Be Accountable: How Benchmarks Enable Smarter Procurement
I’ve often said that procurement leaders need to come out of their shells. The onus is on us as professionals to step up, challenge the status quo, and lead. When we are successful at taking full ownership, our organizations benefit immensely.
The events of 2020 highlighted how important a resilient and agile procurement function is in helping a business react quickly when disaster strikes. I can proudly say that most procurement professionals rose to the occasion. We showed our organizations what we can do to secure supply, mitigate risk, and offer tangible value to our stakeholders, the C-suite, and board members.
As we come out of the pandemic, it is imperative for us to collectively keep our momentum and capitalize on the political capital generated. Let’s continue to build on our success and bring real, measurable value and innovation to our organizations!
The continued success of procurement hinges on several factors. First, you need full visibility into company spend so you can perform advanced analytics, quickly validating spend under contract and budget limits, to approve purchase requests quickly and accurately. Moreover, you need to ensure strong relationships with business owners and suppliers, fully embracing the power of digitalization. Having full end-to-end spend visibility is foundational to manage business spending and allows you to benchmark performance against industry leading metrics. The goal of any procurement leader is to be a competitive advantage, and levering the power of community intelligence is the key.
Benchmarks help you spend smarter and safer
As a finance professional by background, I have always been a strong proponent of fact-based decision-making and measurement. After all, “what gets measured gets done.” If you can’t figure out how to measure your success and set new goals, you might be doing great work, but you’re not holding yourself accountable.
One of the most appealing aspects, for me, of being the CPO of a Business Spend Management (BSM) enabler like Coupa, is that data and measurement is in the very DNA of the culture here. I’m a strong believer in sharing a culture of information and accountability, and it’s something I think our entire profession needs to adopt. As we say at Coupa, “none of us is as smart as all of us.”
Coupa recently published the 2021 Business Spend Management Benchmark Report, which includes 16 best-in-class spend management benchmarks, derived from transactional behavior on the Coupa platform across our entire Coupa community of over 2,000 customers and $2.3 trillion dollars in spend.
I would love it if every single one of us in the procurement profession took a few minutes out of our day to read it. Why? Because without knowing what true excellence looks like, we can’t authentically deliver value to our stakeholders.
Here’s one sample of the valuable industry benchmarks, and why it matters, that you’ll find in this year’s edition of Coupa’s BSM benchmark report:
2021 BSM Benchmark #3 — ON-CONTRACT SPEND
DEFINITION: On-Contract Spend measures the percentage of spend put through contracts which were negotiated and established to enable better prices and terms.
PRIMARY BENEFIT: Optimizing spend and cash.
WHY IT MATTERS:
- Having greater on-contract spend reduces the financial risk and related business costs from supplier liability or wrongdoing by channeling spend to suppliers who have risk-related contract protections.
- Greater on-contract spend also enables procurement to negotiate better contracts and lower pricing in future contracts and renegotiations by leveraging the fact that a large amount of spend has gone through existing contracts.
- Cash flow also benefits since payment terms are negotiated in the contract, and getting more spend on-contract lets you take advantage of favorable payment terms.
This year’s golden opportunity
As spend management professionals we have a golden opportunity this year to re-evaluate and revitalize our processes in ways that make our organizations stronger, smarter, and safer.
Trustworthy benchmarks hold us accountable to continue our leadership momentum and develop a smarter procurement strategy with targeted, measurable goals. Do we want to keep our new seats at the table and be a part of our company's competitive advantage? If so, let’s be sure to stay focused on delivering real strategic value to our organizations, and stay honest with ourselves in making sure we are measuring our success along the way and implementing procurement and strategic sourcing best practices. Let’s raise the bar together — we got this!