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New Book from McKinsey Says the Opportunities from Procurement Excellence are Huge

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Just how big is the procurement opportunity for supply chain and overall corporate success?

Plenty big indeed, according to the new book, Procurement 20/20, written by a quartet of McKinsey analysts (Peter Spiller, Nicolas Reinecke, Drew Ungerman, and Henrique Teixeira).

 The book is based in large part on a substantial amount of survey work and other research the high end consulting firm has performed over the past few years, and makes a compelling case that the financial impact of being excellent at procurement is as great if not greater than any other opportunity most companies might confront.

The book starts by noting that a combination of productivity gains, outsourcing and more has led to a sharp rise in the amount that a firm spends with external parties. In 1970, external spend was 60% of total costs. In 2010, it was an amazing 85% for S&P 500 companies, a level roughly consistent across most industry sectors.

Obviously, as the percent of external spend increases, so too does the impact of being excellent or mediocre in procurement processes and practices.

The prize that can be gained from reaching procurement excellence is really worth focusing on. The authors say that based on the numerous procurement related surveys and more detailed analysis McKinsey performed with some 700 global companies, procurement leaders "not only generated higher cost savings from procurement - 30% more than average performers - they also performed better across a broad set of indicators. That includes reducing their cost of goods sold faster and achieving higher overall returns from operations."...Read more on SC Digest

Last modified on Thursday, 16 January 2014 13:45

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