During an economic climate when most salaries are increasing at about the pace of the rate of inflation, news on compensation for purchasing professionals is good on just about every front:

• Earnings are up 6%.
• More buyers than ever are getting bonuses.
• Women’s salaries are growing faster than men’s.
• Paychecks of purchasers with responsibility for services such as travel are higher than just about anyone else’s.

All this good news is a sure sign of top management’s understanding and recognition of the profession’s value to the corporation.

Results of Purchasing’s 26th annual salary survey show compensation rising to $83,205 in 2006, a 6% increase over last year. That rate of growth is not as high as in 2005; it’s actually more in line with previous years. But the rate is higher than that for salaried workers in many other professions such as engineering and even those in careers related to the supply chain such as logistics managers.

More purchasing professionals than ever before (63%) received bonuses that average 14% of annual salary in 2006, mainly for meeting corporate financial goals, according to results of Purchasing’s survey. While the size of the bonus remains about the same, the percentage of respondents to the survey who are rewarded this way for their performance has been increasing over the past five years.

For the first time since the magazine has surveyed its readers on compensation, women’s average earnings ($66,671)—while still significantly lower than men’s ($89,956)—are growing at a faster pace (7.1%) than average (6%) and quicker still than paychecks of their male colleagues (4.7%). Last year, women’s compensation averaged $62,200, while men’s averaged $85,900.

And, purchasing professionals who are responsible for sourcing services such as human resource benefits, consulting, travel and advertising and marketing are reporting salaries that average more than $100,000 annually, a lot better than their colleagues who source other commodities. This is a continuation of yet another trend: management recognition of the tremendous impact strategic sourcing of indirect goods and services can have on the bottom line.

While the latest data from the Bureau of Labor Statistics show the unemployment rate in the U.S. at 4.4%—its lowest level since 2001—compensation for salaried workers for the most part has not started to rise, nor is it expected to do so in 2007. Results of a survey of more than 1,000 organizations earlier this year by Hewitt Associates, a human resources consulting provider in Lincolnshire, Ill., shows that salaried-exempt employees received raises of 3.6% this year. Next year, these same employees can expect raises of 3.7%, the highest increase in five years, the consultants say.

Results of salary surveys conducted by Design News and Logistics Management magazines show professionals working in positions with similar levels of responsibility to those held by respondents to Purchasing’s annual questionnaire—and similar qualifications—didn’t get big raises either. Design engineers earned an average of $73,000—a raise of 3% over last year—while salaries of logistics managers actually fell 4.5% from $83,790 to $80,000. This is a sign of a leveling off in demand for the professionals, report Logistics Management editors. Both Design News and Logistics Management magazines are published by Reed Business Information, parent company of Purchasing.

These functions are vital to the success of growing companies, so why are purchasing professionals apparently bucking the trend? Purchasing turned to recruiters for a response to that question. It’s simply a matter of supply and demand, they say.

“With the continued success of strategic procurement initiatives and the impact of quantifiable savings, companies have taken note of the millions (and billions) that their strategic purchasing and supply chain groups are saving,” says Kevin Rohan, director of procurement recruiting, J.P. Canon Associates in New York. “The end result is that companies in many industries—pharmaceutical, financial services, manufacturing, chemical processing—are all competing for the same people. It’s forced them to pay premiums to attract talent.”

Over the past eight years, Rohan has seen a 10-20% increase in salary scales for strategic purchasing professionals and the rewards for performance become much more lucrative. Purchasing/sourcing manager jobs that may have had a range of $70,000 to $90,000 six years ago now are being filled at $90,000 to $110,000 or more. Hot industries are those he mentions along with consumer food and beverage, medical devices, and financial services businesses. Companies in these industries are paying top dollar, particularly for purchasing professionals with category expertise at sourcing marketing services, IT, professional services (HR, legal, consulting), travel, facilities and capital equipment/MRO.

