Agenda

Practical Exercise

Top Challenges

Organization

Technology

Metrics/KPI

Partnership

Risk Mitigation

Priorities

Exercise

Choose one of your 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

Top Challenges of a 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

Traditional Procurement Organization

BuyersCategory

Managers

Strategic

SourcingAdministration

Contracts

Management

TACTICAL PURCHASING 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!”

• Evolve from Single-role discipline to a multi-disciplined teams

• Become Agile based on need of the business

Strategic Alignment with Business

Upgrading the Organization

Multidiscipline Commodity Manager

Source

Contract

Buy

Vendor Relationship

Reporting: Metric/KPI

Investment into the Organization

Technology Basics

Supplier Master Standardization & 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

Technology Leveraging

Procurement must 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

Standard Hierarchy of KPI’s

Traditionally Procurements and

Supply Chain try to tackle the

entire pyramid.

Start with Financial Driven Ones

Financial Based Metrics

= Total Cost Savings / Total Procurement Costs

Partnerships

Driving suppliers to innovate

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)

Risk Management

Challenge Companies

Percentage

Procurement is 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%

Prioritizing Initiatives

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

World Class is both Effective & Efficient

Effectiveness

• Economic Return

• Process Quality

• Performance

Efficiency

• Process Costs

• Productivity

• Cycle Times