Presentation Transcript

1. Establish Procurement’s Place: Increase Spend Under Management

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   Subhead here ISM Dallas May 8, 2014
2. AGENDA 1 2 3 4 5 6 Where We Are, and How We Got There Appealing to Leadership Increasing Spend Under Management Continuous Improvement Summary Q&A
3. The Current State of Procurement
4. Procurement’s Pressing Issue
5. THE RESULT A recent Everest Group study* states that $190 billion in goods and services are being procured by outsourcers on behalf of their clients. This includes a record number of engagements in the last two years. Hackett Group Study * “Top Ten Best Practices in Procurement Outsourcing,”
6. A MISSED OPPORTUNITY Failure by procurement to successfully engagewith spend owners Traditional sourcing methods did not have the necessary impact during the most recent downturn Procurement departments are not seen as strategic contributors Many procurement departments have become transactional Sourcing fatigue results in functions reasserting control over spend Perceived gaps between what sourcing claims to achieve and what CFOs report
7. BE RELEVANT Spend control is trending back to the functions and away from procurement. Continued involvement means having to clearly define the skills and value proposition supply chain professionals bring to the table…beyond buying. When everyone’s a savvy buyer, how will you differentiate yourself?
8. BE RELEVANT Ongoing relevance is keyed by your ability to define your contribution, and its value to your stakeholders. Leadership Suppliers Finance Risk Management Continuous Improvement Budget and Planning Support Procurement Cost Avoidance Strategies Incumbent Negotiations Budget Optimization Human Resources Marketing IT
9. APPEALING TO LEADERSHIP
10. HOW THE C-SUITE THINKS Revenue Generation Cost Savings Risk Mitigation Return on Investment
11. Align your goals…and your reports The c-suite is focused on revenue generation and verifiable bottom line improvements. Describe what you do in their terms. Attend your company’s sales meeting, understand the revenue generation methods and overall goals. Report direct savings in terms of margin enhancement, report indirect savings in terms of earnings per share.
12. INNOVATION A Deloitte survey of top finance executives found that nearly 60% of CFOs are focused on business intelligence, influencing strategy, and supporting major initiatives, while fewer than 15% are primarily focused on managing costs. Your CFO is waiting. What are you doing to get noticed? Generate interest by generating revenue.
13. PROCUREMENT AS A PROFIT CENTER Money markets, along with short-term securities and treasury notes currently offer less than a 30 bp return. Payment Cycle By offering early payment in exchange for even a 2% discount, buyers can improve their rate of return 6-8X. 1 2 3 4 5 6 7 8 9 10 11 12
14. PARTNERSHIP VALUE Third Party Consultant Third Party Consultant Internal Procurement Group Internal Human Resources Group Project Implementation Risk - Resulting from a lack of stakeholder contribution & buy-in Performance Risk - Failure to understand supplier capability Market Risk -Caused by a lack of definition around service requirements & acceptable contract terms Price Risk - Due to a lack of tools & strategies used to identify true market value
15. Market Implementation Performance Price Corporate Procurement Human Resources PARTNERSHIP VALUE
16. INCREASING SPEND UNDER MANAGEMENT - 18 -
17. EXPONENTIAL IMPROVEMENTS 2013 Procurian study - 19 -
18. THE FUNCTIONS In the new era, procurement needs to look beyond the RFP to be relevant to their partners in the functions. Facilities Operations Travel & Fleet Logistics Staffing Print Engineering IT / Telecom Benefits MarCom Finance Legal
19. A B2C APPROACH The functions are our customers, and like any consumer they will do business with the person that best understands their needs.
20. 20 DEFINE Every procurement department has cost savings as an objectives, but how you do it is your vision. Negotiations Contracting Supplier management Risk Mitigation Leverage tools Create efficiencies Apply analytics Develop category knowledge Procurement does a lot of things well, but it’s up to you to quantify those activities to show how they add value to your peers’ efforts.
21. MARKET Once you’ve defined a value proposition, you have to communicate it effectively. Assign liaisons to work with key functions Work closely to understand the goals, and sensitivities of stakeholders Actively communicate the ongoing successes of the procurement department Clearly demonstrate how the skills you bring to bear will address the needs of the spend owner
22. DELIVER Establishing a relationship means creating credibility and trust, keeping requires a demonstration of capability and accountability. Opportunity Identification Supplier Identification / Qualification Specification Development Negotiation Award / Contract After the strategic sourcing process ends…you disappear. The strategic sourcing process takes too long.
23. CONTINUOUS IMPROVEMENT
24. Where do savings come from?
25. STAGES OF ORGANIZATIONAL DEVELOPMENT Organizational Size Large 5. Growth Through Collaboration Evolution Stages 4. Growth Through Coordination 3. Growth Through Delegation 2. Growth Through Direction 1. Growth Through Creativity Revolution Stages Small Organizational Age Young Mature
26. PROCUREMENT’S SHIFTING FOCUS Supplier value scenarios
27. MEETING EXPECTATIONS
28. A “DIRECT” PRECEDENT
29. REAL COLLABORATION Optimizing spend under management hinges on procurement’s ability to leverage suppliers’ expertise to drive improvements. Tactical Strategic Implement cutting edge methods Educate to enable the organization Define and aim for best in class Create win-win scenarios Invest in strategic relationships Manage inventory levels Forecast and manage demand Adjust delivery size and frequency Update ordering methods Review authorizations Whatever the method, bringing it home is the key; Identify, Quantify, Implement.
