BENCHMARKING
An Essential Reporting Tool
Presented By:
Nancy Brooks
2008 NAEP Annual Meeting
Dreaded Question #1
or
Opportunity #1
How is Purchasing doing?
(“What is purchasing contributing to the university?”)
The Answer:
Last FY, we managed $240 millions of spend, which
represents 71% of the institutional spend. We
documented cost savings and added revenue
generation of $8.9 million, which translates to a 711%
return on investment. We continue to promote
social responsibility and add value to the campus
community.
Dreaded Question #2
or
Opportunity #2
“So, how does that compare
with our peers?”
Benchmarking
What is Benchmarking?
o
Nancy was
here
Originated as a surveying term
A distinguishable mark placed on a wall,
building, or rock that is used as a reference point
to determine elevation & position in topography
surveys
Benchmarking
In business, benchmarking is used in a similar way
to select reference points to make measurements.
It becomes a standard to measure performance to.
Who Benchmarks?
Organizations who want to
IMPROVE PERFORMANCE
benchmarks of olde

Outputs
# of purchase orders
# of quotes issued
# of purchase orders per buying FTE
# of days to process a requisition
Cost to process a purchase order
.
Old benchmarks were measuring the
outputs of a process…..
But, what are the outcomes of the efforts?
What is the value of the process?
Old Benchmark Analysis
Is it better to have the # of purchase orders
increase or decrease?
Strategic sourcing would lead us to believe that the
numbers should decrease. But what is you
campus is expanding or significantly increasing
sponsored funding?
Old Benchmark Analysis
Is it better to issue lots of quotes or very few?
Too many solicitations could indicate a lack of
strategic sourcing or inefficient bid thresholds.
Too few quotes could indicate too many sole
source procurements.
Old Benchmark Analysis
Is a higher number of purchase orders processed
per buying FTE better than a lower number?
Measuring the number of purchase order per
buying FTE measures the productivity of a
process not the value added by the process.
Benchmarks of olde
The outputs we used to measure are actually
counter to the business efficiency and
effectiveness we seek to achieve.
New Benchmarks
 What
do we benchmark?
What we measure should be strategically
aligned with organizational goals.
Performance Metrics



Translate to the value that procurement has
within the organization
Be understandable by, and meaningful to, senior
administration
Be verifiable
Key Performance Indicators




Percentage of total spend under management
Procurement ROI (savings/operating costs)
Contract compliance
Subjective feedback (structured, survey-based)
Source: Aberdeen Group, November 2007
Key Performance
Indicators/Benchmarks in Higher
Education






% of total spend under management
Cost to process $1 of spend
Cost savings
Average spend per procurement professional
Procurement’s return on investment (ROI)
# Hours of professional development per
procurement professional
Where do we start?
Collecting the pertinent data
1. Institutional Profile:
a) Number of Students (headcount vs FTE)
b) University operating budget less salaries only
2. Procurement Organizational Structure
a) Titles of procurement staff
b) Who does procurement report to?

Collecting data
3. Procurement’s functions & responsibilities
a) functions performed by procurement
b) responsibilities of procurement professionals
4. Operating budget of Purchasing department
Collecting Data
5. Delegated Authority
a) P-card
# of active cards
# of transactions
Net Expenditures
Transaction limit
b) Other forms of delegated authority
Collecting Data
6. Central Procurement Activity
a) Purchase Orders
# of purchase orders
Dollars spent on purchase orders
b) Expenditures not captured on purchase
orders
# of contracts
Dollar value of contracts
Collecting Data

Hours of professional development
(hours of coursework in obtaining degree, hours of workshops
at regional and annual NAEP meetings, other formalized training
opportunities)
Benchmark Outcomes

Total spend managed by procurement (Delegated &
central activity if managed by procurement)

% of total university spend managed by
procurement (Total spend managed/Univ. budget less
salaries)

Average spend responsibility per procurement
professional (Total spend less p-card/number of buying
staff)
Benchmark Outcomes

Efficiency: Cost to process $1 of spend
(Operating budget/total spend managed)


Cost Savings or Increase in Revenue Generated
Return on Investment (ROI)
(Savings + increase in revenue/purchasing operating budget)

Investment in Professional Development
(Total hours of professional development completed)
Best-In-Class

Cost Savings on total spend
> 5%

Return on Investment
> 700%

% of spend under management
> 70%
Source: “The CPO’s Strategic Agenda-Managing Performance, Reporting to the CF”
Aberdeen Group, 2007
The Value of Benchmarking

The institution must be introduced to the
“radical” concept that procurement can do more
than manage the order and delivery of goods
and services; that it can deliver strategic value to
its internal customers and to the institution at
large.
Benchmarking the appropriate key
indicators of performance will help
procurement articulate its value.
Thank You!
Questions?