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 7:00:00 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."

	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

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 (Highest average salaries)

Milwaukee, WI $800,000 Pembroke, MA $500,000
St. Paul, MN $400,000
Garland, TX, $350,000
Attleboro, MA, $325,000
Warren, MI, $300,000
Minneapolis, MN, $300,000
Morristown, NJ, $288,000
Spokane, WA, $277,000
Irvine, CA, $275,000

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

For more information read:

Purchasing compensation: How to negotiate a higher salary

How we did the survey

Purchasing e-mailed its survey to a cross section of readers from a variety of industries in July and August, and received 1,586 responses from men and women filling all job titles, from buyer to chief purchasing officer (CPO). Respondents represent every region of the country, every commodity and every industry. Results have a confidence level of 95% and a margin of error of +/-2.5%.

Measure yourself against these stats

A majority of (92%) purchasing professionals who responded to Purchasing's 28th annual salary survey are satisfied with the direction their careers are taking, and nearly 80% would recommend the field to a friend or family member. Here are some salary-related reasons why this is so:

Salaries and bonuses rose an average 4% in 2008.
Average annual compensation—salary and bonus—is $88,206. Median compensation—the point at which half of survey respondents receive more and half receive less—is $76,000.
Sixty-four percent of respondents got bonuses averaging 14% of their annual salaries.
Sixteen percent receive stock options, with a median value of $9,000.
Twenty-seven percent earn more than $100,000 annually. Of this figure, 3% make more than $200,000.
For buyers, average compensation is $49,182. Average compensation for purchasing or supply vice presidents is $203,107. Commodity managers make $92,756.
Women's salaries continue to rise faster than men's (5.1% vs 4.7%).
Fifty-four percent of respondents are involved in product-development discussions at an early stage.
Purchasing pros have taken on new responsibilities in the past three years. These consist of buying logistics services (24%), quality control (23%) and buying IT services (15%).
Sixty-three percent meet regularly with top management.

Profile of the purchasing pro

Results of this year's survey provide the following demographic data of respondents:

Sixty-nine percent are men. Men ($95,427) earn more than women ($71,951).
Average age of survey respondents is 47 years. Sixty-nine percent are older than 40 years. Respondents who are 41 to 50 years of age earn an average of $90,555. Compensation is much less for purchasing pros younger than 30 years; these respondents have salaries that average $71,975.
Average tenure in the field is 16 years. Forty-seven percent of survey respondents have worked in purchasing longer than 15 years. Average salary of a purchasing pro with more than 15 years experience is $97,181.
Seventy-six percent of purchasing professionals have a college degree. Average salary of respondents who have graduated from a four-year program is $94,555. Among the highest paid are those who have an MBA ($115,224).
Twenty-percent of respondents are Certified Purchasing Managers (C.P.M.). Average compensation for purchasing professionals with certification is $95,725. The average for those without certification is $82,343.
Fifty-nine percent hold posts in middle management, earning $85,961 on average.
Twenty-five percent work in miscellaneous manufacturing industries. Others work in process (chemicals/paper/food) industries (11%) and transportation/automotive (10%) and equipment/machinery industries (10%). Industries paying the highest salaries are: energy/mining/utilities ($103,553), computers ($98,633) and process industries ($98,534).
Forty-one percent work at companies with more than $500 million in annual sales; they tend to be among the highest paid ($106,660). Those who work for smaller businesses, with annual sales of less than $125 million receive $68,422 in their yearly paychecks.
More than half (55%) of respondents work at corporate. Twenty-five percent signify on their survey responses that they are plant buyers. Others (20%) work at the divisional level. Of these, division buyers make the most ($98,363).
Purchasing pros responsible for budgets of more than $25 million are among the highest paid; they earn $112,258. Forty-seven percent of respondents have such responsibility. Buyers with even more money to spend ($500 million plus) make on average $176,995. Just 5% of respondents manage budgets of this size.
Fifty-nine percent have supervisory responsibility; average number of people supervised is 15.
Metals is the single most important commodity purchased for 25% of respondents. Other respondents buy components (18%), electronics (10%), chemicals (10%) and MRO (9%). Seven percent buy services.

And as for next year....

Purchasing professionals who responded to the Purchasing survey expect to see increases in salaries next year of approximately 2% to 3%. They report that their companies have open positions in indirect sourcing and sub-contracting. Because expertise in these areas is in demand among employers, these jobs may pay higher than average salaries.

One respondent says that the toughest to find are qualified candidates with soft skills. "Being able to communicate is key," he says. "I can train the rest." Another echoes that: "I look for ability to sell the strategy and the value of procurement to the organization."

By the end of the first quarter of next year, Tonia Deal at Tonia Deal Consultants expects to be recruiting purchasing pros for executive-level positions—vice presidents and chief procurement officers. She says demand also will be strong for candidates who have expertise at financial analysis. "Companies are looking for purchasing professionals who have the ability to do parametric analysis, a skill especially important in make-or-buy decisions."

For his part, Kevin Rohan at J.P. Canon says merit increases for purchasing professionals will remain static or decrease next year due to the challenging economic climate. However, he says, "the job market continues to be strong and companies will still offer 10% to 20% increases for new-hire critical openings when they find purchasing professionals who can have an immediate impact in many different areas, such as reducing costs, leading new initiatives and launching innovative projects."

Research and consulting firms that report on trends in compensation are more optimistic and are projecting even larger increases—especially for employees who make the grade. According to The Conference Board in New York, companies are planning on raises of 3.8% in 2009 for salaried employees in all functions and 3.9% for executives.

A new report from consulting firm Watson Wyatt in Washington, D.C., shows that employers plan to give workers merit increases of 3.5% next year, identical to the raise they received this year and just slightly lower than the 3.6% in 2007. What's more, companies plan to give bigger raises to better-performing employees, the firm says. Those who exceed expectations will receive 4.4% and those who far exceed them will see raises of 6%.

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