This year’s median salary—that point at which half the survey respondents receive more compensation and half receive less—is $71,500. That’s $2,500 greater than last year’s median ($69,000) a 3.6% increase.

The Institute for Supply Management conducted its first annual salary survey of both members and non-members in the ISM database earlier this year. Results of this study show respondents have an average annual salary of $78,470, a figure in line with Purchasing’s results reported in the December, 2005 issue.

Sixty-three percent of purchasing professionals responding to Purchasing’s 26th annual salary survey received a bonus, averaging 14%. The percentage receiving a bonus is higher than ever before in the history of the salary survey. Last year, the figure was 60%. The average size of the bonus, however, is a bit less than in previous years. In 2005, average size of bonus received by respondents was 11.9%.

Senior executives responding to the survey—including purchasing vice presidents and directors, materials managers, commodity managers, and purchasing and supply chain managers—are the most likely to receive bonuses. More than three quarters of respondents filling these titles received a bonus as part of their compensation package. Consistent with seniority, bonuses are most common among purchasing executives with the greatest supervisory and dollar-volume responsibilities.

All together, respondents received a bonus for meeting company financial goals (62%), development cost targets (18%), cost targets for purchased parts (16%), supplier quality improvements (8%) and cycle time improvements (6%).

Sixteen percent of respondents receive stock options, a figure similar to results of last year’s survey. Average stock value is $12,500.

Results of the 26th annual salary survey reflect the range of purchasing professionals who make up Purchasing’s readership. The magazine received 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.

Purchasing’s analysis of salary according to job title spans a range of $128,600 from lowest to highest. Average compensation for buyers is $49,900. Average compensation for purchasing or supply vice presidents is $178,500. The highest paid respondent earned $600,000 in 2005. He is in middle management, and works in the wholesale, durable goods/service center industry. His main area of responsibility is metals buying.

As in past years, results of Purchasing’s annual salary survey show that a purchasing executive’s professional responsibilities serve as a benchmark of his or her compensation. As dollar volume and supervisory duties increase, so does income. The break point for higher than average earning’s in this year’s study is more than $25 million in annual purchasing responsibility. Survey respondents responsible for less than this typically report compensation close to average or less than average for the profession as a whole; those who purchase at this level and above enjoy better-than-average salaries. Similarly, as supervisory duties increase so does average pay.

The best compensated commodities for purchasing professionals are: services ($106,200), transportation/freight ($92,900) and information technology ($90,400).

	Avg	Buyer	Sr. Buyer	Purch Mgr	Comm Mgr	Supply Chain Mgr	Mat'l Mgr	Purch Mat'l Mgr	VP Purch/Supply	Other
Avg	83,205	49,897	64,279	76,425	84,316	103,253	82,199	118,840	178,469	84,540
Metals	80.2	47.3	61.7	67.6	84.1	92.8	83.2	105.4	173.7	97.0
Chemicals	85.6	48.5	68.7	83.7	102.7	88.4	75.4	120.0	193.5	73.9
Electronics	84.9	49.8	62.6	83.5	86.1	107.0	75.3	120.7	193.9	87.5
Packaging	84.4	49.5	63.7	71.7	77.8	114.7	82.1	136.1	215.0	84.3
Components	79.3	54.4	60.6	71.3	75.3	92.0	86.4	124.8	199.7	78.2
Machinery	86.4	67.1	73.6	88.7	98.0	118.4	70.7	114.7	155.0	77.8
MRO	71.2	48.1	63.0	78.1	75.1	112.7	92.8	104.7	130.2	72.3
Office equipment/ supplies	71.2	37.3	61.7	64.2	81.6			93.7	100.0	85.2
Transportation/ freight	92.9	35.0	38.0	82.3	65.0	128.3	76.8	109.6	158.8	83.1
Information technology	90.4	46.3	72.1	82.8	77.3	117.5		128.8	139.6	90.8
Services (e.g. travel)	106.2	58.8	75.4	102.3	80.4	121.3	123.8	137.4	183.8	96.6
Source: Purchasing