Measuring Procurement Success: SAP Benchmark Data Offers Valuable Insights
In the last few years, ongoing volatility has driven companies worldwide to seek greater visibility into the way they procure goods and services – and explore new strategies and tools to enhance efficiency and outcomes. As organizations look for digital solutions to help, they need to understand how these technologies will translate into real savings and improvements. Accurate benchmarking data can play a critical role in providing that insight.
To make this information easily accessible, SAP conducted a detailed customer survey of more than 100 leading global companies in 2021. The survey showed that the top tier of customers using SAP Ariba solutions realized exemplary results even during a time of multiple supply chain upheavals. These organizations were able to deliver better cost controls and manage more spend with lower headcount than their peers, freeing them to perform more strategic tasks for the business.
By taking a deeper dive into several key metrics, we can see what these benefits mean for customers and how they achieved them. Let’s start with some basic financial statement measurements.
The top tier of customers saw cost of goods sold (COGS) as a percentage of revenue drop by almost 20% more than average customers.
What does this mean? For customers trying to reduce their overall costs of doing business, the reduction of COGS would be a key indicator of success. It should reflect the broad improvement of the procure-to-pay (P2P) process in capturing real financial savings on goods.
A procurement organization working to boost business performance might start by focusing on their supply chain. Increasing control over – and visibility into – the purchase and management of direct materials drives COGS down by allowing for smarter planning decisions. A 20% reduction of COGS as a percentage of revenue creates a tangible surge in profitability for the business. For companies with high direct material costs, this could represent a very large amount of money.
The top tier’s selling, general, and administrative (SG&A) expenses were 50% lower than those of average customers.
What does this mean? Like the COGS metric, the ability to reduce SG&A expenses would reflect enhancement of the P2P process through better efficiency in both the procurement organization and the use of services (such as contractors and other types of non-payroll labor) inside the enterprise.
Services procurement is an area where SAP can help in ways no other company can. Our industry-leading solutions allow customers to effectively manage and understand a wide range of important criteria, including how much they’re paying contractors across their organization, who is doing the work, when they’re on site, and even what proprietary materials they can access.
The ability to capture SG&A savings also represents a drop in costs associated with managing the business. The most common benefit comes from process automation that allows customers to reduce headcount on low-value tasks such as manual processing of POs and invoices. These team members can then be redeployed on more strategic work. Our benchmarking data clearly reflects this shift: The top tier needed 47% fewer procurement FTEs and saw the number of POs managed per FTE increase by more than 100%.
The top tier attained operating margins 69% higher than those of average customers.
What does this mean? The result for companies that realize the benefits of the first two benchmarks is higher operating margins. And savings inside the organization can translate to significantly stronger profits for the business.
These data points offer just a few examples of the real value SAP solutions deliver. To learn more about SAP Ariba benchmarks and the favorable business outcomes we can help you can achieve, check out this infographic.