ROI - Sourcing Force

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Procurement Organization

Annual addressable spend ?Total amount of spend that must be managed through the Procurment department (typically all spend except taxes and wages)

% Spend under control (with contract) ?% of spend with Procurement oversight (spend associated with contractual terms that is processed through a procurement process) %

Avg. % negotiated savings per year ?% savings on annual addressable spend. Savings from volume discounts offered by preferred suppliers. %

Number of active suppliers ?Suppliers active, with minimum 1 transaction over the last 3 years.

Number of strategic procurement FTEs ?# of employees covering all activities such as category management, analysis, RFX, negotiations, deal renewals, supplier management and events

Avg. Annual loaded cost per procurement FTE ?US, Canada and Western countries average Strategic procurement cost is 90 000 $ ( (Average yearly working hours is 1763 hours => OECD)

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Procurement Organization

AVERAGE

Cost of Procurement as a % of Spend ?Leader: 0.596%;
Average: 0.828%;
Laggard: 1.060%.

Calculation: Procurement cost / Total spend. Value: Tracks Procurement Efficiency. Note: Relevant Benchmarks Vary Widely by Industry.

Source: The Hackett group / CAPS / ACME

Procurement FTE per Billion of Spend ?Leader: 43.6;
Average: 51.55;
Laggard: 59.5.

Calculation: # Procurement FTEs / Total spend x 10^9. Value: Measure Focus on Highest Value Activities.

Source: The Hackett group

Procurement Return On Investment ?Leader: 9.5;
Average: 4.6;
Laggard: 2.

Calculation: Savings Implemented / Procurement cost. Value: Justifies Investment in Procurement Organization.

Source: The Hackett group

Annual Purchasing Spend ?Spend under control VERSUS Spend not addressed by the Procurement Department.

10,000,000

Current Annual Saving

2,160,000

Current Procurement Cost

4.63

Current Procurement ROI

10,520,000

Additional saving with x9.5 Procurement ROI (Leader)

1,763

Total working hour per year

100

Internal processing cost per order

Sourcing & Spend Management

AVERAGE

Suppliers per million of spend ? Leader: 3.4;
Average: 10.84;
Laggard: 28.32.

Calculation: Active Suppliers / Million Spend x 10^6. Value: Measures Supplier Leverage and Collaboration Opportunities.

Source: The Hackett group

Suppliers Creation & Maintenance Cost ?Leader: 31$;
Average: 43$;
Laggard: 209$.

Calculation: 72 minutes x internal hourly cost + The average degradation of supplier data is about 2% per month. (Simetryk).

Relates to: Collect information on suppliers - Entering new suppliers - Systems integration - Approval execution - Update - Legal document collection & Financial control.

Annual % of negotiated savings ? Leader: 20%;
Average: 10%;
Laggard: 5%.

The average % ranges from 5 - 20% per Aberdeen and 10% per Hackett.

Savings from negotiation, volume discounts offered by preferred suppliers (project based).

% Spend under control (with contract) ?Leader: 85%;
Average: 59%;
Laggard: 27%.

Calculation: Spend Actively Sourced & Managed by Procurement / Total addressable spend.

Value: Measures Procurement Control and influence; Potential Savings Pipeline.

Source: The Hackett group

ABC Spend analysis ?ABC analysis is a classification method derived from the Pareto principle and split strategic / recurrent / tactical puchases.

Saving from Supplier Mng

149,815

Move from manual data collection, creation & maintenance to digital & automatic solution.

? Year 1: +15% spend coverage up to 85% spend under management.

Year 2: +25% spend coverage up to 90% spend under management.

Year 3: +35% spend coverage up to 95% spend under management.

User and supplier adoption = more spend captured and accurate spend data = real time granular item level visibility = spend savings from new contracts, re-negotiations and compliance to existing contracts/preferred suppliers. Saving using a Source-to-Contract solution

SAVING ON FIRST YEAR

3,899,815

Total saving by leveraging a Source-to-Contract solution: better Supplier control, enhance spend coverage and optimal project efficiency. (Spend analysis, e-Tender, Contract mng, Project mng.

