IBM: Top Chief Procurement Officers Drive Higher Profits

A new IBM study shows that high-performing procurement organizations are driving higher profits through use of big data analytics, social and more.

NASHVILLE, Tenn.—At its Smarter Commerce Global Summit 2013 here, IBM announced a study that says companies with high performing procurement organizations are driving better bottom-line results.

According to the study, these organizations report profit margins of 7.12 percent as compared with just 5.83 percent for companies with low performing procurement organizations. Also, companies with top performing procurement organizations report profit margins 15 percent higher than the average company—and 22 percent higher margins than companies with low performing procurement organizations, IBM said.

The 2013 Chief Procurement Officer Study was conducted by the IBM Institute of Business Value (IBV) and highlights the business impact that chief procurement officers (CPOs) can have on a company's competitive advantage and profitability. It explores how top performing CPOs can increase their influence over strategic business imperatives by driving efficiency and performance, introducing innovative new processes, and uncovering new insight into supplier networks that have a measurable effect on the bottom line.

"This is all about helping procurement officers meet the need of their customers," said Alisa Maclin, vice president of marketing for Smarter Commerce at IBM, at a press conference introducing the study.

Maclin touted the IBM study as the largest of its kind. It surveyed 1,128 procurement executives in 22 countries across North America, Europe and Asia Pacific. Of the respondents, 15 percent were found to be top performers, defined by their ability to exert influence and drive innovation across their companies, while also excelling at procurement fundamentals, said Chris Wright, a senior product strategist at IBM.

The study identified several common actions that enable top performing procurement organizations to achieve superior results. One such action is they gain insight through big data analytics. By using analytics to tackle big data challenges, CPOs can gain new insights into internal business operations and their supplier networks to identify vulnerabilities. Eighty-three percent of high performing CPOs excel at leveraging analytics, compared with just 63 percent of the low performers.

Moreover, high performing procurement organizations collaborate well within and beyond the enterprise. Social business technology helps global procurement organizations connect with internal and external partners. According to the study, 80 percent of high performing companies report that collaboration across departments, such as IT, marketing and sales, is both a key strength and an investment priority, compared with only approximately 45 percent of low performers. High performing procurement organizations see the benefit of close partner collaboration and therefore are more likely to create strategic alliances. For example, top performers direct 38 percent more of their annual spend through strategic alliances than low performing organizations.

Rudy Chang, vice president and general manager of ecommerce at Pitney Bowes, said social business is key for his organization. “The push for social really allows every one of our organizations – every silo – to participate,” he said during a customer panel. “Our push has been on enhancing the employee social network to bring people together to work better with the customer.”