What is the right size for your procurement team?
What to consider when coming up with the right size for your procurement team
Chief Procurement Officers are asked to deliver more and more. They don’t always have the resources to match expectations. What do CPOs need to deliver results and become procurement champions?
1. Procurement team size is determined by value of annual program
Procurement team size is strongly linked to the total value of the annual procurement program. The only statistically significant correlation for factors determining the size of a procurement team was that between team size and the value of the annual procurement program.
2. Laggards and Followers have a lot to catch up
Total value of contracts that each procurement team member establishes per year were examined. The top third of organisations for this metric were termed, ‘Efficiency Champions’. The second third ‘Followers’ and the bottom third ‘Laggards’.
Efficiency Champions establish $340m worth of contracts per year – a whopping $34.7m per employee! Laggards put together contracts worth $21.5m – only $1.6m per employee.
3. Champions run 20 – 30 complex projects each with a value of $18m
In comparison, Laggards complete less than 10 projects, each with a much lower value of $4.5m. Interestingly, both take 6 to 9 months to complete such a project.
4. CPOs rate team capabilities at 53% or lower
This suggests all procurement teams have room to improve their overall capabilities, especially regarding procurement systems and procurement experience of staff outside the procurement team.
Champions and Followers rate the maturity of their procurement systems 35% higher than Laggards.
All three groups struggle with the procurement experience of their clients in the business units. They rate this maturity factor at only 37%.
5. Public sector procurement functions are 2x as big
34 people are part of a typical procurement function in Public sector organisations. In the Private sector, this number is 17 for companies in Industry and just 9 in Service firms.