Total cost to perform the process group "procure materials and services" per $1,000 purchases

This measure calculates the total cost to perform the process group "procure materials and services" per $1,000 value of material and service purchases. Total process cost is the sum of outsourced, overhead, personnel, system, and other costs. The value of all goods and services purchased by your site annually should include all capital expenditure items. The process group "procure materials and services" describes the work of procurement planning, purchasing, and sourcing beginning with developing sourcing strategies for materials and services, the selection of suppliers to provide the materials and services, the development and maintenance of the corresponding contracts, and the ordering of materials and services. This Cost Effectiveness measure is intended to help companies understand this cost expenditure related to the process group "procure materials and services".

Benchmark Data

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Measure Category:
Cost Effectiveness
Measure Id:
103998
Total Sample Size:
2,178 All Companies
Performers:
25th
Median
75th
Key Performance
Indicator:
Yes

Compute this Measure

Units for this measure are dollars.

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Total cost to perform the process group "procure materials and services" / (Value of all materials and services purchased * .001)

Key Terms

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Process Cost Components

Total cost for a process, process group, or function consists of the following five components.

Internal/In-house operating cost consists of the first four components (personnel, systems, overhead, and other).

Personnel Cost

Personnel cost is the cost associated with personnel compensation and fringe benefits of employees (i.e., those classified as FTEs which includes both full-time and salaried/hourly employees) contributing to each respective process. Personnel cost should include all of the following costs.

Employee Compensation: Includes salaries and wages, bonuses, overtime and benefits.

Fringe: Includes contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, and stock purchase plans. This should also include special allowances, such as relocation expenses and car allowances.

Systems Cost

Systems costs include all expenses, paid or incurred, in conjunction with:
Computer hardware or computer software acquired by the organization or provided to the organization through service contracts.

Any related costs to process, service and maintain computer hardware or computer software. The costs of providing and maintaining services for each applicable process (e.g., computer system(s) processing (CPU) time, network/system communication charges, maintenance costs for applications and data storage). This includes the costs related to LANs, WANs, etc. This does not include one-time costs for major new systems developments/replacements. Consultant fees should not be included in depreciation of new system implementations. Include only those costs that occur more than six (6) months after implementation, as normal system maintenance costs. Any systems cost (e.g., maintenance) which is outsourced to a third party supplier should be captured in the separate cost category labeled outsourced cost.

Systems cost should include all salaries, overtime, employee benefits, bonuses or fees paid to full-time, part-time or temporary employees or independent contractors who perform services relating to computer hardware, computer software, processing or systems support.

Overhead Costs

For the purpose of this study, provide the total actual overhead costs for the year related to the specified process. These are costs that cannot be identified as a direct cost of providing a product or a service. Include the primary allocated costs such as occupancy, facilities, utilities, maintenance costs, and other major costs allocated to the consuming departments. Exclude systems costs that are allocated, since these will be captured separately as systems cost.

Other Cost

Other costs are costs associated with the specified process, but not specifically covered in personnel cost, systems cost, overhead cost and outsourced cost in this questionnaire. These other costs include costs for supplies and office equipment, travel, training and seminars. Include the cost of telephones, except for that portion captured in systems cost.

External/Outsourced Cost

In determining outsourced cost, include the total cost of outsourcing all aspects of the specified process to a third-party supplier. Exclude one-time charges for any type of restructuring or reorganization. Outsourced costs should also include costs for intracompany outsourcing (i.e., reliance on a shared services center or other business entity).

Cost Effectiveness

Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.

Median

The metric value which represents the 50th percentile of a peer group. This could also be communicated as the metric value where half of the peer group sample shows lower performance than the expressed metric value or half of the peer group sample shows higher performance than the expressed metric value.

Measure Scope

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Cross Industry (7.3.0)

  • 4.2.1 - Provide sourcing governance and perform category management (10277)
    • 4.2.1.1 - Develop procurement plan (10281)
    • 4.2.1.2 - Clarify purchasing requirements (10282)
    • 4.2.1.3 - Establish materials management contingency plans (10283)
    • 4.2.1.4 - Match needs to supply capabilities (10284)
    • 4.2.1.5 - Analyze organization’s spend profile (10285)
    • 4.2.1.6 - Seek opportunities to improve efficiency and value (10286)
    • 4.2.1.7 - Collaborate with suppliers to identify sourcing opportunities (10287)
  • 4.2.2 - Develop sourcing and category management strategies (20973)
  • 4.2.3 - Select suppliers and develop/maintain contracts (10278)
    • 4.2.3.1 - Select suppliers (10288)
    • 4.2.3.2 - Certify and validate suppliers (10289)
    • 4.2.3.3 - Negotiate and establish contracts (10290)
    • 4.2.3.4 - Manage contracts (10291)
  • 4.2.4 - Order materials and services (10279)
    • 4.2.4.1 - Process/Review requisitions (10292)
    • 4.2.4.2 - Approve requisitions (10293)
    • 4.2.4.3 - Solicit/Track vendor quotes (10294)
    • 4.2.4.4 - Create/Distribute purchase orders (10295)
    • 4.2.4.5 - Expedite orders and satisfy inquiries (10296)
    • 4.2.4.6 - Reconcile purchase orders (10297)
    • 4.2.4.7 - Research/Resolve order exceptions (10298)
  • 4.2.5 - Manage suppliers (10280)
    • 4.2.5.1 - Monitor/Manage supplier information (10299)
    • 4.2.5.2 - Prepare/Analyze procurement and vendor performance (10300)
    • 4.2.5.3 - Support inventory and production processes (10301)
    • 4.2.5.4 - Monitor quality of product delivered (10302)