For the leading companies identified in A.T. Kearney’s 2014 Assessment of Excellence in Procurement (AEP), supply management is not just a way to cut costs—it’s a strategic capability that can also drive sustainable earnings performance and competitive advantage through supplier-driven innovation and risk management (see sidebar).
The success formula covers three pillars: category excellence, high-performing teams, and supplier excellence. The first pillar, category excellence, can double the level of cost reductions through an analytics powered sourcing process combined with long-term category strategies.

The second pillar, team excellence, gives procurement a seat at the C-level table, allowing procurement to focus more on strategic activities such as sourcing and supplier relationship management (SRM), and better measure its impact on the organization, including cost reductions and value beyond cost.
 
Supplier excellence, the third pillar, is where the AEP leaders truly shine. These companies are going beyond cost reduction and creating competitive advantage by tapping into supplier-driven innovation and risk management skills.
For most firms today, supplier excellence remains the least-developed pillar of procurement, but all CPOs recognize the need to build out this capability in the next three years.