World Class Procurement

World Class Procurement

• 2.
  Agenda  Practical Exercise Top Challenges  Organization  Technology  Metrics/KPI  Partnership  Risk Mitigation  Priorities
• 3.
  Exercise Choose one ofyour Organizations: - Draw your basic Procurement Organizational Structure – Buyers, Strategic Sourcing, etc. - Top 5 Metrics or KPI measured - Identify Top 3 Challenges for Procurement - Identify what Technology you leverage best and why - 3 Strategic Initiatives Break Out in Groups of 2 or 3 Review
• 4.
  Top Challenges ofa CPO CPO Survey: Deloitte 2013  Misaligned Objectives  Lack of Resource  Lack of Internal Engagement  Lack of Influence  Data Quality  Availability of Data  Tech Capability  Capability  Lack of Soft Skills  Leadership Skills
• 5.
  Traditional Procurement Organization Buyers Category Managers Strategic Sourcing Administration Contracts Management TACTICALPURCHASING STRATEGIC PURCHASING FTE COSTS Siloed effects resulting in:  “The ERP (fill in blank) sucks!”  “I have no visibility of that contract!”  “Operations are cowboys!”  “Vendor set up is slow!”  “WTF#$@$ !!! was Sourcing thinking!”
• 6.
  • Evolve fromSingle-role discipline to a multi-disciplined teams • Become Agile based on need of the business Strategic Alignment with Business
• 7.
  Upgrading the Organization Multidiscipline Commodity Manager Source Contract Buy Vendor Relationship Reporting: Metric/KPI
• 8.
  Investment into theOrganization
• 9.
  Technology Basics Supplier MasterStandardization & Accuracy Item Master Standardization & Accuracy  Procurement must understand and control the Master Data  Proficiency in Reports and knowledge of metric calculations  Proficiency of System Process Flows
• 10.
  Technology Leveraging  Procurementmust understand business process and how it relates mechanically to the Technology. P2P Process in ERP.  Leverage existing Technology and partner with the IT Group (they are our best friends)  Leverage B2B – Supplier Self Service, eCatalogs  Investments in Tech Technology Cost per FTE invested World Class: $24,507 Average: $12,476 Percent of Organizations with 75% or greater utilization of their primary application / ERP functionality
• 11.
  Standard Hierarchy ofKPI’s  Traditionally Procurements and Supply Chain try to tackle the entire pyramid.  Start with Financial Driven Ones
• 12.
  Financial Based Metrics =Total Cost Savings / Total Procurement Costs
• 13.
  Partnerships Driving suppliers toinnovate World-class procurement groups are very effective at harnessing the intellectual capital of their suppliers to bring new and innovative solutions to bear, helping to influence (not just support) the business strategy. In 2014, the average contribution of supplier innovation efforts to companies‘ total revenue is 3.5% Incremental Revenue from supplier base innovation (as a percent of total revenue)
• 14.
  Risk Management Challenge Companies Percentage Procurementis held responsible for risks but does not have a mandate or the resources 94% Mostly react to risk to ensure regulatory compliance 89% Struggle to fund supply risk management compared to hard dollar ROI projects 49% Until there is a major event, we will not invest seriously in supplier risk management 26%
• 15.
  Prioritizing Initiatives
• 16.
  Sources & References •Procurements New Operating Model, Booz & Co. • Five Characteristics of World Class Procurement in 2014, The Hackett Group • The CIPSA-Hackett Group procurement value, performance and capability study • Enabling Trade Valuing Growth Opportunities, World Economic Forum • Apply the Gartner Maturity Model to Drive Supply Management Value – The Gartner Group
• 17.
  World Class isboth Effective & Efficient Effectiveness • Economic Return • Process Quality • Performance Efficiency • Process Costs • Productivity • Cycle Times