But what does that have to do with procurement?
Procurement functions traditionally benchmark their unit prices against prices in companies which they see as comparable. However, many do not realise that it is rarely feasible to do a 1:1 benchmark of prices as e.g. volume can make a critical difference from one company to the next. The companies would be better of benchmarking their procurement processes instead. The processes will be the same across company size and industry, and a comparison with other companies’ procurement processes will therefore allow for a far clearer picture of the procurement function’s efficiency and potential for optimisation. Such a benchmark will be able to identify far larger potentials than solely pricing optimisation. And in many ways, the process is similar to the doctor’s method for making a diagnosis on the patient’s health.
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