Salary Survey
Procurement's compensation is up again in 2008 according to Purchasing's annual Salary Survey. It's another strong indication of the growing importance of the purchasing profession.
By Susan Avery -- Purchasing, 12/11/2008 2:00:00 AM
Companies are paying top dollar to purchasing professionals who can impact the business—even in a challenging economy.
According to Purchasing's 28th annual salary survey, compensation for purchasing professionals in 2008 rose on average 4%. That's a little more than the average for most other workers. And although recruiters and other compensation experts who specialize in placing purchasing pros say companies plan to keep pay increases steady next year, the job outlook for purchasers is bright and there is plenty of opportunity for raises in 2009.
Average annual compensation—salary plus bonus—for purchasing professionals in 2008 is $88,206, according to survey results. Among the highest earners this year are respondents with responsibility for managing categories of indirect spending, logistics and some commodities such as chemicals and metals.
Purchasers responsible for sourcing indirect spend categories such as travel services earn some of the biggest salaries reported by survey respondents: the average is $101,962. This figure reflects the value companies put on purchasing expertise at managing the category and controlling not only the rising costs of, but also spending on, travel.
About 10% of respondents say management added travel to purchasing's responsibilities in the past three years.
Those who buy commodities such as chemicals and metals have had a busy year, thanks to the volatility of prices. The Purchasing Chemicals Price index through October of 2008 was 32.5% higher than the index for all of 2007. The metals price index was 48% higher. But management has recognized purchasing's challenges in those markets and rewarded buyers with higher-than-average salaries. Survey respondents who source chemicals now make an average $96,713, while metals buyers are seeing paychecks on average of $90,468. The survey respondent with the highest compensation package this year lists metals as the commodity he's mainly responsible for sourcing. He earns $800,000.
Purchasing pros with responsibility for chemicals and metals typically make up a good share of the survey's pool of respondents (25% say they buy metals, 10% buy chemicals).
Likewise, purchasing pros with responsibility for transportation and logistics, another spend category affected by higher costs recently, earn more than the average survey respondent this year ($95,804). Managing logistics—and complex supply chains—has taken on new importance for most companies operating in an increasingly competitive global environment. More and more, they are asking the purchasing operation to manage the category. In fact, 25% of respondents say their companies have added transportation and logistics to their responsibilities in the past three years.
"Logistics is hot," says Tonia Deal, president of Tonia Deal Consultants in Hudson, Ohio, adding that opportunities for purchasing professionals have opened as companies rethink their strategies surrounding low cost country sourcing efforts. "It's not going away, but because of higher fuel costs and some problems with quality, companies are taking a hard look at bringing some sourcing back to North America and they are looking to procurement for expertise at helping them do this."
And, in general, companies are looking for purchasing professionals now with strong negotiation skills, says Deal. Further underscoring procurement's value, she says, is that "They are saying, 'Purchasing we need you to come in and manage these contracts, and do what you do best. Help us create win-win contracts in a down economy.'"
Kevin Rohan, director of procurement recruiting at J.P. Canon Associates in New York, agrees. "One of the positive outcomes of an economic downturn is that purchasing becomes a priority in terms of visibility and resources."
A bump in bonuses
Bonuses have always been an important part of compensation packages earned by purchasing professionals responding to the salary survey. This year, 64% of respondents got bonuses that average 14% of their annual salaries. Last year, 63% got bonuses of 13%.
The bonuses are based on meeting company financial goals for 66% of survey respondents. Other criteria for receiving a bonus include progress toward development cost targets (for 21% of respondents), cost targets for purchased parts (for 16%), supplier quality improvements (8%) and cycle time improvements (6%).
Respondents to the salary survey also receive stock options (16%), with a median value of $9,000.
One respondent contacted by Purchasing says that while purchasers at his company, which is in the process industries, have received raises of 2% to 5% over the past several years, "We see more of a bump in bonuses, due mainly to company performance." In addition to this measure, management also bases bonuses on purchasing's progress toward cost-savings goals (below target, on target, above target), he says.
