Spend Matters- 10 Ideas That Go Beyond Basic Sourcing (IASTA webcast)

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Spend Matters- 10 Ideas That Go Beyond Basic Sourcing (IASTA webcast)

  1. 1. 10 Ideas that Go Beyond Sourcing IASTA hosted Webinar May 2, 2012 Presented by: Jason BuschCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1
  2. 2. 10 Spend Matters ideas that go beyond basic sourcingto enhance procurement’s value to the business• Given the current market context, it’s critical to think beyond the basics to deliver value to the business• Improving procurement’s value to the business requires embracing new sourcing-related tools (contract management, supplier management, etc.) wrapped around basic strategic sourcing activity and services spend knowledge to drive additional savings• There are ten ways (outside of transaction- related focus areas) that we see to deliver this new valueCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2
  3. 3. 1: Go beyond basic eRFX and reverse auctioncapabilities Advanced sourcing/optimization •Fluid RFI/RFP process •More flexible data collection •Supplier creativity/alternative specifications/alternative proposals •Ability to fully explore – not just weight – all price and non-price factors in a tender •Create and apply constraints •Ability to run scenarios based on constraints and present a menu of outcomes for stakeholders to considerCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 3
  4. 4. 2: Connect sourcing activity to contracts – implementsavings faster and manage complianceSourcing and Contract Management•Link sourcing outputs to implemented savings•Move from a static view of contracts as “papers ina vault” to dynamic usage and reference•Use contract management as an opportunity tocreate greater trust and transparency with suppliersand shareholders•Looking at contract management as an opportunityto locate additional savings and cost avoidanceopportunities•Ability to integrate with – and fully leverage –sourcing, spend analysis and related information tocreate an integrated contract lifecycle solution•A user experience built around procurement andlegal together to drive the contracting – andcontract management – processCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 4
  5. 5. 3: Go beyond the contracting basicsAdvanced contracting philosophies•Pursue an active compliance approach thatleverages internal systems and marketplace Contractinformation (e.g., commodity pricing trends,currency rates)•Make your contract management system arepository for the entire organization to rely on(procurement, legal, etc.)•Rethink the notion of a contract – Make the contract a living document designed to manage and govern the relationship versus serving as a static piece of paper to refer back to for re-sourcing or legal purposes – Influence up front – introduce contract terms (e.g., indemnification) into the negotiation phase of a relationship; this can result in material savings and can foster a basis of mutual understanding and trust – Think long-term – the ownership and transference of risk is often as important as the exchange of physical goodsCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 5
  6. 6. 4: Invest in capabilities to support basic suppliermanagement activities Supplier Management Activities •Supplier on-boarding (i.e., the need to efficiently electronically enable suppliers for eProcurement and invoicing) •Supplier portals (i.e., basic portal capability designed to capture supplier information for a range of initiatives: eProcurement, supplier diversity, green/CSR, e-sourcing) •Supplier performance and quality management (i.e., tracking qualitative and quantitative supplier performance metrics such as on-time performance, escapes, PPM; surveys such as ISO, QS, TS to qualify suppliers and ensure claimed credentials were real) •Supply risk management (i.e., monitoring supply risk factors including financial data, operational data, compliance information) •Spend visibility/supplier enrichment at the item level (i.e., creating a common – or virtual – vendor master with detailed and accurate information into spending data to drive sourcing strategies)Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 6
  7. 7. 5: Leverage supplier management initiatives to driveadvanced cost and risk reductionAdvanced Activities Risk Exposure vs. Cost per Supplier $ Carbon Footprint Cost (High)•Go multi-tier Factory Audit Cost per Supplier•Embrace approaches that leverage theintersection of different datasets to drive visibility Catalog Supplier Toxic Substancesand predictive analytics (supplier performance Enablement Supplier Diversityinformation, supplier financial risk, geospatial, On-boarding New Supplier Ape-Invoice Enablementcountry risk, etc.) $ Cost Insurance Certificates (Low) 1 2 3 4 5 6 7 8 9 10•Invest in supply chain traceability to support the Risk Exposurebusiness in new ways Source: Aravo – Market entrance/new product introduction – Avoidance of “conflict” items such as conflict minerals – Certification that products do not contain restricted or hazardous substances•Consider network, BPO and other approachesCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 7
