Why should Procurement organisations benchmark?

One of the first organisations to benchmark in the modern business world was Rank Xerox, who in the 1980s formed a dedicated team to find out how other organisations outside of the photocopying industry managed functions, such as transport. The results provided Xerox with invaluable insights into how to spend money more effectively and, in turn, save money.

“South African organisations are currently under huge pressures to cut costs. Many have recognised that the skills shortage in the country is acute and are reticent about making valuable staff redundant. Instead organisations are actively trying to save money in the goods and services that they buy and consume. In this environment saving money is becoming more and more important,”  Alan Low, CEO of Purchasing Index, told SmartProcurement.

Benchmarking provides a valuable structured insight into how people spend money with their suppliers and how effectively they use these goods and services. Benchmarking therefore:

  • Measures the effectiveness of a organisation’s spend, both in the purchase and use of goods and services.
  • Strengthens procurement’s negotiating position with suppliers by giving them insight into other market related prices.
  • Helps to manage the organisation’s costs over time in a sustainable manner.
  • Helps the development of effective purchasing and usage strategies and policies.
  • Produces independently validated reports for procurement’s customers (the business units) and management.
  • Assists procurement to market its services to its internal clients and provides empiric evidence of the value of procurement.
  • Supports increased competition by showing who else can supply goods and services and what new services are being offered.
  • Highlights the cost of technical and user preference within the organisation.

“For many in procurement the current volatility in exchange rates and commodity prices presents unique challenges in continuing to ensure that the organisation’s money is spent wisely. Benchmarking can provide a unique view in what is happening in the SA marketplace,” he says.

Alan Low can be contacted on the details below:
Telephone: +27 11 803 0005
Cell: +27 84 890 0005
Email: alan@pibenchmark.co.za

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