Another respondent who also works in the process industries says his company pays bonuses to managers in the purchasing operation that range from 10% to more than 25%. These bonuses are paid based on progress toward goals associated with increases in working capital (i.e., extending payment terms) and process-automation efforts, among others.
Bonus figures are above averages reported in new research by Hewitt Associates, a human resources consulting and outsourcing company in Lincolnshire, Ill. The research shows U.S. workers earned bonuses that average 10.8% in 2008, declining slightly from 11.8% in 2007. Among the more common types of awards offered by employers, according to Hewitt, are business incentives (63%), special recognition (56%) and individual performance (41%).
How purchasing compares
Rohan at J.P. Canon says average annual merit increases of procurement professionals he's interviewed as a recruiter are in the 3% to 5% range, in line with the average increase of respondents to this year's survey. They work mainly at pharmaceutical, financial services, manufacturing and consumer products companies.
But, the average increase for those he's assisted in finding purchasing jobs in other companies is significantly higher: 20%.
The merit increases are mainly to recognize purchasing accomplishment at managing costs, he says. But it is not the only criteria. Other reasons for raises include success at rolling out new processes and systems (based on return on investment), team development (for managers) and professional development contributing to department goals ( for individual contributors).
The 2008/2009 U.S. Compensation Planning Survey from consulting firm Mercer shows that purchasing compensation is higher than the average for other professions. Mercer reports that companies increased compensation for employees in all functions by 3.8% in 2008.
Purchasing professionals earn more than their colleagues in related fields. Average annual salary for design engineers is $86,194, according to results of a survey by Design News magazine. Results of a similar survey by Logistics Management magazine show logistics professionals earn $80,000, the same as in the past two years. These publications and Purchasing all are published by Reed Business Information.
Value of purchasing
Recruiters and salary survey respondents alike say purchasing compensation continues to rise as the function takes on more importance in the eyes of management.
Especially valuable to companies now are purchasing professionals who "have it all," says Rohan of J.P. Canon. From his vantage point, he sees companies compensating handsomely buyers with expertise at reengineering processes, use of formal sourcing methodology, use of e-procurement tools and managing certain categories of spend such as energy, chemicals and logistics.
Likewise he says companies are willing to pay more for purchasers with degrees in supply chain management, purchasing operations or logistics from such schools as Michigan State, Arizona State, Bowling Green, Penn State, Syracuse and Northeastern.
Adds Deal at Tonia Deal Consultants of companies unwilling to pay the going rate for qualified purchasing professionals, "If they don't recognize the market, and get up to speed with salaries, they will suffer."
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 |
| Average | Median | |
| Source: Purchasing | ||
| Salary | $88,206 | $76,000 |
| Age | 47 | 48 |
| Years' experience | 16 | 15 |
| Average | Buyer | Sr. buyer | Purch mgr | Comm mgr | Supply chain mgr | Mat'l mgr | Purch mat'l mgr |
VP purch/ supply |
|
| Source: Purchasing | |||||||||
