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November 12-14, 2017

Bellagio Resort & Casino, Las Vegas

Key Issues in Procurement: What Are Procurement Leaders Focused on Achieving and What Capabilities Will Get Them There?

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This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a

competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for

any purpose is strictly prohibited without the prior written consent of The Hackett Group.

Copyright © 2017 The Hackett Group, World-Class Defined. All rights reserved.

3© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017

Kurt Albertson is a Principal with The Hackett Group with program responsibility for North American

Advisory programs focusing on client relationships, business development, research and program

delivery. Mr. Albertson works with over one hundred Global 1000 companies leveraging research

and thought leadership to provide strategic direction and best practice business advice within

Procurement and Finance.

Prior to joining the Hackett Group Mr. Albertson spent six years as a management consultant in

Sourcing and Procurement during which he worked with executives from dozens of large

corporations on sourcing, business and technical strategies, organizational and business process

design, and cultural change.

Mr. Albertson also has five years of automotive experience working in manufacturing, quality, and

operations. In this role he designed and implemented global manufacturing processes and

supervised production operations.

Mr. Albertson has been quoted in the Wall Street Journal and other major publications, has been the

key note speaker at many national events, and travels globally to support client objectives.

Kurt Albertson – Principal, Procurement Advisory Practice

Contact Information:

770-225-7570

[email protected]


Enabling World-Class: Hackett’s Solution PortfolioBenchmarking, Advisory, Business Transformation

▪ Unlimited inquiry access for members to Hackett experts for transformation steering

▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett Certified Best

Practices through the Best Practice Intelligence Center

▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events

▪ Enterprise, functional and process-based performance studies & value accelerators

▪ “Gold Standard” Benchmark – over 8,500 conducted, the empirical backbone for your transformation at the

SG&A Enterprise, Functional, and Process level.

▪ World-Class, Peer, and Custom Peer comparative metrics and best practices

▪ Ability to provide multiyear World-Class Program view of performance over time

▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP

▪ Finance

▪ Human Resources

▪ Information Technology

▪ Procurement

▪ Supply Chain and Operations

Membership

Advisory &

Research (Provides insights into World

Class Performance)

Benchmarking(Defines World Class

Performance)Hackett Perspective on World-Class Finance – Accelerating GBS | 9

Peer Group World Class

The World-Class Advantage – FinanceWorld-Class organizations always find a way to get there

IT Cost (per end user Equivalent)

Procurement Cost (% of spend)


23%

$1.7K$2.2K

HR Cost (per employee)


19%

0.59%0.73%$6.0K

22%

2014 Cost of Finance by Process Category (as a % of revenue)

Finance Cost (% of revenue)


1.12% 46%

-59%-46%

-23%

0.60%$7.7K

0.39%

0.21% 0.23%

0.16%0.11%

0.17%

Transacting Control & Risk Planning & Strategy

Practice or

Outcome

Process

Taxonomy

Vision

Dimension

SDM

Component

Capability /

Enabler 1 - Lagging 2 - Achieving 3 - Exceeding 4 - Leading

Current

State

Assessment

PriorityFuture State

TargetAverage Gap

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which a

sourcing strategy

exists

Sourcing strategy is ad hoc or

nonexistent.

Sourcing strategies reflect and are

aligned with overall business

strategy and objectives, including

high level risk requirements.

Historical spend analyses are

regularly and routinely conducted

by market and across markets -

i.e. by specific commodity, service,

location and business.

Commodity management and

sourcing strategies define

appropriate purchasing and

payment processes and tools.

Contract terms, lengths, and

conditions are defined to drive

optimal benefits to the enterprise;

in terms of total life-cycle cost,

service, and quality.

Sourcing strategy is reviewed and

updated annually (or more

frequently) to reflect direct linkage

to the company's strategic growth

plans, market changes and

product innovations, production

plans and business

M&A/ventures.

2 - Achieving 2 - Medium 3 - Exceeding 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Breadth of supplier

universe

Supplier selection is based on

historical or personal

relationships; suppliers often

selected prior to Procurement’s

involvement in a project.

Projects are initiated to limit the

total number of suppliers and

bundle the spend volume.

