Becoming a Procurement Change Agent A Global Survey of Procurement - - PowerPoint PPT Presentation

Becoming a Procurement Change Agent

A Global Survey of Procurement and Change Management July 2014

Confidential

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Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

140702 Iasta CIPS event.pptx

Your Panelists

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James Jenkinson – Vice President, Efficio James has been with the firm since 2001. He has over 17 years of experience in procurement, operations and supply chain management. James works across both

• ur Consulting and Managed Services units and is responsible for our technology
• ffering and providing customised solutions to our clients. James holds a B.B.S from

Massey University in New Zealand and a Honours degree from the University of California, Berkeley. Constantine Limberakis – Director of Sales & Marketing, Iasta As the director of sales and marketing enablement at Iasta, Constantine is focused on strategic efforts for creating brand awareness and promoting new ideas around Iasta’s products and services. With over 15 years of experience in the software and consulting industry, he’s held various roles in sales, marketing, market research, and product

• development. Constantine holds a BA in History from the University of Illinois at Urbana-

Champaign and an MBA / Masters in Public & International Affairs from the University of Pittsburgh.

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Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

140702 Iasta CIPS event.pptx

Survey Demographics – By Job Role

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8% 8% 10% 18% 22% 34% Contract Manager Other Executive CPO Sourcing Manager Category Manager VP / Director of Sourcing

Roles represented mid – Upper level procurement professionals with

• 44% VP / Directors Sourcing or CPO
• 48% noted as a Manager
• 8% represented Executives outside

procurement

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Survey Demographics – Company Size

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14% 11% 15% 32% 25% Enterprise: $5B+ Large: $1B - $5B Very Small <$50M Medium: $250M - $1B Small: $50M - $250

Company size focused on mid-large enterprises

• 32% represented companies

$1B - $5B revenue

• 25% represented companies
• ver $5B
• 26% represented companies

$50M and $1B

140702 Iasta CIPS event.pptx

Survey Demographics – By Industry

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Other industries included

• Food Manufacturing 3%
• Healthcare 3%
• Higher Education & Research 3%
• High Tech 4%
• Industrial Machinery 5%
• Public Sector 4%
• Life Sciences 1%
• Insurance 4%
• Media 2%
• Mining 1%
• Oil & Gas 3%
• Restaurant & Hospitality 2%
• Sports & Entertainment 1%
• Telecommunications 4%
• Travel & Transportation 4%
• Banking & Financial

Services 3%

• Defense & Security 1%
• Other 6%

14%

Engineering, Construction, and Operations

8%

Consumer Products

5%

Industrial Machinery

9%

Professional Services

5%

Utilities

11%

Retail

140702 Iasta CIPS event.pptx

Survey Demographics – By Geography

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42%

Rest of the World

• France 1%
• Germany 3%
• Belgium 1%
• Brazil 2%
• India 3%
• Ireland 3%
• Italy 2%
• Mexico 1%
• Spain 1%
• Norway 1%
• Sweden 1%
• Netherlands 4%
• Denmark 5%
• Canada 4%
• Other Europe 3%
• Other South America 2%
• Other Asia 1%

58% of the respondents were from the US (38%) and UK (20%)

38%

Based in United States

20%

Based in United Kingdom

140702 Iasta CIPS event.pptx 9

Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

140702 Iasta CIPS event.pptx

Increasing the Rate of Savings is a Top Priority

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(5%-10%) (20%-30%)

4% 14% 39% 43% 11% 8% 14% 67% 5% 15% 30% 50% 25% 17% 25% 33% Improving supplier risk management capabilities Building more strategic supplier relationships Driving wider

• perational efficiencies

through procurement Increaseing the rate of cost savings (identified and realised)

Small ($50M to $250M) Medium ($250M to $1B) Large ($1B to $5B) Enterprise (> $5B)

What is your procurement team's top priority for 2014-2016?

• Large organisations value
• perational efficiencies just as

much as cost savings

• Large companies are better

equipped to work cross-functionally which allows that to address

• perational efficiencies more

effectively

• It was interesting to see how the

“small” companies value building supplier risk strategies, which is typical of our smaller clients who depend on a handful of suppliers to deliver very specific products

• Smaller companies may be more

risk-aware for their business Comments

140702 Iasta CIPS event.pptx

Companies are focused on launching company-wide savings programs in 2014

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What sourcing initiatives has your team launched in 2014?

