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Napp 2009 Keynote Address

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    Napp 2009 Keynote Address - Presentation Transcript

    1. P2P Rising Andrew Bartolini Vice President & Group Director, Global Supply Management February 9, 2009 © AberdeenGroup 2008
    2. P2P Rising Table of Contents Introduction 2009 – Revive, Refresh, Renew CPO Rising A/P Rising Summary & Recommendations Q&A 2 • © AberdeenGroup 2009
    3. Introduction © AberdeenGroup 2008
    4. P2P Rising My Bio Title Vice President & Group Director Summary • Recognized expert in sourcing, procurement, and supply management • Leader of Global Supply Management Research at Aberdeen Group • Twice named a “Pro to Know” by Supply and Demand Chain Executive Experience Leadership roles in sales, marketing, and services at Ariba and Commerce One; Rich experience in strategic sourcing, business process transformation, and software implementation. Background also includes consulting and investment banking Education • MBA – Indiana University • BA – Holy Cross College (MA) 4 • © AberdeenGroup 2009
    5. P2P Rising About Aberdeen Group (Boston, MA) Founded in 1988 394,000+ Panel Members and over 2 million readers Benchmarked over 700,000 enterprises Aberdeen research is used by more than 90% of the Fortune 1000 10 distinct research coverage areas Aberdeen will publish over 1800 Reports in 2009 which will be read by more than 1 million readers ALL Reports are FREE (some for limited time) 5 • © AberdeenGroup 2009
    6. P2P Rising Aberdeen’s Research Coverage Global Supply Management (GSM) Manufacturing Supply Chain Enterprise Technology Service Chain Communication Information Technology Sales & Marketing Product Innovation Enterprise Administration Over 5500 On-Line Research Documents are available serving 300,000+ User Sessions / Month 6 • © AberdeenGroup 2009
    7. P2P Rising Aberdeen’s GSM Research Coverage Role-Based Analyze Source Contract Procure Pay Research Source-to-Settle CPO CFO CIO Complex Categories Suppliers T&E Contract Labor & Professional Services Real Estate & Facilities Strategic Meetings Print/Marketing 7 • © AberdeenGroup 2009
    8. P2P Rising Global Supply Management Research Panel: 68,893 & Growing Size of Companies Roles at Companies % of Users By Revenue % of Users By Title 18% 15% 8% 11% 51% 34% 43% 20% <$50M $50-$250M $250M - $1B >$1B C-Level VP/Dir. Manager Other Geographical Representation Research Advisory Council % of Users by Region 24+ Industry Leaders 13% 3% 22% 62% N. America EMEA Asia Pac. Rest of World 8 • © AberdeenGroup 2009
    9. P2P Rising Research and Demographics (for today’s discussion) Hypothesis 900+ Professionals Aberdeen believes that 2009 will be a year of significance for the Size Procurement & Payables, a year of Large (Greater than $1B) – 58% the “P2P Rising” – rising to meet Mid-Market ($50M to $999M) – 29% new challenges, rising to new Small (Less than $50M) – 13% operational heights, and rising in prominence within the enterprise. Yet, with increased visibility comes an Region expectation of consistent execution North America – 62% and delivery. EMEA – 31% Asia Pacific – 7% Approach Industry Aberdeen Group conducts web- Manufacturing – 11% based surveys to target Technology – 8% professionals in our research membership pool Finance – 7% We then followed up with interviews 29 other categories from survey respondents 9 • © AberdeenGroup 2009
    10. 2009 – The Year Ahead Revive, Refresh, Renew….. Rebound? © AberdeenGroup 2008
    11. P2P Rising Times are Changing “It is not necessary to change. Survival is not mandatory.” - W. Edwards Deming “If you don’t like change, you will like irrelevance even less.” - General Eric Shinseki “Change is inevitable…. except from a vending machine.” - Robert C. Gallagher 11 • © AberdeenGroup 2009
    12. P2P Rising Times are Tough Global Crisis Bailouts & Credit Crunch Layoffs & Uncertainty Tough Times Demand Smart Strategies 12 • © AberdeenGroup 2009