Procurement is involved in the

supplier selection process.

Suppliers are often considered on

a regional or compartmentalized

basis.

Supplier universe is considered

by major commodity or service

area rather than in aggregate.

Suppliers are considered for

bundled and/or extended services

that may extend to multiple areas

of competency.

Supply universe is global and not

limited to traditional commodity

suppliers.

1 - Lagging 2 - Medium 2 - Achieving 1.00

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree to which

supplier risk is

measured and

managed within the

sourcing process

Risk not considered as part of

sourcing decisions or supplier

management.

Supply risk is considered as part

of category-specific sourcing

efforts and supplier performance

management processes.

Supply base risk is explicitly

factored into broader business

continuity objectives. Supplier

risk is considered beyond the

specific good or service being

sourced.

Procurement works with other risk

management staff, ensuring

alignment between internal

risk/return preferences, business

objectives, and both general and

specific supply market risks.

3 - Exceeding 3 - High 4 - Leading 0.90

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

contingency

planning performed

to assure supply

No supply contingency planning

exists.

Contingency plan exists in case of

supply shortage; alternate

suppliers and alternate locations

identified.

Alternative supply sources are

developed in conjunction with

current suppliers for key

purchases.

Back-up suppliers are required for

critical or strategic categories and

items, including formalized

contingency plans to ensure

seamless supplier transition and

application of penalties and

liabilities with supplier(s) at fault.

3 - Exceeding 2 - Medium 3 - Exceeding -0.55

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of supplier

qualification in

place

No formal supplier qualification

process.

Simple processes in place to

register suppliers and inspect

supplier qualifications at time of

registration or category review.

Established supplier training

program on enablement

strategies and buyer’s

technologies. Formal program

exists to identify key qualification

metrics with stratification based

on category criticality and supply

alternatives.

Annual review of at risk suppliers

and suppliers of key categories.2 - Achieving 2 - Medium 2 - Achieving 0.37

Practice

Sourcing and

Supply Base

Strategy

Supply

Assurance

Process

Design

Degree of

effectiveness and

efficiency of price

refresh process

Quoting and price refresh process

is undefined and performed

manually and on an ad hoc basis.

Quoting and price refresh process

is defined and audited manually.

Quoting and price refresh

processes are structured to

minimize enterprise financial

impact to all parties.

Quoting and price refresh

processes are automated, nearly

error-proof,, with appropriate

controls in place..

2 - Achieving 2 - Medium 2 - Achieving 0.46

Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Level of

rationalization of

supply base size

Large number of suppliers due to

short-term, “one-off” relationships.

Organization has identified the

need to rationalize the number of

suppliers in order to create

leverage.

Supply base rationalization is

complete. Few new suppliers are

needed and an added supplier

typically results in a removed

supplier (equilibrium). Strong

relationships developed with

current suppliers focusing on JPI

in critical or large dollar spend

areas.

Structured process is in place that

benchmarks the marketplace and

ensures continual supply base

assessment.


Practice

Sourcing and

Supply Base

Strategy

Purchased

Cost

Reduction

Process

Design

Maturity of use of

supply market

intelligence

Supply market knowledge is ad

hoc and incomplete.

Process, tools, and sources

established to gather and

organize data on most categories.

Supply market intelligence /

knowledge captured to identify

when a supply strategy needs to

be re-visited.

Supply market intelligence /

knowledge captured, modeled,

and utilized for pro-forma

simulations done during strategic

planning, design, sales, etc.


Business

Transformation(Transforms Performance into

World Class)

Service

Delivery

Components

Information

Service

Placement /

Scope

Process

Sourcing /

Location

Strategy

Process

Design

Enabling

Technology

Skills &

Talent

Governance

&Organization

▪ Enterprise Performance Management

▪ Shared Services, Global Business Services & Outsourcing

▪ Merger Integration

▪ Working Capital Management

▪ Oracle EPM (Platinum Partner)

▪ SAP ERP (Gold Partner)

▪ Hyperion

▪ Kronos

▪ Workforce Management

▪ Application Managed Services

▪ Source to Pay Solutions

– Assessment

– Selection

– Implementation

– Change Management

Best Practice

Technology

Enablement(Implements Technology to

enable World Class)

