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Procurement’s Next FrontierThe Future Will Give Rise to an Organization of One

Copyright © 2014 Accenture All rights reserved. 2

IntroductionAccenture Sourcing & Procurement Research

2007 2009 2011 2015 …

1 http://www.accenture.com/SiteCollectionDocuments/PDF/HHP_brochure_low10_07_07.pdf

2 http://www.accenture.com/SiteCollectionDocuments/PDF/South%20Africa/Accenture-Compulsive-Contributors-More-is-asked-and-more-is-delivered.pdf

High Performance through Procurement1

Procurement Masters saved 10 times

what it costs to run procurement

“It pays to be good.”

Compulsive Contributors2

Procurement Masters expanded their

focus to generating value beyond cost

savings

“More is asked and more is delivered.”

Procurement’s Next Frontier

The Future Will Give Rise to an

Organization of One

“A New Digitally Driven, Strategically

Focused Procurement Organization.”

Accenture Sourcing & Procurement Research Background

2008 2010 20132012 2014


Future of Procurement

PoV52 executive interviews

Our research was designed to understand the business and procurement trends that

would substantially affect procurement organization globally in the next 5 to 7 years.



Digital platforms and technologies are expected to totally transform the way most

procurement organizations do business


Cost of

Procurement(as % of spend)

2020201520112007

Insightful Spend

Understanding(as % of spend)

Contract/Policy

Compliance(as % of spend)

Controlled

Suppliers(as % of suppliers)

0,2%

100%

98%

100%

1,0%

10%

40%

0,7% 0,6%

20% 60%

40% 50% 70%

80%50%

Smaller, more cost-efficient

procurement organization supported

by digital platforms and technologies

Full control through close cooperation

with strategic suppliers in the ‘virtually

integrated enterprise’

Cognitive systems to support

procurement professionals increasing

compliance, automation and quality

Extended use of advanced analytics

together with the industrial internet of

things leading to meaningful spend

insights

internal

external


Executive SummaryThe Procurement Organization of One

Four key digital technologies will give rise to a procurement organization of one:

cognitive systems, analytics, cloud computing and the industrial internet of things

Key trends leading to the future of procurement:

1

2

3

4

5

6

5

2

6

4

3

1

The future procurement organization will consist of a group of

procurement professionals embedded in the business connected back

to a smaller, core-decision making team supported by technology.

Companies will establish a more intimate relationship with a small

group of strategic suppliers, creating a ‘virtually integrated

company’, boosting top line growth through more effective innovation

Future procurement cloud’s advantage will go beyond process and

technology standardization and low cost to enhanced usability and

more effective use of content

The industrial internet of things will reshape the procurement

function offering increased traceability, enhanced use of analytics and

challenging the status-quo of key procurement processes

The expanded use of advanced analytics will benefit the procurement

function on different domains

Cognitive systems will take over routine, manual work resulting in

cost savings through automation, increased quality, consistency &

compliance and augmenting faster and better decision making


Virtually Integrated EnterpriseThe Three-Tier Supplier Ecosystem

Supported by digital technologies a more intimate relationship will be established

with the company’s strategic suppliers, creating a virtually integrated enterprise

Company

Uncharted

Suppliers

Transactional

Suppliers

Suppliers that are currently

unknown but may provide

relevant products, services and

innovation

Key suppliers that will be

treated as part of the company

Focus on operational efficiency

through a high degree of

automation

Strategic

Suppliers

Virtual

Supplier Room

Virtual Supplier

Room, Analytics

Virtual Supplier Room,

Cognitive Agents, Analytics

VIRTUAL INTEGRATED ENTERPRISE

Companies will rely more heavily on a small group of strategic suppliers in order to

significantly boost top line growth through more effective innovation


Virtually Integrated EnterpriseThe Virtual Supplier Room

The virtual supplier room will serve as a virtual gathering place for the company and

its suppliers to connect and exchange ideas


The future procurement organization consists of a group of procurement professionals

embedded in the business and connected back to a smaller, core-decision making team

Organization of OneThe Procurement Organization of the Future

A small, central, decision-

making core team supported by

advanced technology (e.g.

cognitive computing, the 5 apps,

…) focusing on higher-level

cross-business unit

procurement requirements.

Procurement professionals

fully embedded in the

business, addressing business

issues while applying

procurement knowledge.

Non-strategically differentiating activities will be conducted by

technology (virtual agents) and/or the virtually integrated enterprise.