    13. P2P Rising 2009 - The Year Ahead 2009 will be a very challenging year 71% of CPOs expect significant increase in Supply Risk 44% of CPOs have already delayed major initiatives Budgets are constrained or shrinking CPOs remain focused on increasing Spend under Management Cost Savings remains the top goal 13 • © AberdeenGroup 2009
    14. P2P Rising Smart Strategy #1 – Manage Supply Risk Case Study — Supply Risk and Contingency Planning A Global manufacturer (and Fortune 100 company) noted that supply base risk management is the absolute top priority for his team in 2009 and has invested significant training in financial ratio analysis and contingency planning for a team of 30 buyers of the most risky categories. "We expect the recession will have severe consequences for our top tier Canadian suppliers. We don't know which suppliers will be impacted, but we spent the last six months developing a contingency plan for every North American- based supplier.“ North American VP of Direct Materials 14 • © AberdeenGroup 2009
    15. P2P Rising What if a CEO had: A CFO who did not know the company's cost of capital and lacked visibility into calculating its gross margin or quick ratio 15 • © AberdeenGroup 2009
    16. P2P Rising What if a CEO had: A CFO who did not know the company's cost of capital and lacked visibility into calculating its gross margin or quick ratio A VP of Sales who did not know the company's average deal size or sales win percentage and lacked visibility into the current sales pipeline 16 • © AberdeenGroup 2009
    17. P2P Rising What if a CEO had: A CFO who did not know the company's cost of capital and lacked visibility into calculating its gross margin or quick ratio A VP of Sales who did not know the company's average deal size or sales win percentage and lacked visibility into the current sales pipeline A VP of Manufacturing who did not know a product‘s total cycle time and lacked visibility into any utilization or quality metrics 17 • © AberdeenGroup 2009
    18. P2P Rising Incompetence or Malfeasance? What are the Implications? Should someone lose his/her job? Should many people lose their jobs? Does the Board need to be involved? Would you buy stock in this company? 18 • © AberdeenGroup 2009
    19. P2P Rising What if a CEO had a Chief Procurement Officer (CPO) that…. Does not have a formal spend analysis program Lacks good visibility into overall spend Fails to leverage spend data in sourcing activities 19 • © AberdeenGroup 2009
    20. P2P Rising What if a CEO had a Chief Procurement Officer (CPO) that…. Percentage of all enterprises Does not have a formal spend analysis 26% program Lacks good visibility into overall spend 42% Fails to leverage spend data in 52% sourcing activities 20 • © AberdeenGroup 2009
    21. P2P Rising WHAT ARE THE IMPLICATIONS? For the CEO…… For the CPO……. For the Procurement Dept……. For the enterprise…… 21 • © AberdeenGroup 2009
    22. P2P Rising Smart Strategy #2 – Analyze Your Spend The Impact of Spend Analysis on Procurement Performance Incremental Performance Metric Benefit 1 Average savings achieved from a sourcing effort 93.0% Spend under management 39.4% Contract compliance rates 30.6% Maverick spend reduction 16.3% 1 Average incremental gains achieved by 280+ survey respondents Source: AberdeenGroup October 2008 22 • © AberdeenGroup 2009
    23. P2P Rising Spend Analysis Automation Fully manual 13% 26% 11% Partially automated Fully automated, disparate systems 50% Fully automated, common enterprise-level system Source: AberdeenGroup October 2008 23 • © AberdeenGroup 2009
    24. P2P Rising Average Savings by Level of Automation 11% 8% 5% 4% Fully automated, single Fully automated, Partially automated Fully manual system disparate systems Source: AberdeenGroup October 2008 24 • © AberdeenGroup 2009
    25. P2P Rising Why What You Do Is Important: Top-Line versus Bottom-line Impact Revenue (in millions) $350 $10 Million in Savings equates $300 to….. $250 $200 $150 $100 $50 $0 Finance CPG Mfg. Hi-Tech Savings Impact: Income Statement & Market Capitalization 25 • © AberdeenGroup 2009
    26. CPO Rising © AberdeenGroup 2008