In

-h

ou

se

Co

mp

le

te

O

utso

urc

in

g

Colo

catio

n

CustomerResponsibility

ProviderResponsibility

Sa

aS

A

pp

lic

atio

ns


Objectives

▪ Review trends for priorities of procurement leaders

▪ Review trends for procurement capabilities

▪ Discuss Hackett’s Digital Transformation framework

Priority Trends


In 2017, revenue growth will continue to outstrip FTE and budget plans in procurement

4.0%

3.2%

1.2%

4.1%

1.4%

0.7%

2015-2016 Actual 2016-2017 Projected

Efficiency

Gap

Productivity

Gap

Revenue growth Number of staff (FTEs) Operating budget

Source: 2017 Key Issues Study, The Hackett Group

The never ending drive to “do more with the same”


Success starts with aligning procurement’s value with enterprise objectives and building out the right sets of capabilities to perform

Procurement

Value: Evolve the Service Value

“What do we aspire to be?” which

becomes “What to execute?”

Procurement

Performance:

Recalibrate the Service Execution

“What is the level of performance

for both efficiency and

effectiveness?”

Procurement

Capability:

Redevelop the Service Capability

“What capabilities do we have today

or need to acquire to change?”

ProcurementWhat does the business need

Procure-to-Pay to deliver and

what does it do?

SUPPLY ASSURANCE

PURCHASE

COST

REDUCTION

TCO

REDUCTION

DEMAND

MANAGE-

MENT

VALUE

MGT

How well is Procure-to-Pay

delivering relative to WC and

Peers? What capabilities are

needed to be built?

Service

Delivery

Components

Information

Service

Placement

Process

Sourcing

Process

Design

Enabling

Technology

Skills &

Talent

Governance

&

Organization


The top priorities defining procurement’s value proposition in 2017 and beyond

Critical High

39%

23%

26%

13%

11%

5%

19%

21%

16%

12%

48%

61%

55%

64%

58%

62%

45%

42%

45%

48%

Elevate the role of procurement to a trusted advisor

*Improve procurement’s business agility

Reduce and avoid purchase costs

Expand purchasing’s scope / influence

Deepen influence on complex indirect spend categories

Increase internal stakeholder satisfaction

Obtain more value from purchase-to-pay (P2P)

*Support enterprise digital transformation objectives

Reduce supply risk to avoid regulatory non-compliance

Reduce supply risk to ensure supply continuity

Risk

Influence

*Biggest movers 2016 to 2017


Cost savings (priority #1): Most procurement organizations had a savings target for 2016 and most either met or exceeded their target

Did your company have a 2016 savings

target for indirect spend?

Yes, 74%

No, 9%

No but the company had one savings

target that encompasses both Direct and Indirect

spending, 15%

Do not know, 1%

How well did you meet your 2016 savings

target on indirect spend?

Did not meet, 3%

Met, 28%

Exceeded, 55%

Do not know, 7%

Did not have a target, 8%


But as procurement organizations mature their goals begin to evolve beyond savings to also include broader strategic value objectives

As your procurement organization matures and many savings opportunities are exhausted, do you see savings goals being reduced and

procurement’s scorecard shifting to more strategic areas?

N/A – there’s no shortage of savings opportunities for us

to take advantage of

Savings goals are not going down despite being harder to find. We are expected to continue to unearth the

same of greater levels of purchase cost reduction.

As the organization matures, we see the goals evovling to other

areas like strategic value and non-price related cost reductions (ex. process re-engineering, reduced

cost of quality). 49%

16%

35%


2.5

4.1

4.7

2.9

3.9 4.14.4

4.6 4.6

8.0

11.4

12.7 12.5

10.7

9.09.4 9.5

10.4

The history of Procurement’s ROI

Source: The Hackett Group, 2017

Digital

ExcellerationExcel in a

Volatile

Recovery

Enable

Success in

Any Economy

Accelerate

Global Growth

Optimize

Global

Performance

Integrate the

Enterprise

for Sustainable

Success

Accelerate

Growth from

Innovation

Creating a

World-Class

Internal

Customer

Experience

Creating

Agility in a

Digital Age

2011 2012 2013 2014 2015 201620102009 2017

World

Class

Non-WC

Peer

ROI = Savings/Procurement Cost

*Non-WC has 35% more investment in operations activities


Digital Service Delivery Model

Intensifying competition

Disruptive innovation

Customer as King

The Insight Imperative

The Digital Imperative

The five forces of change

▪ Make and implement decisions

quickly

▪ Respond rapidly to changes in

business demands and priorities

▪ Flexible process and frameworks

that align with stakeholder

objectives

▪ Forecast and plan continuously

to identify future risks and

opportunities

What’s required for agility?