7% 39% 43% 43% 64% 22% 25% 64% 33% 72% 25% 55% 33% 17% 50% 42% 58% Outsourcing non-core activities to focus on strategic areas Launching initiatives related to CSR/Sustainability 15% Implementing technology to improve processes Significant increases in training and recruiting 25% Launching company-wide savings delivery programs 60%

Medium ($250M to $1B) Large ($1B to $5B) Enterprise (> $5B) Small ($50M to $250M)

• Savings delivery is seen as the most

important, with enterprise companies focussing on training (which we are seeing in the marketplace)

• There is a lot of technology being

implemented in 2014

• Small companies are looking to

specialists to regenerate their procurement functions through

• utsourcing, by implementing better

processes, better technology and most importantly better talent

• Larger organisations seem intently more

focused on CSR/Sustainability due to the public/reputational risk exposure

• Important and common pattern related to

talent, whilst savings are very important, talent retention important also Comments

140702 Iasta CIPS event.pptx 12

Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

140702 Iasta CIPS event.pptx

Overwhelming majority of teams are measuring effectiveness based on total cost savings

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How is your procurement team's effectiveness currently being measured?

11% 11% 29% 86% 61% 21% 29% 28% 19% 36% 81% 56% 25% 25% 30% 40% 40% 70% 35% 20% 25% 33% 42% 17% 92% 17% 17% 25%

Total Cost Savings Procurement ROI Managed v. Total Spend Cost Avoidance Delivery and Accuracy Contract Compliance Procurement Cycle Times

Large ($1B to 5B) Small ($50M to $250M) Medium ($ 250M to $1B) Enterprise (> $5B)

Comments

• Driving out cost savings is the most

tangible way of delivering benefits and the favourite of procurement functions globally

• Cost avoidance is important for larger

companies especially for indexed commodities

• Contract compliance, delivery and cycle

times are harder to quantify and achieve, therefore less emphasis is traditionally placed on these areas

• While procurement is interested in

savings, operational stakeholders are just as interested in decreasing delivery times, increasing order accuracy and reducing procurement cycle times

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Support from executives or business stakeholders is still the biggest hindrance

Which is the biggest hindrance as it relates to advancing your sourcing capabilities?

11 7 Inability to track and manage spend 19 Sourcing and commodity skills Support from executives

• r business stakeholders

100 22 Lack of Technology Formal sourcing procedures 41

• It is not surprising that executive and business

support is still the biggest hindrance. Most, if not all executives do not recognise the benefits provided by procurement

• This indicates that procurement has a change

management issue, where procurement is still struggling to influence their internal stakeholders in a compelling way

• Lack of spend visibility is still a problem
• Procurement lacks the ability to convince

executives of the need for investment –

• Many have invested heavily in ERP

assuming this solves the issue – this does at a high level but not at a procurement level

• Finance and procurement need the same

information connected differently; not speaking a lingua franca Comments

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Procurement teams want to improve their skills for establishing stakeholder engagement

Select the top three most important skills your team needs to meet procurement objectives?

21% 48% 51% 53% 55% 55%

Establishing stakeholder enagagement Verbal and written communication Project Management Analytic skills Negotiation skills Subject matter/category expertise

• Interesting observation that the top

skill required is influencing, which has very little to do with procurement

• Interpersonal skills are very

important when trying to affect any type of change management

• The two areas we do the most

training and up skilling in are analytics and verbal / written communications

• Many procurement organisations

underestimate the power of compelling presentations and presenting skills but it needs to be based on strong analytics Comments

140702 Iasta CIPS event.pptx 16

Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

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Regardless of company size, the majority of companies have no formal SRM processes in place

What is your main savings lever to achieve target savings? & Do you have a formal SRM process in place?

14% 32% 14% 25% 14% 8% 39% 22% 19% 20% 15% 30% 10% 33% 42% 8% 8% 0% No short terms plans to impement SRM Plan to implement SRM in next 12-24 months 25% SRM in place less than 1 year 11% SRM in place less than 3 years SRM in place more than 3 years

Small ($50m to $250m) Medium ($250m to $1b) Large ($1b to $5b Enterprise (>$5b)

11% 13% 23% 49% Other 4% SRM Programs Tactical sourcing initiatives Re-negotiate existing contracts Full strategic sourcing initiatives

Comments

• SRM programs seem to be a

lagging indicator for achieving savings, where traditional methods are the norm

• Smaller companies are not as

invested in the focus on SRM as larger organisations

• SRM is also hard to define; it is

such a broad topic that can range from simple contract management to strategic alliance where suppliers are extensions of a company

• No one knows how to start – the

issue here is companies get tied up in endless discussions around how to define and implement SRM across a different of very different supplies and functions

140702 Iasta CIPS event.pptx

Usage of supplier internal systems via integration is low

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What sources of information do you use to determine a suppliers importance?

