-COVID “new normal” period for business inevitably commences.
Compliance levels remain low, but are improving. It should, however, be an area of focus for CPOs since only 65.1% of all spend and 76% of all transactions, on average, are compliant with contracts. As this report notes every year, Ardent’s research on contract compliance has shown that every non-compliant dollar of spend costs the enterprise an extra 12% to 18%. The hard cost of non-compliance adds up fast. From an operational perspective, catalog-based spend and PO-based spend give procurement departments certain assurances about the supplier source and the decision-making process involved in the purchase.
From an overall influence perspective, procurement organizations should look at their spend “pie” and determine where the greatest impact can be made – either managing the current spend better or bringing new spend under influence. The reality for most teams is that there are opportunities in both areas. That said, in aggregate, the first-time impact a new RFP has on a category is almost certain to be greater than the refinements made to a category strategy that has been in place for years.
If you are interested in learning more about the key procurement and CPO data collected in our annual research study, consider listening to Ardent’s brand new “Procurement Rising” podcast series. Click below to listen to new episodes. The podcast is also available on Apple, Spotify, Stitcher, Google, or wherever you get your podcasts.