In 2017 a key objective continues to focus on a more agile procurement organization (priority #2)

Agile enterprises are those that are capable of changing internally at the rate of external change

Hackett Procurement Agility Model rolled out in 2016


Hackett’s Procurement Agility Model

Agile procurement organization

Low agility Agility enabler High agility

Change averse culture, preserve status

quo, focus on resource utilization

Embrace change, view change as an

opportunity, focus on business outcomes

Bureaucratic decision-making, lacks

empowerment, fosters inappropriate risk

taking

Delegated decision-making authority,

change-oriented leadership, calculated risk

taking

Talent tied to specific roles, common talent

management strategies for all roles, limited

learning and development, life-long

procurement

Flexible talent placement, talent

management tailored to needs of roles,

continuous learning and development,

rotation

Talent

Leadership

Culture

Low HighAgility enablement index

Excerpt from Hackett Procurement Agility Model


We continue to see a drive to elevating procurement’s role to that of a “trusted advisor” (#3 priority)

81%

Ranked elevating the

role of procurement

to a trusted advisor

as a critical or major

objective in 2017

Source: Key Issues Study, The Hackett Group, 2015

77%

64%

61%

57%

53%

47%

36%

35%

35%

5%

4%

Consistently deliver on the basics

Hire and retain high-caliber staff

Increase agility

Develop category management strategies

Deliver high-quality market insights and research

Build better awareness of procurement’s services

Discover and recommend innovative suppliers

Prove value through small projects

Improve the overall buying experience

Other

N/A

Which capabilities will help the most to achieve trusted advisor status?


Hackett 2016 Procurement Forum


In 2017 the conversation continues to shift towards improving the “quality” of influence as opposed to simply “quantity” (#4 and #5)

Savings for stage when

procurement is involved (Quality)

4.57%

2.85%1.92%

0.61%

0.60%

0.56%

Design /Specification

(Demand Mgmt.)

SupplierIdentification

Negotiation &Contracting

Cost Reduction Cost Avoidance

3.45%

2.48%

5.18%

Source: The Hackett Group, 2016

85%77%

68%

100%95% 93%

Direct Materials IndirectMaterials

IndirectServices

Procurement Spend

Influence (Quantity)



Category 1 Category 2 Category 3 Category 4 Category 5 Category 6 Category 7 Category 8 Category 9 Category10

Category11

Category12

Quality Quantity of Spend ($M)

Qu

alit

y o

f S

pen

d

Infl

uen

ce

Supply

Assurance

Price

TCO

SRM - Risk

SRM - Innovation

Demand

Management

SRM - Performance

Sp

end

($1

0M)

Opp

ortu

nity

Opp

ortu

nity

Opp

ortu

nity

Opp

ortu

nity

Opportunity

And we see organizations reflecting this shift with respect to their measurement models across various categories


Increasing stakeholder satisfaction (priority #6) benefits significantly from a structured approach to customer relationship management

▪ Identify key stakeholder groups and individuals,

their interactions and general attitude

▪ Develop measurement approaches tailored to

key stakeholder groups

▪ Analyze customer feedback, plan for action by

leadership to own and deliver

▪ Provide feedback to key stakeholder groups on

customer satisfaction and action plans to address

identified improvement needs

Identify

Customers

Improving the

Customer

Experience

Measure

Success

Analyze

Results

Take

Action


Some critical success factors for a customer-centric approach to procurement ranked by importance and capability

High ImportanceLow Importance


54% of organizations admit procurement brand is not recognizable despite the potential increase in spend influence that it would drive

7%13%

58%

13%7%

No impact Increase by 5-10%

Increase by 11-20%

Increase by 21-30%

Increase bymore than 30%

42%

54%

YesNo

Are procurement brands recognizable

with stakeholders today?How much do you estimate increased brand

awareness would change spend influenced?


