Editor’s Note: Over the next few weeks on CPO Rising, we’re publishing some “best of” 2021 articles as we reflect on the year and prepare for the new year ahead.
The 2021 Procurement Benchmarks represent the performance and operational results of the average procurement department in the market today. The percentage of spend under management at the average enterprise sits at 63.3% in 2021, staying essentially flat over the past three years. This confirms a theory presented in the 2017 edition of the CPO Rising research study: the average procurement organization is satisfied with merely managing less than two-thirds of the enterprise’s overall spend. A fading goal, this disheartening factor represents a sizable, lost opportunity for the typical enterprise. Ardent’s research has shown that enterprises realize a savings of between 6% and 12% on every new dollar of spend placed under procurement’s control. There are other benefits beyond savings that also result from procurement’s influence, including improved quality and lower risk.
The decades-long reliance on savings (be it identified or implemented) is continuing to diminish as the procurement function itself provides a new range of value to the greater organization; nonetheless, it remains important. Although last year’s (2020) “actual” savings (7.37%) is exactly what was targeted by procurement teams at the start of the year. The average savings target for procurement teams this year (2021) is up slightly (7.57%). Ardent’s expectation is that the savings target and the intensity in which it is pursued could both increase if the stock market stumbles.
One consistent area of growth over the past few years is within the realm of supplier enablement. On average, 38.1% of a business’ supplier base is electronically-enabled (up from 32.4% since 2018). This is an interesting factor in the greater discussion of digital transformation, as the “digitized enterprise” is one that leverages seamless and holistic process workflows for maximum efficiency and knowledge-sharing. In an age of global commerce, connectivity between buyers and suppliers that is enabled by technology will be a critical piece of the global business networks and supply chains that unify the world’s enterprises. That said, the reason to enable more suppliers is as simple as significantly lowering transaction processing costs.
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.