    27. P2P Rising On The Procure-to-Pay Process “The intelligence and fidelity exercised in the purchase, care, and use of supplies, influences directly the cost of construction and operations, and affect, therefore, the reputations of officers and the profits of owners…The subject needs elucidation on many accounts." ~ Marshall M. Kirkman, The Handling of Railway Supplies: Their Purchase and Disposition; 1887 27 • © AberdeenGroup 2009
    28. P2P Rising Evolution of Procurement/Supply Management Procurement Purchasing Clerical Operations Managerial Strategies Supply Pre-1900 Pre-WWI WWI & WWII 1950s-1960s 1970s-1980s Management Independent Purchasing is Obtaining raw Processes Emphasis on function in established as materials, become more purchasing railroad a clerical role supplies, & standardized strategy and industry services developing the became vital to People ability to Limited trained for the operations source goods traction in function at an efficient other price industries Best practices 28 • © AberdeenGroup 2009
    29. P2P Rising Supply Management - Recent History 1980’s & 1990’s Dominant supplier strategy for key commodities “Spend Under Management” via long-term contracts Buying power / aggregation Strategic Sourcing Quality 2000’s Technology-enabled transformation Globalization CPO (C-Level procurement executive) 29 • © AberdeenGroup 2009
    30. P2P Rising The CPO’s Strategic Agenda No formal plan 21% Formal one-year plan Formal multi-year plan 45% 34% Source: AberdeenGroup 30 • © AberdeenGroup 2009
    31. P2P Rising Top Ten KPIs KPI % Selected 79% of Identified cost reduction/savings 72% Enterprises % of spend under management 64% track Supply Assurance Cost avoidance 58% Implemented / realized cost reduction savings 55% Procurement ROI (savings / operating costs) 52% % of suppliers = 80% of spend 51% Supplier performance (price, delivery, quality, 49% service, etc.) Procurement spend as % of revenue dollars 46% Requisition, PO or invoice transaction volume 34% Procurement spend per procurement 33% employee 31 • © AberdeenGroup 2009
    32. P2P Rising Maturity Framework Definition of Maturity Mean Class Performance Class Best-in-Class: Top 20% of aggregate More than 70% of spend under management performers Industry Average: Middle 50% of aggregate Between 40% to 70% of spend under management performers Laggard: Bottom 30% of aggregate Less than 40% of spend under management performers Source: AberdeenGroup, 32 • © AberdeenGroup 2009
    33. P2P Rising CPO’s Top Priorities 69% 67% 51% 47% 44% 42% 39% 33% People Suppliers Spend Technology BIC All Others Source: AberdeenGroup, 33 • © AberdeenGroup 2009
    34. P2P Rising CPO Goal: Increase SPEND Under Management What strategies will CPOs employ to increase spend under mgmt.? Analyze and distribute spend data 74% Demonstrate/market the value of the 49% procurement group Improve visibility into compliance 49% Policy changes and mandates 36% Increase procurement automation 30% Source: AberdeenGroup, 34 • © AberdeenGroup 2009
    35. P2P Rising CPO Goal: Improve SUPPLIER Development & Collaboration What do you hope to gain from supplier-focused efforts? Product quality and supply 74% performance Remove time/cost from supply chain 66% Develop/improve capabilities and capacity 62% Supply market constraints and inflation 36% Product and process innovation 33% Supplier diversity 18% Source: AberdeenGroup, 35 • © AberdeenGroup 2009
    36. P2P Rising CPO Action: Improving SUPPLIER Development & Collaboration 66% Risk 41% 34% 34% Cash Improve supplier Improve planning Dedicated supplier Improve electronic performance and forecasting development teams "supplier measurement enablement" across Source-to-Settle Process Source: AberdeenGroup, 36 • © AberdeenGroup 2009
    37. P2P Rising CPO Goal: Increase Process Automation (TECHNOLOGY) 26% E-Procurement 55% 31% Spend Analysis 48% 32% E-Sourcing 42% Planned 38% In Use Contract Management 39% 32% E-Payables 36% Supplier Network or 34% Portal 34% Source: AberdeenGroup, 37 • © AberdeenGroup 2009
    38. P2P Rising CPO Goal: Enhance PEOPLE Skills and Capabilities Need people with different 74% job skills Need people with better 53% education Need more people due 46% to growth Source: AberdeenGroup, 38 • © AberdeenGroup 2009
    39. P2P Rising Barriers to Procurement Transformation 76% 65% 62% 50% 45% 42% 42% 39% 27% 18% Misaligned Recruiting and Supplier contract Lack of budget Lack of executive processes and retaining skilled compliance support systems talent Source: AberdeenGroup, BIC All Others 39 • © AberdeenGroup 2009
    40. P2P Rising CPO Operational Excellence Framework Laggards Industry Average Best in Class Cost Savings Rate • 0-2% • 2-5% • 5% or more • Minimal visibility • Reported with visibility • Tied to enterprise outside of procurement financial metrics Procurement ROI • 100-300% • 300-700% • 700% or more Spend Under • 0-40% • 40-70% • 70% or more Management • Includes common • Includes core categories • Includes complex categories (e.g., supplies) (e.g., raw materials) categories (e.g., services) Budgetary Process •Independent of •Based on input from • Procurement is an procurement procurement integral part Finance • Ad hoc interaction • Regular interaction • Continuous interaction Relationship • Reporting to CFO • Have trust of CFO Technology •Basic or partial supply • Broad suite • Full Suite Utilization management suite • Linked to finance • Strong linkage to finance • Strong analytics • CPM systems in place Source: AberdeenGroup 2009 Source: Aberdeen Group 2007 40 • © AberdeenGroup 2009
    41. Accounts Payable Rising Yes, Accounts Payable Is Rising © AberdeenGroup 2008
    42. P2P Rising The A/P Department is Coming of Age In the past 2 years, role of A/P has become more strategic in 56% of enterprises. 18 months ago, 40% of enterprises believed A/P was playing a “more strategic” role. 42 • © AberdeenGroup 2009
    43. P2P Rising However, Paper Remains The “Rule,” Not The Exception PAYMENTS INVOICES Electronic Electronic Paper/Manual Paper/Manual 21% 38.5% 61.5% 79.0% Source: AberdeenGroup September 2008 43 • © AberdeenGroup 2009
    44. P2P Rising Maturity Framework Definition of Maturity Class Mean Class Performance Best-in-Class: $2.18 cost to process an invoice Top 20% of aggregate performance scorers 2.8 days to process an invoice Industry Average: $9.38 cost to process an invoice Middle 50% of aggregate performance scorers 15.8 days to process an invoice Laggard: $34.11 cost to process an invoice Bottom 30% of aggregate performance scorers 35.1 days to process an invoice Source: AberdeenGroup September 2008 44 • © AberdeenGroup 2009
    45. P2P Rising Best-in-Class: Real-Time Visibility All Others Best-in-Class Liabilities/credits by 44% vendor 26% Line item detail of PO 44% invoice 30% 44% Status of POs 27% Avoidance of missing 40% bills and late pmts. 12% Line item detail of 40% non-PO invoice 13% Discounts, rebates, 36% and other terms 12% Source: AberdeenGroup September 2008 45 • © AberdeenGroup 2009
    46. P2P Rising Best-in-Class: Fully Automated A/P Activities Payment status tracking 64% 22% 55% Electronic receipt of invoices 13% Payment scheduling 55% 25% 56% Electronic payment processing 16% Best-in-Class 44% All Others PO matching 14% E-documents for invoice approval 49% 19% Duplicate invoice verification 40% 27% Source: AberdeenGroup September 2008 46 • © AberdeenGroup 2009
    47. P2P Rising Best-in-Class Technology Usage Best-in-Class All Others 82% 60% 55% 45% 44% 38% 40% 40% 30% 28% 22% 12% Electronic Imaging and Supply chain Comprehensive Supplier Spend analysis payment system workflow finance solutions A/P automation networks, XML, or solutions for solutions (EIPP) EDI invoices Source: AberdeenGroup September 2008 47 • © AberdeenGroup 2009
    48. P2P Rising Best in Class Characteristics (Strategies for Success Place a significant emphasis on gaining clear visibility into A/P operations (process and data) Leverage e-payables solutions to a significant advantage Strong collaborative ties with internal and external stakeholders Strong audit controls 48 • © AberdeenGroup 2009
    49. Summary & Recommendations © AberdeenGroup 2008