  8. 8. 6: Hunt for big category game (even if anti-poachingtypes are defending their territory)Next Level Categories•Combine sourcing, contract management,compliance and transactional management•High visibility (and high-value) servicescategories – Marketing – Legal – Accounting – Consulting – BPO and outsourcing•Pursue direct materials spend in new ways – Alternative specifications – Demand aggregation – Commodity management/hedging – Supplier-generated innovationCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 8
  9. 9. 7: Embrace specialists and specialty tools foradvanced services categoriesSupplier Management Activities•Consider specialty advisors (just as you wouldwhen buying BPO) – Focus on knowledge transfer and building internal self-sufficiency – Identify internal/external candidates to lead efforts for larger opportunities•Understand the importance of generating trustwithin the business and winning executivesupport•Use advanced (standard) toolsets whenpossible for sourcing activities, but leverageadditional solutions as needed in specificcategories (marketing spend intelligence,matters management/legal, etc.)•Leverage a VMS for SOW/project-basedengagements when requiredCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 9
  10. 10. 8: Partner with suppliers in creative ways including targetingtotal costFocus on the total relationship cost•Understand the TCO of doing business withglobal suppliers – Balance of global sourcing and regional sourcing – Re-shoring•Embed cost models at all stages of the sourcinglifecycle•Put on your operational efficiency hat Source: Chainlink – Joint cost take out programs – Put waste in the crosshairs – Just-in-time (JIT), vendor management inventory (VMI) and related programs for direct spend•Understand “sweet spot” for preferred servicessuppliers and pooling the right set of business forthemCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 10
  11. 11. 9: Track implemented savings, cost avoidance andresults from a finance-driven perspectiveSavings Implementation•Savings tracking and forecasting systems help companiesdrive savings opportunity identification in a way that goesbeyond spend analysis•They can accelerate the execution of savings implementationinitiatives and objectives and reduce savings leakage bypinpointing and documenting specific areas where lost savingsoccurred•For tracking information, users can get extremely granular withthe inputs they want to report against on a high level includingmarket indexes, rebate structures, baselines, currency rates,cost structures, dimensionality, target costing/pricing, budgetsand forecasts•On the actual reporting side, procurement leaders can definespecific savings tracking mechanisms and fields (e.g., pricesavings, market/commodity/index fluctuation savings, currencyfluctuation savings, substitution savings, batch size savings,spend reduction savings, external savings, realized savings)they wish to measure againstCopyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 11
  12. 12. 10: Deploy commodity management programsalongside sourcing activitiesGet Serious About Direct Spend•Develop a point of view and explain to management andshareholders the underlying reasons driving commodityvolatility and forecasting uncertainty•Reduce commodity exposure•Understand how to best price the underlying risk elements ofcontracts•Explore how suppliers price (and potentially misprice) risk•Lower overall costs (potentially) despite upward pressure onraw material inputs•Build more collaborative relationships with suppliers that helpmake us a customer of choice•Aggregate the buy (to enable hedging, to buy forward in risingmarkets, to create more effectivebudgeting/planning/forecasting, etc.)•Statistical modeling for demand planning and forecasting, plusmore to correlate factors on the supply side. Gatheringintelligence and building tools around it (looking forcorrelations)Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 12
  13. 13. Contact detailsJason BuschManaging Director, Azul Partners, Inc.Founder and Executive Editor, www.spendmatters.comEmail: jbusch@azulpartners.comPhone: 773-525-7406Copyright © 2012 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 13
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