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AT Kearney Procurement 2014
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AT Kearney Procurement 2014

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  • 1. Tobias Fehre Drs. Michael Strohmer December 4th, 2013 Zurich Consult the Stars – Purchasing 2014 and beyond CIPS – Chartered Institute of Purchasing & Supply
  • 2. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 2 Mobilizer Innovation driver Star Shaper Information broker Cost cutter Beginner Sourcer Strategist Becoming a procurement star – high external and internal effec- tiveness – needs to be earned and defended Holistic Procurement Transformation (HPT™) framework Low High Low High P P P P P P P P P S OF S OF S OF S OF S OF S OF S OF S OF S OF Internal effectiveness External effectiveness S: supplier; P: procurement; OF: other functions; line indicating strength of interaction Source: A.T. Kearney Route 1: Strategic sourcing first Route 2: Organization first 2 1
  • 3. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 3 Use the Chessboard logic to manage new technologies typi- cally with low initial demand and supply power over the lifecycle The Purchasing Chessboard® – 64 methods www.purchasingchessboard.com External effectiveness Low High Supply power 8 7 6 5 4 3 2 1 Invention on demand Core cost analysis Vertical integration Bottleneck management Sourcing community Procurement outsourcing Compliance management Leverage innovation network Design for sourcing Intelligent deal structure Political framework management Buying consortia Mega supplier strategy Closed loop spend management Functionality assessment Product teardown Composite benchmark Product benchmark Cost data mining Master data management Supplier consolidation Specification assessment Design for manufacture Process benchmark Complexity reduction Standardi- zation Spend transparency Bundling across generations Value chain reconfigu- ration Supplier tiering Collaborative capacity management Visible process organization RFI/RFP process Supplier market intelligence Make or buy Revenue sharing Sustainability management Virtual inventory management Vendor managed inventory Expressive bidding Reverse auctions Best shoring Profit sharing Project based partnership Total life cycle concept Supplier development Total cost of ownership Price benchmark Cost regression analysis Strategic alliance Value based sourcing Collaborative cost reduction Supplier fitness program Leverage market imbalances Unbundled prices Factor cost analysis Demand reduction Contract management Bundling across product lines Bundling across sites Global sourcing LCC sourcing Cost based price modeling Linear performance pricing Low High Demand power A B C D E F G H Source: A.T. Kearney Mature technology, competitive Mature technology, balanced Mature technology, oligopolistic New technology 1
  • 4. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 4 FulfillMakeLaunchDesignConceptCharter Deploy all levers along the stages of the product life-cycle Influence on cost drivers during life-cycle of need Percentage of spend influenced 100% 0% Ruthless competitor Spec improvement Value chain efficiency • Challenging industry beliefs • Redefining specification • Designing efficient manufacturing • Optimizing value-chain design External effectiveness Source: A.T. Kearney Levers Product life-cycle 1
  • 5. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 5 Bring traditional supplier management to a new level for more results A.T. Kearney Supplier Interaction Models Strategic potential (What could this supplier be to you?) Performance (At what level is this supplier performing today?) High Harvest Influence Integrate Improve Mitigate Low Sustain Invest Develop Bail out External effectiveness Ordinary ProblematicCrucial Source: A.T. Kearney 5-15% 70-90% 5-15% # of suppliers 55-65% 35-45% 10-15% HighLow 1
  • 6. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 6 Selectively introduce partner-aligned category management to broaden the scope of Procurement’s activities Evolution of procurement organizational models Decentralized/ coordinated Partially centralized Fully centralized Partner-aligned category mgmt. Time Level of excellence Partner-aligned category management • After a long period of centralization, leaders are now re-examining their organizational models • Need for value beyond cost requires closer engagement with business and other functions for areas where procurement wants to provide additional value • The trend is happening first in businesses where: – Supplier quality is important – Suppliers play key role in industry innovation – High level of new product introductions – Sudden demand shifts (e.g. geographic) Source: A.T. Kearney Internal effectiveness 2
  • 7. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 7 Cost of procurement Implement a procurement business intelligence … but what do we know about procurement operating performance? • Influenced or managed spend? • Sourcing velocity or cycle times? • Sourcing project yields? • Compliance rates? • Stakeholder satisfaction with procurement? By team member? • Sourcing pipeline by person? Procurement business intelligence Procurement keeps costs within benchmark “tolerances”… 1. Influenced spend by procurement: procurement sourced it, assisted in the sourcing process, or was involved in the contracting process, or purchases went through a procurement-designed and supported P2P system Source: A.T. Kearney AEP Research 2011 0% 1% 2% 3% 4% % of spend1 Internal effectiveness 2
  • 8. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 8 ROSMASM enables procurement performance management measurement, standards and transparency on multiple levels ROSMASM – The tool for the CFO Return on Supply Management Assets or ROSMASM Financial results delivered Procurement costs Spend influenced Spend addressed Savings/ benefit gained Savings/ benefit implemented Additional benefits Period costs Structural investmentsx x x + + :– Addresses total 3rd party spend that Procurement influences, along with consideration for visibility and governance of spend Evaluates speed of addressing spend under Procurement influence Encapsulates all savings and other financial benefits gained from spend addressed Evaluates how well negotiated agreements and policies are followed and enforced Includes other financial benefits not captured already Captures cost of the Procurement infrastructure and capabilities development Captures all periodic costs, e.g. people costs, external support costs Internal effectiveness Source: A.T. Kearney 2011 AEP Research 2
  • 9. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 9 CIPS, ISM and A.T. Kearney joined forces to offer the ROSMASM performance check CIPS, ISM1 and A.T. Kearney joined forces – ROSMASM performance check as first-step Access will be granted via the CIPS homepage 1. ISM: Institute for Supply Management Source: A.T. Kearney Internal effectiveness Online performance service to obtain ROSMASM score and benchmarking Early 2014, CIPS will offer complimentary access CIPS will provide guidance and training suggestions to address identified issues 2 ROSMASM – Performance Check
  • 10. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 10 Thank you! Source: A.T. Kearney Drs. Michael Strohmer Partner A.T. Kearney GmbH Vienna Tel.: +43-664-60648-124 email: michael.strohmer@atkearney.com Tobias Fehre Principal A.T. Kearney GmbH Frankfurt Tel.: +49-175-2659-709 email: tobias.fehre@atkearney.com
  • 11. A.T. Kearney 10/45836d/YvwrWeQklQQmllQHlG 11 Americas Atlanta Bogotá Calgary Chicago Dallas Detroit Houston Mexico City New York San Francisco São Paulo Toronto Washington, D.C. Asia Pacific Bangkok Beijing Hong Kong Jakarta Kuala Lumpur Melbourne Mumbai New Delhi Seoul Shanghai Singapore Sydney Tokyo Europe Amsterdam Berlin Brussels Bucharest Budapest Copenhagen Düsseldorf Frankfurt Helsinki Istanbul Kiev Lisbon Ljubljana London Madrid Milan Moscow Munich Oslo Paris Prague Rome Stockholm Stuttgart Vienna Warsaw Zurich Middle East and Africa Abu Dhabi Dubai Johannesburg Manama Riyadh A.T. Kearney is a global team of forward-thinking partners that delivers immediate impact and growing advantage for its clients. We are passionate problem solvers who excel in collaborating across borders to co-create and realize elegantly simple, practical, and sustainable results. Since 1926, we have been trusted advisors on the most mission-critical issues to the world’s leading organizations across all major industries and service sectors. A.T. Kearney has 58 offices located in major business centers across 40 countries.