Differences in procurement maturity growing globally

Companies in the utilities sector have the highest maturity level in the area of procurement. Organisations in mining, wholesale and ICT come in on second place, reveals a recent research by Supply Value. Across the board, the differences in procurement maturity are on the rise.

Every year Supply Value, a supply chain consulting firm, conducts research into the trends and developments within the field of procurement. For the 2015 edition, Supply Value teamed up with IFPSM and ISM*, and surveyed more than 550 procurement professionals from 20 countries operating across various branches. Around half of the respondents work in companies with more than 500 FTE.

Procurement maturity
One of the themes investigated through the research is the procurement maturity of organisations. For this the researchers used the procurement development model created by Keough**. The model has five levels of achievement, dependent on the level of maturity, from humble beginnings (‘Serve the Factory’; score 1) to masters of maturity (‘World-class Supply Management’; score 5).

“The further an organisation develops within the procurement maturity model, the more mature the purchase-function and processes become, the more partnerships the company enters into, the more supplier performance measurements and improvements to best practice are made, and how the more integral values in the value chain improves”, explains Ramon Abbenhuis, consultant at Supply Value and co-author of the report.

Out of the data significant differences in maturity between sectors are disclosed. For instance, organisations in construction and retail scored under 2.7, considerably lower than the leaders, that are particularly active in the utilities, wholesale and ICT sectors. “These are the sectors professionally engaged in procurement-, contract- and supplier management.” With a score of 2.3 businesses in construction, forestry, fisheries are the lowest scorers in the area of procurement. Not entirely surprising, according to Abbenhuis, “procurement traditionally plays a smaller role in the business practice of these sectors. However, they typically still have a relatively large amount of low hanging fruit in the area of purchase and contract management.”

Growing differences
From the full dataset it can be concluded that the difference between leaders and laggers is on the increase. Where last year merely 4% of companies made it into the “World-class Supply Management” category, this year it has risen to 10%. With increases in the level 4 category also occurring from the previous years’ result. At the same time however, a similar trend can be seen at the lowest level, with as consequence that businesses have been driven out of the middle category “coordinated purchasing”. “The first trend, in which companies move into the highest maturity levels, can be explained by the fact that more and more companies are professionally active in procurement, contract and supplier management. This is no longer something only done by large businesses in each of the sectors. We are anxious to observe if the trend will continue in the next edition of the research.”

* IFPSM = The International Federation of Purchasing and Supply Management. The platform unites more than 40 national and regional purchasing associations worldwide, who have around 200,000 purchasing professionals as members. ISM®= Institute for Supply Management®. ISM is the first supply management institute in the world, with over 46,000 supply chain professionals as members, ISM advances the practice of supply management to drive value and competitive advantage, and contribute to a prosperous, sustainable world.

** The procurement development model from Keough: