Curious about Procurement Salary benchmarks?

We are also and we will be answering most of your questions around salary benchmarks.

There are primarily two reasons we are covering Procurement salary benchmarks

1.Providing a baseline for procurement professionals

As you know most of our readers are procurement professionals, and if you are reading this chances are you are a procurement professional too.

As our readers chart our their career path in procurement, we wanted to give them an idea about what to expect from a compensation standpoint.

Also if you are curious to know where you stand as compared to the market, hopefully, this should solve your curiosity.

2. Understanding long-term trends

We were curious about the long-term trends in procurement salaries.  So we are trying to figure out whether the long term trend is upward or downwards.

Research Methodology

When we started on this project, we thought about sending a survey to our readers but ISM (Institute of Supply Management) already does that so we dropped the idea of gathering data using our own surveys. And honestly, we don’t have reach like ISM.

We gathered data for the last 8 years. Why 8 years?

We wanted to cover the trends over 10 years but due to the financial crisis of 2008 – 2009, the data for 2008-2010 was not a good representation of the long-term trends.

You can see 2011 onwards trends, but really the last 3-4 years is the trends you would see in a booming economy.

Few observations and disclaimers before we move forward

1. We saw some inconsistencies in the data and we will point them out as we move forward. Again the data is the output of a survey of hundreds of procurement and supply chain professionals.

As per the last survey (2018), 2972 responses were received.

As per the calculator on survey’s site survey monkey, for a response like this, you could assume a 95% confidence level.

Survey benchmarks

In case you are planning to use this data for salary negotiations, Use this data as a baseline and then do additional research around your industry, location and the company you are planning to join.

2. All these numbers are average salary across industries. So you should always adjust this based on your industry averages.

3. Titles are grouped together, so you probably have to find the closest match for your job title.

4. The number presented is average base numbers and you might or might not have a bonus program in your company.

4. We answer the following questions in this research

Impact of location on the salary of procurement professionals.

– Impact of gender on the salary of procurement professionals.

– Impact of experience on the salary of procurement professionals.

– Impact of certification like CPSM on the procurement professionals salary

3. Key Procurement Salary benchmarks

Now let’s look at the various salary benchmarks. All the salary benchmarks are grouped under 5 job titles

1. CPO – Chief procurement officer or equivalent titles like Head of Supply management.

2. VP level – This includes titles like Vice president of procurement, VP of purchasing, VP of supply chain or supply management.

3. Director Level  – This includes titles like Director of Purchasing, Director of procurement. 

4. Manager level  – This includes titles where you might be managing a team of professionals. For example Procurement manager, sourcing manager, supply chain manager.

5. Experienced Supply management professionals  – Professionals with some experience in the industry.

6. Emerging Supply management professionals  – New talent who is making significant progress in their supply management career.

 

1. Average Salary for Procurement professionals

Here is how the average salary by job titles across the last 8 years.

Average salary for procurement professionals

Key observations

1. CPO salaries have fluctuated a lot in the last 8 years. In the last 3 years though, there is a steady increase. CPO salaries can be directly attributed to the economy and since the economy is in the boom cycle, the salaries are on the rise.

2. VP levels – the salaries have been on the decline and has not recovered back to 2011 levels.

3. Director level and manager level salaries have remained pretty stable.

4. Emerging supply chain professionals or beginners have seen a steady increase in the salary.

Net Increase or decrease in base salary

Next, we looked at the absolute increase or decrease in salaries over the last 8 years we studied and here are the results. we compared the salaries of 2011 and 2018 to get to thu

Net Increase or decrease in average Salary

As we noticed earlier, all job titles have seen a salary increase in the last 8 years. But at the VP level, the net decrease is 12%.

We are not sure if this is an anomaly in the data or generally VP level professionals are being paid less over time.

The salary for emerging supply chain professionals has increased by 57% over the past 8 years.

Of course, the base was low, to begin with, so that is one reason for the dramatic salary increase.

But we feel that the other reason it is going up is that companies are realizing that they need smart talent to elevate the role of procurement in their organization.

It is good news for students who are looking to build a career in procurement and supply chain.

Next, we wanted to see if there is a difference in pay based on gender and what the long-term results look like.

2. The average salary for men

Here is how the average salary for men look like in the last 8 years

Average salary for procurement - men

Key observations

The trend with the average salary is consistent with the Men salaries.
The salaries at CPO level has been rising consistently and VP level has been fluctuating.

Let’s compare the average net increase in salary for the past 8 years. This is calculated as a difference in salaries between 2011 and 2018.

Net increase or decrease in men salary

As you can see from the chart above

The salary for the entry level talent has more than doubled.

We don’t interpret this as an increase in starting salaries but a realization that good procurement talent is valued. And hence the name emerging supply management professionals.

CPO’s salaries have seen an 8% increase in salaries over the last 8 years.

However, VP level positions have seen a net decrease in salaries. This trend is puzzling, we don’t know what caused it. It very well could be a data anomaly.

The other reason we could think of is that CPO’s compensation is closely aligned with other executives where they are compensated based on the overall performance of the company. The VP level might be compensated based on a fixed salary.

The other encouraging trend is that salaries for experienced professionals have increased by 40%.

3. The average salary for Women

Let’s look at average salaries for Women

Average_salary_procurement_women

Key observations

CPO level and VP level trend are consistent with what we have seen for Men.

Women CPO salaries have increased and Women VP salaries have decreased.

Director level and Manager level salaries have seen a consistent rise in the last 8 years.

Let’s compare the average net increase in salary for the past 8 years-Difference between 2011 and 

Increase_decrease_women

All job titles have seen an increase in salary except the VP level and the trend is consistent with what we have seen with the average and men salary.

 

4. Difference between salaries – Gender Gap

The obvious questions from here are

-> Is there a gender gap from a pay perspective. Are men paid more than women?

-> The second question is about the long-term trend and whether the salaries are increasing or decreasing at a higher pace for one gender vs the other.

To answer the first question, we took an average of salaries across 8 years to calculate the average salary by job title. It is not perfect since we are taking averages of averages but we wanted to have some comparison point.

The results are as below.

average_salary_comparison_men_women

At CPO level, women average salary is higher than men. In this case, 3.5% higher than men.

When you compare VP level salaries, men earn more than women and the difference is pretty stark.

– On average women procurement professionals at the VP level, earn 28.5% less than men. The trend is consistent across all other job titles.

– Director level – Women earn 11.7% less than men

– Manager level – Women earn 13.5% less than men

– Experience Supply chain professionals – Women earn 16% less than men.

– Emerging supply management – Women earn 3% less than men.

So to conclude, except at executive level, there is a clear gender gap in procurement salaries across the board.

Next, we wanted to look at the long-term trend, so we compared the net increase or decrease in salaries across both genders.

Netincrease_decrease_men_women

The Key trends are as follows

– At CPO level, women have seen higher increases than men.

– At the VP level, both have seen a decrease but the decrease in women salaries at this level is pretty sharp. As you can see from the results above, Women salaries decreased by 35% vs. men where the salary decrease is at 16%.

– At director level, women saw a higher net increase in salaries as compared to men. Women salaries increased by 25% as compared to men who only saw an increase of 19%.

– At manager level, both saw similar % increase in salaries.

– The main difference is the emerging supply management salaries, men saw an increase of 105% vs 37% for women. We can’t explain this because in our experience we have not seen a gap in salaries at this level.

5. Impact of experience on procurement professional salaries

Like in any other job, experience matters but we wanted to see how much does it matter and what is the trend in salaries when you compare the number of years in the job.

Average_salary_by_experience

As the experience increases, the salary also increases as you can see above.

So what is the difference in average salary?

Let’s take 2018 and compare the difference in salaries

– Procurement professionals with < 5 years of experience on an average earn $97,000

– Procurement professionals with 6-10 years of experience on an average earn $111,000.  So 6-10 years earns 15% more than the previous tier.

– Procurement professionals with 11-20 years of experience earn an average salary of $123,000. 11-20 years of experienced procurement professionals earn ~11% more than the previous tier

– And more than 21 years earns $129,000. 21 years + earn ~5% more than the previous tier.

For professionals with experience of 21 years and above, the lower increase in salary % is understood because the base salary is also going up.

So now let’s compare the base salaries between a less experienced professional (<5 years) and a veteran (>21 years). The difference in the average base salaries is $32,000 or 33%.

These are average salaries across job titles, so the numbers don’t do justice to reflect career progression and salaries increase as you go higher up in your career progression.

Net Increase or decrease in salaries

increase_decrease_experience

In terms of the net increase or decrease over the last 8 years. There is a steady increase in salaries over the last 8 years.

Procurement professionals with 11-20 years in experience have seen the highest increase in salary of 28%.

If it is the same set of respondents over a period of time, then this makes sense because their experience in increasing and the salaries follow the trend.

On the > 21 years buckets, the net increase is small over the last 8 years. That could be because their salaries are in the higher bracket and the net increase might still be significant but the % wise it is less as compared to other experience categories.

6. Impact of education on procurement professional salaries

People often wonder the impact of additional education on their salaries and career growth.

While the survey doesn’t answer the question about career progression, it does answer the question about salary.

As you can see in the graph below, Procurement professionals with a master’s degree earn more than the professionals with just a bachelor degree. Now this is just an observation and but we are not suggesting causation here, it is a mere correlation.

Average_salary_education

Has the gap increased in years?

Let’s analyze that

Here is the comparison of salaries over the last few years

Masters vs Bachelors

As you can see above the gap was as high as 34% in 2013 and as low as 18% in 2011.

To average it out – Procurement professionals with master degrees earn 26% more as compared to procurement professionals who only have a bachelor’s degree.

Net Increase or decrease in salary

Not only the salaries are lower, to begin with, the growth in salaries is also limited for procurement professionals with only a bachelor’s degree. The difference is calculated by taking the difference of 2011 and 2018 salaries.

Increase_decrease_education

As you can see in the graph below, the salaries for professionals with a bachelor’s degree only increased by 2% as compared to professionals with master’s degrees where the increase is 12%.

So to summarize, master’s degree does help in earning more salary.

7. Impact of location on procurement professional salaries

Does location matter when it comes to salary?

The short answer is Yes and you know that already. But let’s look at the trends across different locations.

One thing which we don’t know is whether ISM surveys adjust for cost of living in base salaries. We are assuming that it is but we are not sure.

The survey data is presented in regions, so there is no state-specific data but the states are grouped in regions. Following is the net increase or decrease in salaries (comparing 2011 and 2018 salaries)

Incrase_decrease by location

When we look at the last 8 years, all locations have seen a steady increase in salaries except the mid-Atlantic regions where the net salaries actually decreased over a period of time. That includes New Jersey, Pennsylvania, and New York.

States like Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah, and Wyoming saw the biggest net increase in salaries in the last 8 years.

Since the data is collated from different states, it is different to identify which state is mostly driving this number.

Following by Mountain states, the Pacific states saw an increase of 21%. So procurement professionals in Alaska, California, Hawaii, Oregon, and Washington saw a net 21% increase in salaries over the last 8 years.

New England region has the lowest salary increase in the last 8 years. The net increase in salaries was 6% over the last 8 years.

The average salary in each region /State

To keep the graphs readable, we didn’t plot salaries over years, but we did look at the last year salaries (2018) and how each region stacked.

Procurement_Salary_by location - 2018

As you can see in the chart above, procurement professionals in the Pacific region earn the most and professionals in mountain region earns the least.

Now when you compare this with the net increase/decrease, this makes sense. For example, New England saw only a net 6% increase but that region has the second highest salary in the region.

8.Impact of certification on procurement professional salaries

Are the certified procurement professionals paid more than their noncertified colleagues? The answer is Yes and here is the data.

Average_salary_certificaiton vs non certification

As you can see above, certified professionals have consistently seen a higher salary in the last 8 years.

How much higher, let’s see that

Average_Salary difference - certification- non certification

As you can see above, certified procurement professionals earned as high as 13% in 2018. The lowest salary difference is in 2012 which is 3%.

So certified professionals earn anywhere between 3% to 13% higher than non-certified professionals.

To summarize, certified procurement professionals earn 9% higher than the non-certified procurement professionals.

8. Does CPSM certification make you more money?

Another common question asked is which certification is better. Most of you would have heard that CPSM certification makes more sense, especially in the United States.

So we looked at the data to see if CPSM certified procurement professionals are paid more than procurement professionals who have certifications other than CPSM.

Aerage_salary_CPSM vs Non CPSM

As you can see above CPSM certified professionals are paid more barring few exceptions.

We compared the salary each year to get to this answer. As you can see above, CPSM professional earns as high as 23% in 2011.

Average_Salary difference - CPSM- non CPSM

However, the gap is shrinking. In the years 2014, 2015 and 2017, CPSM professionals earned less than professionals with other certifications.

Also, the gap has been shrinking since 2011 and in the year 2018, it is down to 7%.

What we don’t know for sure is that whether it is due to an anomaly in the data – survey participants or is this a real trend.

The average salary difference between CPSM and other procurement certifications is 5% over the last 8 years.

Hope you found this helpful! if you do, feel free to drop a note in the comments section.