| $88,206 | $49,182 | $64,890 | $80,141 | $92,756 | $101,890 | $81,024 | $133,606 | $203,107 | |
|
Services (e.g., travel) |
$101, 962 | $54,697 | $70,054 | $96,377 | $101,556 | $112,500 | $91,958 | $162,933 | $201,650 |
| Chemicals | $96,713 | $56,800 | $69,842 | $83,877 | $101,214 | $110,875 | $70,000 | $163,904 | $244,500 |
| Information technology | $96,625 | $45,612 | $75,200 | $84,388 | $120,547 | $102,000 | $50,000 | $137,333 | $274,500 |
|
Transportation/ freight |
$95,804 | $44,333 | $71,000 | $73,400 | $77,292 | $109,000 | $67,000 | $144,467 | $186,000 |
| Metals | $90,468 | $46,471 | $65,075 | $74,071 | $93,591 | $96,303 | $88,863 | $125,638 | $227,850 |
| Electronics | $87,314 | $50,330 | $60,337 | $80,295 | $88,605 | $90,040 | $84,591 | $146,849 | $215,000 |
| Packaging | $87,291 | $48,852 | $72,375 | $78,581 | $126,200 | $115,000 | $64,274 | $118,827 | $129,000 |
| Machinery | $85,852 | $84,000 | $76,013 | $81,346 | $89,820 | $93,000 | na | $108,125 | na |
| Components | $79,058 | $49,235 | $59,864 | $83,639 | $84,616 | $106,409 | $72,773 | $114,482 | $147,260 |
|
Office Supplies/ equipment |
$78,740 | $43,771 | $45,833 | $76,429 | na | $92,977 | $82,000 | $113,688 | $165,333 |
| MRO | $78,542 | $50,123 | $57,208 | $79,769 | $81,750 | $92,214 | $132,500 | $115,000 | $150,333 |
| Average | Buyer | Sr buyer | Purch mgr | Comm mgr | Supply chain mgr | Matl mgr | Purch matl mgr |
VP purch/ supply |
|||
| $88,206 | $49,182 | $64,890 | $80,141 | $92,756 | $101,890 | $81,024 | $133,606 | $203,107 | |||
| Communications equipment | $88,435 | $42,917 | $59,956 | $74,042 | $93,650 | $150,000 | $59,333 | $171,719 | na | ||
| Computers arelated equipment | $98,633 | $40,000 | $65,853 | $85,378 | $113,000 | $90,000 | $94,167 | $240,000 | $295,000 | ||
|
Equipment/ machinery |
$84,652 | $51,847 | $65,110 | $77,493 | $83,571 | $91,648 | $79,636 | $135,400 | $247,500 | ||
| Electronics | $84,372 | $52,540 | $58,557 | $74,822 | $88,097 | $93,567 | $68,461 | $151,559 | $218,333 | ||
|
Energy/ mining/utilities |
$103,553 | $50,504 | $72,150 | $94,207 | $105,676 | $111,600 | $91,416 | $137,117 | $276,000 | ||
| Financial/services | $91,749 | $43,563 | $66,417 | $71,500 | $120,000 | $101,227 | $61,185 | $142,611 | $186,200 | ||
| Industrial controls/instruments | $83,280 | $45,563 | $53,333 | $89,550 | $90,956 | $71,000 | $104,333 | $155,643 | $288,000 | ||
| Miscellaneous manufacturing | $79,038 | $48,289 | $65,324 | $74,739 | $95,780 | $105,121 | $73,429 | $119,692 | $137,100 | ||
| Primary metals and metals fabricating | $79,792 | $41,171 | $65,912 | $67,774 | $79,417 | $103,500 | $92,770 | $132,047 | $166,667 | ||
| Process industries (chemicals/paper/food) | $98,534 | $58,176 | $72,247 | $89,378 | $106,820 | $110,688 | $80,667 | $141,269 | $178,167 | ||
|
Transportation/ automotive |
$94,017 | $50,253 | $65,920 | $86,950 | $82,530 | $96,800 | $79,143 | $123,583 | $304,250 | ||
|
Wholesale, durable goods/service centers |
$95,277 | $49,300 | $50,990 | $82,818 | $98,146 | $88,583 | $80,583 | $117,543 | $230,950 | ||
|
Source: Purchasing
| |||||||||||
| Salary By City (Lowest Average Salaries) |
|
Russellville, AR $30,000 San Diego, CA, $30,000 Melbourne, FL, $29,500 Augusta, GA, $29,304 Twin Falls, ID $29,120 Portland, OR, $27,000 Birmingham, AL, $25,000 Mogadore, OH, $25,000 Arabi, LA $25,000 Scottdale, PA $24,000 |
PURCHASING.COM EXCLUSIVE SALARY SURVEY DATA:
To read prior salary survey reports on Purchasing.com go here:
2007 Purchasing Salary Survey: Purchasing salaries continue their Climb
2006 salary survey: Purchasing paychecks get fatter
2005 salary survey: Applause please
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