2019 Hackett Group Performance Metrics

Procurement: Supply Base Leverage

For Current Members of Executive Advisory Programs

Metric description Peer group World class

Number of suppliers per billion in spend 6,015 1,988

Percent of suppliers making up 80% of annual spend 6.16% 5.33%

Source: The Hackett Group, 2019

What Is “World-Class Performance”?

World-class companies, as defined by The Hackett Group’s empirically based
methodology, have not necessarily achieved excellence in all areas, but, using
selected best practices, they have been able to strike the right balance of efficiency
and effectiveness. As a result, they are able to create conditions that enable them to
compete against the best companies around the global whether or not they themselves
are global organizations. World-class organizations have attained their superior
performance levels because they have made appropriate tradeoffs and decisions
regarding the practices they follow, and they have executed on them extremely well.
Our process taxonomy assures that definitions are not only consistent from function
to function, but also between companies being compared. Our structured process
taxonomy, combined with the consistency with which we collect data – and the
empirical nature of the data itself – enables us to make objective and relevant
assessments and recommendations.

© 2019 The Hackett Group, Inc.; All Rights Reserved. Metrics Procurement Supply Base Leverage I The Hackett Group I 1
 The Hackett Value GridTM
EPM Value GridTM The Hackett Value GridTM
We have defined process groups down to the activity level,
incorporating individual processes, sub-processes and activities
performed. Further, we collect staffing, costs and best practice
HIGH

World-class
World-class utilization for each of these functions and process groups,
EFFECTIVENESS regardless of job title, reporting hierarchy, geographical location or
organizational model. To identify the world-class organizations, we
1D
analyze performance metrics using our proprietary Hackett
1Q
Value GridTM.
EFFECTIVENESS

Performance metrics associated with efficiency are scored on the

horizontal, or “X,” axis. These may include such output measures
World-class
as cost as a percent of revenue and cycle times. Performance
EFFICIENCY metrics associated with effectiveness are scored on the vertical,
or “Y,” axis. Each company is ranked relative to the others in the
comparison group. Companies above the break-points of the top
quartiles in both efficiency and effectiveness are designated as
“world-class overall.”

LOW
1Q 1D
HIGH After we identify world-class performance metrics, we isolate and
EFFICIENCY
analyze specific drivers for each function at these organizations.
Source: The Hackett Group
Finally, we evaluate the impact of structural factors, that is, the
attributes of or decisions made by world-class performers that
help them respond to demand drivers. Structural factors must be
quantifiable in their results and replicable by other organizations.
World-class companies are identified using actual
Information about metrics should be considered as a starting point
performance metrics
in any discussion about performance. It is important when setting
How well What we How we choose targets to take into account the overall goals, strategies, operating
we do it must do to do it
environment and other factors specific to each company. Please
contact your Hackett Advisor to understand how the metrics
PERFORMANCE
METRICS = DEMAND
DRIVERS + STRUCTURAL
FACTORS presented in this document may apply to your organization.
Factors
Types Cost Geographies served Process
of
drivers Cycle time Products People/
Error rate supported Organization

Productivity Regulatory Technology

environment Partnering
Economic return
Customers served Strategy
Supplier leverage
Size
Equity model

Source: The Hackett Group

Email: info@thehackettgroup.com
www.thehackettgroup.com

Atlanta +1 770 225 3600 London +44 20 7398 9100 Sydney +61 2 9299 8830
Atlanta | Chicago | Frankfurt | Hyderabad | London | Miami | Montevideo | New York |
Paris | Philadelphia | San Francisco | Sydney | Vancouver

This publication has been prepared for general guidance on the matters addressed herein. It does not constitute professional advice.
You should not act upon the information contained in this publication without obtaining specific professional advice.

© 2019 The Hackett Group, Inc.; All Rights Reserved.

© 2019 The Hackett Group, Inc.; All Rights Reserved. Metrics Procurement Supply Base Leverage I The Hackett Group I 2