	Year 1	Year 2	Year 3
1/ Organization, Sourcing & Spend	3,750,149	8,062,649	13,022,024
2/ Order Processing	1212	1212	1212
3/ Invoice Processing	208	267	413
TOTAL SAVING	1,423	1,487	1,638
Incremental saving		0	0

	Year 1	Year 2	Year 3
Budget for Administrator users	2,616	2,616	2,616
Budget for Procurement/Validator users	8,484	8,484	8,484
Budget for Preferred suppliers management	3,600	3,600	3,600
Implementation fee	25,000
TOTAL INVESTMENT	38	13	13

	Year 1	Year 2	Year 3
Sourcing & Spend management	3,750,149	8,062,649	13,022,024
Order processing	1212	1212	1212
Account payable	208	267	413
Total	1,423	1,487	1,638
Incremental Total		0	0

	Year 1	Year 2	Year 3
Yearly cost for all Administrators	2,616	2,616	2,616
Yearly cost for all Standard user	8,484	8,484	8,484
Yearly cost for all Preferred suppliers	3,600	3,600	3,600
One time implementation fee	25,000
Total	38	13	13

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Procurement Organization

Procurement Organization

Cost of Procurement as a % of Spend ?Leader: 0.596%; Average: 0.828%; Laggard: 1.060%. Calculation: Procurement cost / Total spend. Value: Tracks Procurement Efficiency. Note: Relevant Benchmarks Vary Widely by Industry. Source: The Hackett group / CAPS / ACME

Procurement FTE per Billion of Spend ?Leader: 43.6; Average: 51.55; Laggard: 59.5. Calculation: # Procurement FTEs / Total spend x 10^9. Value: Measure Focus on Highest Value Activities. Source: The Hackett group

Procurement Return On Investment ?Leader: 9.5; Average: 4.6; Laggard: 2. Calculation: Savings Implemented / Procurement cost. Value: Justifies Investment in Procurement Organization. Source: The Hackett group

Annual Purchasing Spend ?Spend under control VERSUS Spend not addressed by the Procurement Department.

10,000,000

2,160,000

4.63

10,520,000

1,763

100

Sourcing & Spend Management

Suppliers per million of spend ? Leader: 3.4; Average: 10.84; Laggard: 28.32. Calculation: Active Suppliers / Million Spend x 10^6. Value: Measures Supplier Leverage and Collaboration Opportunities. Source: The Hackett group

Annual % of negotiated savings ? Leader: 20%; Average: 10%; Laggard: 5%. The average % ranges from 5 - 20% per Aberdeen and 10% per Hackett. Savings from negotiation, volume discounts offered by preferred suppliers (project based).

% Spend under control (with contract) ?Leader: 85%; Average: 59%; Laggard: 27%. Calculation: Spend Actively Sourced & Managed by Procurement / Total addressable spend. Value: Measures Procurement Control and influence; Potential Savings Pipeline. Source: The Hackett group

ABC Spend analysis ?ABC analysis is a classification method derived from the Pareto principle and split strategic / recurrent / tactical puchases.

Saving from Supplier Mng

149,815

SAVING ON FIRST YEAR

3,899,815

Estimate your S2P ROI

Order Processing

Tips <img src="https://sourcing-force.com/wp-content/themes/Divi-child/roi_calculator/images/icons/icon_6.png" alt="">

Order Processing

Interner ordering cost per order ? Leader: 26$ ; Average: 51$; Laggard: 97$. Manual & paper based processes versus full digitalised processes. Source: Aberdeen Benchmark report on e-Procurement and invoicing

Purchase Request to Order cycle time (days) ? Leader: 1; Average: 2.5; Laggards: 7.5. Source: Aberdeen Benchmark report on e-Procurement and invoicing

Usage of P-card out of total spend ? Leader: 5.20%; Average: 1.10%; Laggards: 0.02%. Source: The Hackett group

% of Transactions via E-catalog integration ?Leader: 45%; Average: 35%; Laggards: 25%. Source: The Hackett group

12,500

1,900,548

Potential saving

860,548

3,500,000

36,254

0

313,740

SAVING ON FIRST YEAR

4,675,683

0.70%

116

115

8.57

Estimate your S2P ROI

Account Payable

Account Payable

% of invoice sent electronically ?Leader: 36%; Average: 24%; Laggard: 11%. Manual & paper based processes versus full digitalised processes. Source: Aberdeen Benchmark report on e-Procurement and invoicing

Current processing cost per invoice ? Leader: 3.10$; Average: 15.60$; Laggard: 38.80$. Full Human ressources costs engaged in managing Supplier invoices. Source: Aberdeen Benchmark report on e-Procurement and invoicing

Invoice processing cycle time (days) ?Leader: 3.8; Average: 9.7; Laggard: 20.8. Faster invoice processing time because of automation means more invoices become eligible for early payment discount. Source: Aberdeen Benchmark report on e-Procurement and invoicing

Spend under early payment discount ? Leader: 31%; Average: 10%; Laggard: 1%. Allow supplier to optimize their treasury.

