Hackett Group Report On Impact Of Digital Transformation Shouldn’t Surprise Practitioners​

Posted on August 10, 2017


“World-class procurement organizations now operate at 22 percent lower labor costs than their peers, and have 29 percent fewer staff, while demonstrating improved effectiveness and better performance across a wide array of key metrics . . .” – The Hackett Group

The other day while driving my 12-year-old daughter to soccer practice I was listening to one of my golden oldies albums (which of course is now on CD) when one of the tracks caught her attention.

Realizing that I had lost any semblance of my “coolness” when I purchased my first family van some years ago, I was surprised when she asked me to play the song again.

After a few repeated listens, she finally said this is really great, is it a new artist?

When I told her that the song first hit the charts almost forty years ago, she was surprised because after all how is it possible that she could like the same music that I do? I guess the idiom that “everything old is new again” is true.

I was reminded of this exchange when I read the email from The Hackett Group regarding their latest research “Raising the World-Class Bar in Procurement Through Digital Transformation.” You can get a copy of their research by registering through the following link: http://bit.ly/2vFh3iW.

Typical procurement organizations can substantially narrow the gap between their cost levels and that of top performers, and top performers can become even better by leveraging digital transformation, according to new world-class procurement research from The Hackett Group, Inc.

So What’s New?

While I would encourage you to download a copy of the report, the references made in the email to lower labor costs, fewer staff and improved metrics through leveraging digital transformation is not new.

Like the hit song from forty years ago, none of the above will likely be surprising to successful practitioners.

The reason?

Because the same principles associated with achieving these results haven’t changed over the years.

Case In Point: The Department Of Defence

Back in my practitioner days (1997 to 2005), I was responsible for turning around a Department of National Defence contract. One of the main issues was the absence of collaborative intelligence between the primary buying group and the bases they were purportedly serving.  This disconnect resulted in the Department purchasing MRO Indirect Materials at an average premium of 157% above the going market rate.

Compounding the problem was the fact that delivery of the acquired goods which called for a next day SLA performance of 90% was hovering around the 50% mark and, costs related to staff size and warehousing meant that neither the DND nor taxpayers were coming close to achieving the best value result.

One of the first things I did was to establish some new parameters based on analyses such as the time of day an order was placed and its impact on both cost and delivery.  Ironically, technology was the last piece of the puzzle to be introduced, and only after the framework for a successful program was already in place and savings patterns firmly established was the platform implemented.

By following a process first- technology second strategy, we avoided one of the biggest problems associated with ERP-centric implementations. Specifically, when an organization leads with technology you usually find that the people adapt to how the technology works versus the technology adapting to the way in which people work in the real-world.

The results of my approach were relatively straight forward. After being officially launched in May 1997, SLA performance improved from 51% to slightly higher than 97% by September 1997.

Costs were also quickly brought under control, with the DND realizing annual savings of 23% each year over the seven years that I had run the program.

Inventory levels that had been built up to compensate for the poor SLA delivery process were ultimately reduced by 90% over an 18 month period and, with it the size of the purchasing staff assigned to the DND contract which went from 23 people down to 3 within 24 months.

A Sound Strategy Never Gets Old

Is The Hackett Group’s research groundbreaking? Not Really. Is it a worthwhile read? Absolutely.

For those of us who have adhered to the principles and practices the report promotes, it is another confirmation that we got it right. For those who, like my daughter’s discovery of an old hit song, it is a revelation that a sound strategy never gets old.


Posted in: Commentary