Strategic Insights – Benefits of Procurement Benchmarking

By: Manpreet Kaur

In today’s business landscape, competition no longer exists solely between individual organizations. Rather, there is also competition between their supply networks. To build the best supply networks, it is essential to establish integrated business models that prioritize effective relationships and value creation. Procurement Benchmarking plays a vital role as the main interface between an organization and its suppliers.

Benchmarking involves comparing the procurement function’s performance with that of the best competitor or organization within the industry. It is not limited to examining superior performance but also includes an evaluation of how it is achieved. The information gathered is used to establish performance targets and action plans for the procurement function. Benchmarking can determine procurements performance and industry standards simultaneously. It can draw a comparison between how procurement is currently performing and what it needs to achieve over time. In this process, it can identify gaps that must be filled to reach the desired level of performance.

What are the challenges faced by organizations while benchmarking procurement activities?

Selecting the right key performance indicators (KPIs) and metrics:

The process of selecting appropriate key performance indicators (KPIs) and metrics for benchmarking purposes can be a complex task. Each organization may have its own distinct priorities when it comes to evaluating procurement performance, making it challenging to identify the most suitable set of metrics that align with the organization’s unique goals and objectives. This necessitates careful consideration and evaluation to ensure that the chosen metrics accurately capture and reflect the organization’s specific objectives in the realm of procurement.

Benchmarking relies heavily on data and availability:

Data plays a crucial role in benchmarking, and the challenges associated with data availability and quality can be significant. Many organizations face difficulties in obtaining comprehensive and accurate data for comparison purposes. This includes data related to spending, supplier performance, and various aspects of procurement processes. The lack of reliable data can hinder the benchmarking process, making it challenging to accurately assess and compare performance against industry standards or best practices. Overcoming these data challenges requires organizations to invest in robust data collection and management systems to ensure the availability of reliable and relevant data for effective benchmarking.

Different organizations may have unique procurement processes:

Comparing procurement processes across different organizations can be a complex task due to the inherent uniqueness of each organization’s approach. This variability arises from factors such as organizational structure, culture, and goals, which can significantly impact the way procurement is conducted. As a result, it becomes challenging to make direct comparisons between organizations. Each organization’s distinct processes and practices must be taken into account when benchmarking, ensuring that the comparisons are contextualized and considerate of the specific factors that contribute to the variability in procurement approaches.

How SpendEdge helps organizations with procurement benchmarking

Deep dive benchmarking exercises:

At Spendedge, we specialize in conducting thorough benchmarking exercises that delve deep into the procurement functions of organizations. Our aim is to identify the most appropriate key performance indicators (KPIs) and metrics that accurately measure and evaluate procurement performance. Through our comprehensive approach, we analyze various aspects of procurement, including spending patterns, supplier performance, and procurement processes. By leveraging our expertise and industry knowledge, we assist organizations in selecting the right set of KPIs and metrics that align with their specific goals and objectives. Our benchmarking services provide valuable insights and recommendations to enhance procurement performance and drive organizational success.

Research studies to provide visibility on the latest industry trends:

At SpendEdge our experts offer research studies that aim to enhance clients’ procurement processes by providing valuable insights into the latest industry trends, regulations, and emerging best practices. These studies are designed to offer visibility and keep clients informed about the dynamic landscape of their respective industries. By leveraging our services, clients can gain a competitive edge in their procurement operations. Our research studies delve deep into market dynamics, supplier landscapes, and regulatory changes, enabling clients to make informed decisions and optimize their procurement strategies to stay ahead in the market. With SpendEdge, clients can access comprehensive and up-to-date information to drive efficiency and effectiveness in their procurement processes.

The success story of SpendEdge helping an oil and gas company with procurement problems

Our client is a leading oil and gas company based in France. They were interested in discovering the best practices followed by successful procurement organizations across various industries. They also wanted to identify the overall mission of the purchasing department in best-in-class procurement organizations to increase their visibility.

Our SpendEdge professionals assisted by thoroughly comprehending the structure of organizations’ purchasing departments and their overall responsibilities. Our experts evaluated the annual purchase spending, volume, and efficiency, and assessed the engagement models and key parameters/metrics for measuring procurement efficiency by gathering information from various primary and secondary resources. We provided a detailed comparison of different procurement organizations, including their geographic presence, structure, overall procurement strategy, and more. Additionally, we offered enhanced visibility into emerging procurement best practices, commonly observed KPIs and trends.

Contact us now to solve your procurement problems!

Author’s Details

Manpreet Kaur

Assistant Manager Presales – Sourcing and Procurement Intelligence

Manpreet is a presales specialist at Infiniti Research and has expertise in sales, business strategy execution, and innovative solution design. She is actively involved in supporting clients from F&B, CPG, Healthcare, Pharma, Chemicals, BFSI, Oil & Gas and Automotive sectors.