    50. P2P Rising P2P Will Matter MORE in the Future Global CEO’s View : 1 Top Pressures… Top Areas for Innovation… Revenue Products & 83% 64% Growth Services Cost Reduction 64% Operations 43% Asset 45% Utilization Business 40% 40% Risk Model “ “ It is one of the things that keeps me awake at night – ensuring that we have a source of supply at the right cost to be competitive. Clay Jones, Chairman & CEO Rockwell Collins 1 - Source: IBM Global CEO Study 2006 50 • © AberdeenGroup 2009
    51. P2P Rising The Big Picture Innovator & Pioneer Thomas Alva Edison 51 • © AberdeenGroup 2009
    52. P2P Rising 70 years to “invent” the electric light bulb? The first electric In 1882, light was made Thomas Edison in 1809 got it right. 52 • © AberdeenGroup 2009
    53. P2P Rising Edison’s Innovation: Network Distribution Efficient & Accessible Many Participants Multiple Uses/Types Leveraged Infrastructure 53 • © AberdeenGroup 2009
    54. P2P Rising Procurement’s Light Bulb Supplier Analyze Source Contract Procure Pay Management Supply Management Source-to-Settle (aka P2P) Process Automated Data-Driven Numerous Supplier Touch-Points Linear 54 • © AberdeenGroup 2009
    55. P2P Rising Aberdeen Recommendations - Procurement People (Internal & External) Formalize your people management program Establish competency models Develop a career path planning program Utilize strategies from other functions Intensify efforts to collaborate with business and functional stakeholders Expand supplier enablement programs 55 • © AberdeenGroup 2009
    56. P2P Rising Aberdeen Recommendations - Procurement Process Champion the standardization of source-to-settle processes across the enterprise Work with finance to define how all enterprise-level savings metrics are measured and tracked Develop and track a spend management pipeline Technology Integrate Spend Analysis Solution with Sourcing Tools and Processes Support Accounts Payable investment in e-payables solutions 56 • © AberdeenGroup 2009
    57. P2P Rising Aberdeen Recommendations: Accounts Payable Drive for enterprise-level visibility across A/P operations If the case for full A/P automation cannot be made, start with the most labor-heavy tasks Integrate e-payables solutions with transactional systems. Develop a comprehensive supplier enablement strategy Set goals to convert a significant percentage of manual payments to electronic 57 • © AberdeenGroup 2009
    58. P2P Rising The Search for “CPO” - Results Center for Prosthetics Orthotics (CPO.biz) University of Tennessee - CIRCLE PARK ONLINE CPO Science (cpo.com) CPO Makita, CPO Bosch & MANY CPO-Tools Sites Corn Products International (ticker:CPO) – MANY Sites CPO Ltd (Imaging Products & Document Mgmt Services) Wiki – Chief Petty Officer CPO® certification courses… Certified Pool/Spa Operator Wiki – Certified Pre-Owned – MANY other Car sites Citizen Participation Organization (CPO) Program Washington County, Oregon CPO Community Properties of Ohio Certified Paraoptometric Examination 58 • © AberdeenGroup 2009
    59. P2P Rising The Search for “CPO” - Results The Correctional Peace Officers (CPO) Foundation CPO Commerce, Inc. of www.cpooutlets.com “fame” CPO is the third largest food pantry in North Carolina Contingency Planners of OHIO (CPO) Chief People Officer NOAA's Climate Program Office (CPO) CPO of Myrtle Beach is a promotional company “Welcome to the Goatlocker” (CPO History and Traditions) Charged Particle Optics Software “What does CPO Stand for?” 48 Results including Czech Philharmonic Orchestra & Chief Petting Officer, Copiapo Chile airport (“CPO”) 59 • © AberdeenGroup 2009
    60. P2P Rising Aberdeen Recommendations Visit Google.com Search for CPO Advance until you see “CPO’s Agenda” or CPO Rising” Repeat every day for 3 months Make all staffers perform this twice per day for 3 months CPO Rising……. in Search Results! 60 • © AberdeenGroup 2009
    61. P2P Rising Q&A (and Contact Info) Andrew Bartolini, Vice President & Group Director Global Supply Management, AberdeenGroup Andrew.Bartolini@aberdeen.com 617.854.5310 For More Research Please Visit: www.aberdeen.com/channel/procs.asp 61 • © AberdeenGroup 2009

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