10,000 / per invoice

701,929

Potential saving

1,000,000

102,767

105,289

164,953

310,832

SAVING ON FIRST YEAR

€

Steps Completed

S2P scope of work

Tips <img src="https://sourcing-force.com/wp-content/themes/Divi-child/roi_calculator/images/icons/icon_6.png" alt="">

Return On Investment : SAVING VERSUS INVESTMENT

Saving with a Source-to-Pay solution

Sourcing-to-Pay Investment

Your Return on investment: 0.03

Steps Completed

Congratulation!

Scope of Work

Saving

Investment

Return on investment : 0.03

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Cost of Procurement as a % of Spend ?Leader: 0.596%;
Average: 0.828%;
Laggard: 1.060%.

Calculation: Procurement cost / Total spend. Value: Tracks Procurement Efficiency. Note: Relevant Benchmarks Vary Widely by Industry.

Source: The Hackett group / CAPS / ACME

Procurement FTE per Billion of Spend ?Leader: 43.6;
Average: 51.55;
Laggard: 59.5.

Calculation: # Procurement FTEs / Total spend x 10^9. Value: Measure Focus on Highest Value Activities.

Source: The Hackett group

Procurement Return On Investment ?Leader: 9.5;
Average: 4.6;
Laggard: 2.

Calculation: Savings Implemented / Procurement cost. Value: Justifies Investment in Procurement Organization.

Source: The Hackett group

Suppliers per million of spend ? Leader: 3.4;
Average: 10.84;
Laggard: 28.32.

Calculation: Active Suppliers / Million Spend x 10^6. Value: Measures Supplier Leverage and Collaboration Opportunities.

Source: The Hackett group

Annual % of negotiated savings ? Leader: 20%;
Average: 10%;
Laggard: 5%.

The average % ranges from 5 - 20% per Aberdeen and 10% per Hackett.

Savings from negotiation, volume discounts offered by preferred suppliers (project based).

% Spend under control (with contract) ?Leader: 85%;
Average: 59%;
Laggard: 27%.

Calculation: Spend Actively Sourced & Managed by Procurement / Total addressable spend.

Value: Measures Procurement Control and influence; Potential Savings Pipeline.

Source: The Hackett group

Tips

Interner ordering cost per order ? Leader: 26$ ;
Average: 51$;
Laggard: 97$.

Manual & paper based processes versus full digitalised processes.

Source: Aberdeen Benchmark report on e-Procurement and invoicing

Purchase Request to Order cycle time (days) ? Leader: 1;
Average: 2.5;
Laggards: 7.5.

Source: Aberdeen Benchmark report on e-Procurement and invoicing

Usage of P-card out of total spend ? Leader: 5.20%;
Average: 1.10%;
Laggards: 0.02%.

Source: The Hackett group

% of Transactions via E-catalog integration ?Leader: 45%;
Average: 35%;
Laggards: 25%.

Source: The Hackett group

% of invoice sent electronically ?Leader: 36%;
Average: 24%;
Laggard: 11%.

Manual & paper based processes versus full digitalised processes.

Source: Aberdeen Benchmark report on e-Procurement and invoicing

Current processing cost per invoice ? Leader: 3.10$;
Average: 15.60$;
Laggard: 38.80$.

Full Human ressources costs engaged in managing Supplier invoices.

Source: Aberdeen Benchmark report on e-Procurement and invoicing

Invoice processing cycle time (days) ?Leader: 3.8;
Average: 9.7;
Laggard: 20.8.

Faster invoice processing time because of automation means more invoices become eligible for early payment discount.

Source: Aberdeen Benchmark report on e-Procurement and invoicing

Spend under early payment discount ? Leader: 31%;
Average: 10%;
Laggard: 1%. Allow supplier to optimize their treasury.

10,000
/ per invoice

Tips