The 5 apps will serve as the technology foundation of procurement:

Virtual Company

Mall

Supply Analytics

Virtual Supplier

Room

Virtual Category

Room

Supplier Network

A cloud-based set of pre-approved privat and public “shops”

from which the internal customer can select goods and services,

in lign with company policies, preferred suppliers and contracts.

A standard dashboard bringing together a wide variety of

data and enabling both procurement and business users to solve

specific problems or answer questions.

A virtual collaboration room enabling the company to interact

with its strategic suppliers and to foster innovation through the

virtually integrated enterprise.

A central place, driven by social media, where the category

managers will find category specific and relevant market

intelligence.

App connecting the company with the supply market and

supporting tendering, performance assessment, supplier

discovery and supplier interaction.

Organization of OneFive Procurement Apps of the Future


Cloud ComputingFocus on Usability and Content

Future procurement cloud’s advantage will go beyond process and technology

standardization and low cost to enhanced usability and more effective use of content

Historcial benefits:

Lower oprational costs (SaaS)

Process and technology

standardization

Faster access to new functionalities

Future competitive advantages:

Amazon like – Usability resulting in

increased productivity and engagement

Google like – Enriched content paired

with analytics leading to better insights

Cloud computing is key to become virtually connected with the external world:


Industrial Internet of ThingsFundamentally Transforming Key Aspects of Procurement

Today’s mobile device-driven market will shift to an interconnected Industrial Internet

of Things reshaping the procurement function

INDUSTRIAL INTERNET OF THINGS (IIOT)

Impact on Procurement:

Increased traceability of

products & materials

Enhanced use of

analytics to improve

decision-making

Challenging the status-

quo of key processesCombining sensor-driven computing, industrial

analytics and intelligent machine applications into a

single universe of connected intelligent industrial

products, processes and services.


Riding the Analytics WaveAnalytics within the Procurement Function

An Accenture survey shows procurement as the least likely corporate function to use

advanced analytics

Structurally align with the corporate analytics center of

excellence

Invest in the proper supporting technologies (including

machine learning!)

Tackle analytics of highest value given maturity and industry

In order to benefit from the use of analytics and improve

business decision-making, procurement organizations need to:


Riding the Analytics Wave5 Analytics Impacts to Procurement

Five procurement areas, in particular, look set to benefit the most from the expanded

use of advanced procurement analytics


Cognitive ComputingFrom Augmentation to Automation

Intelligent and self-learning computers will become trusted ‘expert advisors’,

augmenting complex decisions and operating autonomously under human supervision

What exactly is Cognitive Computing?

Accenture defines Cognitive Computing as a

combination of multiple technologies that enable

computers to:

Perceive the world (e.g. computer vision,

audio processing or sensor processing)

Analyze and understand the collected

information (e.g. natural language or

knowledge representation)

Make informed decisions and take action

(e.g. inference engines, machine learning or

expert systems)


Cognitive ComputingUse and Benefits for Procurement

Accenture research indicates that in the next five to seven years, an organization’s

routine, manual work will become increasingly handled by intelligent virtual agents

Setting up and conducting

requests for proposals

Finding relevant suppliers

Evaluating suppliers’ performance

Creating cost models and

industry cost curves

Analytics and advanced modeling

Compliance

Order fulfillment, report

generation, reporting and catalog

maintenance

Logistics, picking and packing

Benefits for Procurement

Cost savings through

automation

Increased quality,

consistency and

compliance

Augmenting faster and

better decision making

Potential target activities for Virtual Agents within

the Requisition-to-Pay cycle:


Cloud Computing

Analytics

Industrial Internet of Things

Cognitive Computing

Virtually Integrated

Enterprise

Business Stakeholders

Embedded

Procurement Teams

… and supported by 4 key

digital technologies

A new digitally driven, strategically focused procurement organization

The future will give rise to a

Procurement organization of one,

collaborating closely with …

ConclusionFuture of Procurement

17Copyright © 2015 Accenture. All rights reserved.

About the Research

The research was designed to understand the business

and procurement trends that would substantially

affect procurement organizations globally in the next

five to seven years. We conducted a total of 52 one-hour,

one-to-one interviews during which we tested

several research hypotheses. Interviews were conducted

with executives across a variety of industries and

geographies. The majority of executives represent large

global multinational organizations with revenues of up

to $130 billion.

Research insights represent the views of current chief

procurement officers, chief supply chain officers, chief

financial officers, chief technology officers, a chief

executive officer and a chief strategy officer, as well as

other senior-level executives in procurement and supply

chain. We also spoke with senior executive-level digital

and technology experts.