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Procurement: The Last Best Place for Results Improvement


A.T. Kearney

More than 130 years ago, Joseph Wharton gave an endowment to the University of Pennsylvania to establish the School of Finance and Economy. The gift sparked management science as we know it today. Wharton's gift brought a steady stream of thought leaders with innovative concepts, tools, and methods to improve business performance. Icons in the field, including Towne, Davenport, Gantt, Ford, Sloan, Drucker, Deming, Taguchi, and Ohno, created game-changing approaches such as JIT, Six Sigma, BPR, Lean, EVA, Balanced Scorecard, and Competing on Analytics. And advancements in management science have accelerated with the increasing waves of disruptive technologies—more, faster, cheaper computational power—that have fundamentally changed how we monitor, operate, and drive our businesses.

Thanks to these innovations and innovators, executives today can quickly evaluate business health and performance as never before. Quarterly analyst calls feed the "Street" with sound bites about plant utilization, recurring revenues, client contract renewals, fill rates, economic value added (EVA) targets, and business and geographic unit specific cash-flow estimates. Yet when it's time for the "voice over" on procurement performance on the analyst calls, there is a hushed moment of silence. For, when asked about procurement performance, most CFOs go on and on about keeping even with or ahead of inflation—saying little about gaining ground through procurement efforts. In fact, research shows that in their public remarks, CFOs discuss safety, sales force, and manufacturing performance roughly 400, 360, and 100 times, respectively, and far more frequently than procurement performance.


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