30. 1. Cost Driver or Program Improvement Generic Utilization Specialty Management Network Access PDL Management Wellness / Clinical Current Position Current Position Current Position Current Position Current Position 2. Define existing and desired state Supplier Best-in-Class Supplier Best-in-Class Supplier Best-in-Class Supplier Best-in-Class Supplier Best-in-Class 3. Make suggestions on how to move to best in class Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4 Recommendation 5 Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4 Recommendation 5 Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4 Recommendation 5 Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4 Recommendation 5 Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4 Recommendation 5 4. For each suggestion, present the solution, the relative price / efficiency impact, and the “pain” in achieving the result Solution Solution Solution Solution Solution Impact Impact Impact Impact Impact Disruption / Cost Disruption / Cost Disruption / Cost Disruption / Cost Disruption / Cost
31. SUMMARY
32. Change management is not a “one and done” activity Partnerships require an organization commitment from both parties Drive value beyond the sourcing cycle Increase analytical capabilities to quantify impact Sell to leaders in the context of their objectives Increase commercial capabilities Educate yourself on your customers’ business Be anonymous, not invisible
33. HUMAN RESOURCES Personnel Services Benefits Temporary Labor Bkgd. Investigations Relocation Globalization Dental Administration Drug Testing Recruiting HHG Mgmt. Consulting Vision Pharmacy Outplacement Labor Mgmt. Training Call Center Medical EAP Human Resources Adoption Continuum Primary Responsibility: To develop and maintain internal customer service and attract and retain talent. Key Issue / Sensitivity: Spend categories have an impact on entire employee base, so reducing disruption is a key message. Effective Solution: Buyer amnesty – quell the fears of spend owners by creating an environment of mutual success.
34. MARKETING & communications Collateral Services Advertising Brochures Displays Tradeshows Direct Mail Outdoor Internet Mailers Promotional Items Fulfillment Agencies Radio Print Premiums Service Awards Call Centers Design Cable Broadcast Marketing and Communications Adoption Continuum Primary Responsibility: To develop and maintain brand image and competitive edge. Key Issue / Sensitivity: Spend categories have an impact on departmental budgets, efforts should be to increase buying power, not shrink capacity. Marketing has the added sensitivity of savings being equivalent to budget reductions. Effective Solution: Add buying power – sharing savings with your partners in marketing to allow for more flexibility can buy participation.
35. FACILITIES & MAINTENANCE Site Maintenance Services Industrial Cleaning ISO Registrars Equipment Calibration Waste Mgmt. Real Estate Painting Insulation Tool Cleaning Elevator Janitorial Services Security Guard Lighting Laundry HVAC Mechanical Energy Food Service Facilities and Maintenance Adoption Continuum Primary Responsibility: To create a safe, functional work environment. Key Issue / Sensitivity: Unlike other indirect spends, the majority of these markets have been competitively sourced in the past, so compression of cost is likely to be less significant. Facilities-related projects have the added challenge of dealing with many locations as well as numerous site and item-specific service requirements. Effective Solution: Provide perspective – understand the massive scope of this group.
36. IT & telecommunications Hardware Labor Services Laptops Switches Programmers Analysts Wireless IP / VPN Desktops Routers Developers App. Support Helpdesk Local / LD Peripherals Servers Consultants Implementation Data Maintenance IT and Telecommunications Adoption Continuum Primary Responsibility: To ensure functionality and create efficiencies. Key Issue / Sensitivity: The majority of these markets trend downward, and the increased transparency provided by a strategic sourcing process helps to capitalize on those conditions. IT has the added challenge of dealing with small supply bases for equipment, and large (global) ones for services. Effective Solution: Rely on their expertise – IT has a specific knowledge set, allow them a maximum level of participation in the process.
37. FINANCE & LEGAL Finance Legal Consulting Corporate Cards Audit Services Immigration Tax Finance Human Resources Tax Prep Check Writing Patent Liability Management Public Relations Contingent Staff Debt Recovery Labor Contract Organizational IT Finance, Legal, and Consulting Adoption Continuum Primary Responsibility: To create and maintain strategic relationships while ensuring stability and corporate compliance. Key Issue / Sensitivity: Highly strategic responsibilities have afforded these groups the power to resist procurement efforts. Despite this fact, there are a significant number of opportunities for creating cost efficiencies while mitigating risk in the CFO’s arena. While highly complex, the historic absence of transparency in these categories has resulted in strategic sourcing projects identifying unprecedented savings. Effective Solution: Be patient – it’s harder to penetrate here than elsewhere.
38. Q&A
39. THANK YOU David Clevenger 216.325.0412 dclevenger@corporateunited.com linkedin.com/in/davidbclevenger/