Risk rounds out the top ten priorities for Procurement executives

67%

58% 56%51%

33%

41%

35%32%

47%

41%

32% 31%

25% 25% 24%22%

20%

17%

24%20%

8%17%

11%10%

Cyber /information

security

Intensifiedcompetition

Disruptiveinnovation

Access tocritical talent

Regionaldemand

weakness

Regulatory risk IP theft /industrial

espionage

Exchange ratevolatility

Current (2016) Projected increase in 2017-2018

Percentage of companies ranking as “high risk”


Capability Trends


Hackett has recently updated its Service Delivery Model which supports the building of capabilities to deliver on value objectives

• Customer experience strategy

• Service catalog design

• Service based end-to-end process

design

• Continuous improvement capability

design

• Information mgmt strategy

• Performance mgmt framework

• Information deliver strategy

• Analytics strategy and design

• Integrated enterprise information architecture

• Org & Gov strategic alignment model

• Enterprise process ownership model

• Service placement design

• Organization design

• Governance model design

• Service partnering/sourcing

strategy

• Service partner selection

• Outsourcing partner relationship

model

• Technology SDM design decisions

• Business technology governance model

• Functional technology strategy

• Functional technology architecture

• Core values/mindset definition

• Talent strategy

• Skills and competency definition

• Continuous learning and development

• Employee Performance mgmt

• Culture development strategy


Let’s look at how executives feel about the importance of current procurement capability gaps in driving their objectives

Improve procurement analytical, modeling and reporting capabilities

Align procurement skills and talent with changing business needs

Measure and manage procurement performance and business value

Modernize procurement application platform(s)

Improve procurement responsiveness to changes in business demands

Increase spend influence though strategic sourcing

Obtain more value from existing categories through category management

Obtain more value from existing suppliers through SRM

Expand procurement work executed in GBS / SSO

Invest in procurement CoE to enhance ability to provide value added services

Invest in supply market intelligence capabilities

Reduce procurement operating cost

Refine continuous improvement programs and techniques

Increase budget for procurement software tools

Invest in procurement technology other than software

78%

73%

72%

70%

70%

64%

62%

56%

45%

43%

42%

33%

33%

33%

22% High/Very High

26© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Four pillars support

procurement’s digital

business strategy

Data and analytics

form the foundation

Let’s talk about what digital transformation means to procurement by reviewing Hackett’s Procurement Digital Transformation framework

The Digital Business Strategy

2Omnichannel,

personalized

stakeholder

experience

3Digitally

enabled

procurement

workforce

4“Smart”

orchestration of

source-to-pay

services

5Ecosystem of

networked

solutions

1 Analytics-driven insights

42%

say that

collecting

new forms of

category

market

intelligence

is the top

use case for

big data in

procurement

1. Setting a foundation of

analytics-driven insights


The five levels of business intelligence

Optimization

Predictive modeling

Forecasting

Simulation

Alerts

Query/drill down

Ad hoc reporting

Standard reporting

Co

mp

etitive

adva

nta

ge

Complexity

AnalysisWhy did it happen?

MonitoringWhat’s happening now?

ForecastWhat might happen?

PredictThe probability of it

happening?

ReportingWhat happened?


Defining ‘Big Data’Big data is high-volume, high-velocity and/or high-variety information assets that demand cost-effective, innovative forms of information processing that enable enhanced insight, decision making, and process automation

VALUEPatterns, trends,

associationsVERACITY

Uncertainty of data

VOLUME

Scale of data

VELOCITY

Analysis of streaming data

VARIETY

Different forms of data

Top three Big Data use case that have the

greatest potential in procurement:

42%

Collect and analyze new

forms of category market

intelligence

39%

Conduct spend analysis

leveraging unstructured

sources (e.g., maverick and

tail spend buying)