32% 14% 71% 57% 4% 32% 31% 33% 44% 14% 44% 30% 35% 55% 35% 55% 25% 50% 25% 25% 17% 67% ERP systems Supplier internal systems (via integration) 5% Direct from supplier (via supplier portal, email, interviews, etc) 3rd party market intelligence Other internal systems Sourcing or procurement tools/ systems 50%

Small ($50m to $250m) Medium ($250m to $1b) Large ($1b to $5b) Enterprise (> $5b)

• Large companies use internal data

sources, whereas smaller companies use more external sources

• Apart from collecting spend data,

internal systems are not best source of supplier data – we find that going to supplies is always very helpful for detailed market insight and third party sources for high level market data

• Other internal systems make up to

50% of information on suppliers;

• pportunity for consolidation (MDM)
• Anticipate an increase in demand

for data collection / big data third party market intelligence Comments

140702 Iasta CIPS event.pptx 19

Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

140702 Iasta CIPS event.pptx

Poor quality of spend data from internal systems is the top challenge for initiating sourcing activities

What do you find to be most challenging when making sense of spend data for initiating sourcing activities?

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10 7 5 Poor quality of spend data from internal systems Labor intensive process of managing and collecting data Inability to identify and forecast savings opportunities Pressure to put more spend under management Inability to identify and prioritize top spend areas Inability to forecast contract expirations 100 40 22 16

• IT has slowed down the path to spend visibility

by assuming an ERP will solve this problem

• ERP systems create great financial data but not

actionable data for procurement people

• Gaining budget for even more reporting

technology is very difficult after the costs of an ERP implementation.

• ERP systems need to better align with how

procurement needs to see data, they are still too finance focused – I guess this is part of the reason why SAP brought Ariba

• The idea of “Source to Settle” in one system is
• ften a challenge; more often there are many

systems feeding procurement requiring a tool for visibility at the executive level. An analyst once coined it Source to Settle, to Settle, to Settle

• There is a huge opportunity for better tools to

come in from classification to predictive analytics Comments

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For those who use an eSourcing tool, supplier adoption and cumbersome eSourcing tools were the biggest challenges

What do you find most challenging when using an eSourcing tool?

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18% 21% 29% 4% 14% 8% 17% 11% 8% 19% 25% 10% 0% 10% 30% 50% 0% 17% 0% 25%

I don’t know how to use it/not user friendly Suppliers are not able to use the tool No platforms available for use Management has not yet decided how to use the tool eSourcing method is too cumbersome

Large ($1b to $5b) Enterprise (> $5b) Small ($50m to $250m) Medium ($250m to $1b)

• Historically, the biggest challenge

for us is ensuring suppliers are able to use the system

• Its one thing to ask IBM to

complete an eRFX, its another for a

• ne man band courier driver
• Having said that, we are not

finding this to be a problem, the penetration of the internet now means that even the smallest suppliers are able to use the internet

• Heavy customisation for large

companies may result in systems becoming more cumbersome

• Ease of use is at the top of the

agenda for most providers lowering the barriers for buyer and suppliers Comments

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Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

140702 Iasta CIPS event.pptx

The UK has been more active in launching procurement activities in 2014

What type of procurement initiatives has your team launched in 2014?

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27% 41% 41% 59% 77% 18% 19% 19% 19% 26% 53% 56%

Deploying supplier centric programs focused on risk Outsourcing non-core activities to focus on strategic areas Launching initiatives related to CSR/Sustainability Significant increase in training and recruiting Implementing technology to improve processes Launching company-wide savings delivery programs

US UK

• This is more about maturity and

delayed focus from the US

• In the US, the notion of a triple-

bottom-line approach to business success has always been a voluntary one not regulated - therefore not obligatory

• Focus on training is more about

talent availability and cost of change

• CSR is more important in Europe

due to compliance and recent scandals

• The link between brand and supply

chain are closely linked (e.g.) BP, Horse Meat in food chain, Green Values/Targets Comments

140702 Iasta CIPS event.pptx

The US is generally more aggressive when it comes to sourcing many categories

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2.42 2.42 2.77 3.11 3.81 4.15 4.15 4.50 4.50 5.19 5.54 4.45 4.01 4.45 2.00 5.12 1.56 3.12 6.24 4.23 5.12 4.45 Temp Labour Travel Telecoms

+34%

• 62%
• 25%

+39%

• 6%
• 1%

+66% +61%

• 36%

+84%

• 20%

Packaging Raw Materials Consulting Construction Transport Legal Advertising Office supplies

US UK

UK vs. US sourcing activity by category

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Introductions – Meet Your Panelists A Look at the Survey Priorities & Initiatives Procurement Effectiveness Supplier Management Data & Technology Some Differences by Region (US v. UK) Live Q&A

140702 Iasta CIPS event.pptx

3 Observations to Becoming a Change Agent

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Understanding the size of the company as a comparative to know what steps to take next in terms of:

• Technology investment
• Areas of strength and weakness

Looking at geography as an aspect of change

• Understanding culture and regional aspects
• Making sense of trends behind decisions

Recognizing that size or geography may not matter when comparing certain challenges faced by procurement globally

1 2 3