34%

Track real-time supplier risk

and performance metrics

Source: Big Data Case Studies in Procurement,

March 8th Webcast, The Hackett Group

Only 2%

of

organizations

have an

explicit

customer

management

organization,

formal service

delivery

model, and set

of

engagement

processes

2. Building an

omnichannel,

personalized

stakeholder

experience


Creating an omnichannel and personalized stakeholder experience for engaging procurement services

▪ Omni-channel access to procurement process

allowing ability to buy/pay for goods/services from

all locations (corporate, satellite offices/locations,

home, on-the-go/mobile)

▪ Real-time information and status on all

procurement requests/transactions

▪ Intelligent purchasing process that know who you

are, where you sit, and what role you play in the

organization

Chat support

Self-service

Newsletter

Email and messaging

Intranet portals

Phone support

Voice

Mobile

Social

Web

3. Creating a digitally

enabled workforce

31%

of

organizations

consider

access to

critical talent

an area of

high risk and

they expect

that risk to

grow 20% in

the next year.


There are a broad array of procurement’s skills and talent concerns keeping CPOs up at night…where to focus?

Most serious concerns Serious concerns Moderate concerns Least serious concerns

Ability to attract

and retain

Developing

leadership capability

within procurementAlignment of procurement

staff skills with changing

requirements

Procurement managers’

people mgmt. &

development capabilities

Training and developing the skills

of procurement staff

Ability to offer learning &

career progression opps.

Communication vehicles

and styles appropriate

for/preferred by younger

workers

Impact of increasing use of

and dependence on

technology by procurement

Productively integrating

new generation of workers

into the company

Impact of growing use of outsourcing on

staff development and career paths

Maintain adequate skill levels

as older workers retire

Dealing with varying talent

mgmt. requirements of staff

in different regions

Impact of increasing

globalization/ offshoring

of procurement

resources

Source: Skills and Talent Outlook, The Hackett Group, 2014

Most pressing…. Leadership

Attract and retain talent

Learning and career

progression opportunities

Staff skills

development

People mgmt

skills


Creating a digitally enabled workforce relies on many of the “transferable” skills that are needed as we evolve procurement’s value proposition

Business Acumen

Understand key business drivers

Knowledge of factors, priorities and business demands

Identify problems and prioritize alternatives

Relationship Management

Advanced interpersonal skills

Positively influence decisions

Open and approachable

Supply Risk Management Expertise

Assess and prioritize business and category-specific risks

Measure, prioritize, and address risk

Develop risk mitigation plans for high-priority drivers

Data Analysis and Modeling

Process data and extract relevant information

Knowledge of analytical tools and methodologies

Translates analyses into actionable plans

Strategic Mindset

Develop strategic frameworks and visions

Anticipates market changes

Address challenges and outline future direction

Savings and Financial Analysis

Translate savings and value improvements to P&L impact

Develop tools to track, measure and forecast savings

Analyze supplier financial statements for detailed insights


The question of our time: Will Procurement exist in 25 years?

Yes – but it will look very different from today

▪ Transactional tasks may be entirely automated

▪ Sourcing activities may be executed electronically with little need for human intervention

▪ Data analysis will be embedded into our information systems

However…..

There will always be a need for interpersonal relationships, values based

decision making, creativity, and judgement to harness the value of the supply

network.

As humans have in the past, we will adapt our personal value and our

surroundings for success

23%

of P2P

organizations

are piloting or

have partially

rolled out

robotic

process

automation

4. Orchestrating a

“smart” portfolio of

digital services


While P2P process cost reduction is attractive, the real payback comes from enabling broader source-to-settle and business objectives

Value Drivers

Process Cost Reduction

• Transactional purchasing

process cost reductions

• Accounts payable process

cost reductions

Service Level Excellence

• Maverick spending reduction

• Supplier non-compliance to contract

• Demand management (consumption reduction)

• Demand management (spend influence)

• Sourcing savings via better spend visibility from

P2P

• Cost of capital from DPO improvement

• Early payment discounts

• Rebates from purchasing cards

• Reduced cost of P2P errors for direct materials

• Reduced supplier late payments penalties

Strategic Business

Enablement

• Improved/protected

customer service, revenue,

profit

• Brand protection:

compliance risk;

supply/supplier risk

• Opportunity cost of

management time

10X process cost reduction

Foundational to delivering on benefits is end-to-end alignment across source-to-settle


40% 25% 10% 10% 15%

Global category strategy BU / region / large country Local / small country Tactical sourcing Non-procurement managedspend

This includes spend management orchestration through flexible spend management capabilities

Global category strategy

Tactical sourcingBU / region / large country sourcing

strategy

Local / country sourcing strategy

Non-procurement managed spend

?Source: Global Category Management Study, The Hackett Group, 2016

Percentage of company spend managed using each approach

Hackett’s perspective: Global by design, regional as

appropriate, local when required

Tail Spend Mgmt


Defining tail spend: A common definition focuses on the suppliers that make up the bottom 20% of spend

23%

10%6%

24%

7%3%

Lower Quartile Median Upper Quartile

Percent of Suppliers Representing 80%

Invoice volume Invoice spend

“Shorter

Tail”“Longer

Tail”

Hackett P2P Study, 2015

To

tal s

pe

nd p

er s

up

plie

r

Suppliers1 n

80% of spend with

20% of suppliers

Tail spend: 20% of

spend with 80% ofsuppliers

Getting a handle on tail spend starts with an understanding of the supply base profile

Caveat: We normally

also look this by

transaction volume


What are the top strategic activities in a COE or similar team?

39%

41%

40%

14%

14%

17%

Execute strategic sourcing & sourcing event management

Contract & commercial excellence

Analytics

Currently In Place Expanding Use

19%

22%

26%

31%

12%

10%

10%

10%

Cognitive procurement, AI, RPA

Supply innovation

Procurement brand, marketing and communications

Supply market intelligence

Planning/Evaluating Piloting

Top three activities currently in place or expanding use

Top four activities currently being evaluated or piloted


5. Unlocking value

through an ecosystem

of networked

procurement solutions

32%

of

organization

s plan to

consolidate

to a single

source to

pay platform,

but only 8%

have

achieved that

goal today


32% plan to consolidate to a single source to pay platform… but only 8% have achieved that goal today

8%

14%

15%

31%

32%

We use our ERP provider for all source-to-pay processes with only

limited exceptions

We use our ERP and a single source-to-pay solution for the majority of

processes

Our goal is to consolidate all source-to-pay applications on a single

platform provider but we still have disparate tools in place today

We have a “best of breed” strategy which allows us to pick and choose

individual solutions based on how well they meet our requirements

We use a single source-to-pay software provider with limited

exceptions

Which statement would you say best describes your source-to-pay technology strategy?



Many organizations are just getting started with Robotic Process Automation although it is ranked as transformational over the next decade

5%

18%

23%

27%

39%

43%

45%

57%

59%

75%

Enterprise social networking

Prompt payment regulation

Millennial workforce

Global economy

Mobility

Cloud computing

Robotic process automation

Process ownership and link to procurement

Predictive analytics and forecasting tools

Digitalization of B2B connections and transactions

77%

16%

7%

RPA Adoption in P2P

None

Piloting

Partially Rolled Out

Source: 2016 P2P Key Issues Study Results

Trends that will have the greatest transformation impact on P2P in the

next 10 years


The ecosystem of available solutions are all at different levels of maturity

Source: 2016 P2P Key Issues Study Results

We feel procurement

will be focusing more

attention in next few

years


Summary

▪ While cost savings are core to procurement’s value proposition it is evolving to include other

business value objective

▪ Procurement’s focus is shifting to more of an influencer in order to deliver overall business value

and becoming a trusted advisor is core to success

▪ Stakeholder relationship management is a critical capability that should be formally developed

▪ Procurement should be viewed as a single end-to-end global process with strong alignment and

collaboration

▪ Digital transformation objectives of the enterprise are being cascaded down to supporting

function like procurement and can drive step-change benefits

▪ Digital transformation is not simply about technology, talent transformation for example is a

critical component of the journey


Contact information

KURT ALBERTSONPRINCIPAL, PROCUREMENT ADVISORY

1000 Abernathy Rd

Suite 1400

Atlanta, GA 30338

Tel.: 770.225.7570

[email protected]

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