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Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
Agile Procurement: A New Value Proposition for a Volatile World
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Agile Procurement: A New Value Proposition for a Volatile World

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eWorld Purchasing & Supply Conference …

eWorld Purchasing & Supply Conference
Day 1 - September 28th, 2010

09:30 to 10:05 AM Agile Procurement: A New Value Proposition for a Volatile World

Overview:

The procurement function has certainly proved its worth over the past few years, as many organisations cut costs rapidly to survive the economic downturn. But opinion is still firmly divided on the economic outlook for the next few years, with the only consensus being unpredictability. So would the same purchasing efficiencies be available second time around, if a ‘double-dip’ recession takes shape? Or will procurement’s contribution quickly be forgotten if a global recovery emerges instead? Chris Sawchuk from the Hackett Group puts forward the case for a new value proposition that can cope with unprecedented levels of uncertainty – challenging existing models in favour of increased flexibility and agility throughout the procurement and supply chain functions.

Speaker:

Chris Sawchuk, Global Procurement Practice Leader, The Hackett Group

Published in: Business, Economy & Finance
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Notes
  • Nice presentation, but beware before you engage this second tier benchmarking firm that outsources its data collection and analysis; Hackett tells a great story but at the end of the project, you have no tangible guidance on how to become world class. Just ask BP or Rio Tinto or my company.

    Our last meeting with Hackett: My CPO: 'So Chris, this is a nice presentation of a collection of best practices, but I'd like to understand how we compare to our competitors and our industry.'

    Chris Sawchuck: 'Well you have to understand that what we agreed to deliver a roadmap to world class. We've done that.'

    CPO: 'No! You have not. You have taken some standard slides of best practices included some discussion of staff interviews and given us recommendations that may or may not be applicable to what we do. There is no indication from you that any of this is applicable to what we do. Help us better understand the relevance of this presentation.'

    Chris Sawchuk: 'We'll have to refine this and get back to you.' -- His famous last words. More than 12 months later, we are still waiting. I guess he is more interested in presenting at conferences than helping his clients.

    I know, you don't believe me. Well, just ask Hackett employees (quoted below)

    * 'No methodology, Knowledge repositary is a real mess - just try to have someone really define 'world class' and you will see what I mean. Scary fact about Hackett: World Class has no basis in research, it's not a real measure/metric of what is happening in the market today. It is a series of nebulous company characteristics that the advisory teams make up and then backfill with 'research' stats.'
    * 'Take a hard look at the Senior Director and Vice Presidents - - most do not practice the Company philosophy and are only interested in billing the client for as much as they can get away with.'
    * 'In terms of their Transformation/Strategic (Mgmt consulting) group: There was a inability to define a strategy and build content and reputation in the area - all things to all people results in the strategic advisory team being very ineffective with clients.'
    * Hackett's long term strategy seems to change on a regular basis. The company is always trying to catch the next trend, unfortunately its often a day late and a dollar short.'
    * 'Everyone has an opinion, but no one can execute. Lots of smoke and mirrors especially the procurement advisory team.'

    Source of quotes: 'http://www.glassdoor.com/Reviews/The-Hackett-Group-Reviews-E7906.htm
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  • 1. The Journey to World-Class Agile Procurement A New Value Proposition for a Volatile World Chris Sawchuk Principal, Global Procurement Advisory The Hackett Group September 28th and 29th, 2010
  • 2. Agenda  Where Have We Been? – Quick review of the last 2.5 years  So What Do We Do Now? – Excelling in Uncertainty  What are World Class Organizations Doing? – Practices of Leaders  Closing Thoughts Page 2 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 3. Where We Have Been Page 3 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 4. To begin, let‟s quickly review where we have been… US Producers Price Index (all commodities) last 2.5 years 1 2 4 “Procurement‟s perfect storm” “Survival mode” 3 “The New Normal” “Proactive and deliberate focus: cost, cash and risk” Plentiful Supply, Scarce Demand Scarce Supply, • Renegotiating Contracts • Delaying & • Extending payment terms Plentiful Demand scaling back • Securing supply • Reducing supplier viability risk Uncertainty Prevails, Agility Is Key capital • Increased climate of risk & volatility • Staving of price investments increases • Globalization & emerging market exploitation • Reducing • Acceleration of creative destruction cycles: • Finding talent discretionary • Sustainability Innovate..or die spending • Evolving • Freezing hiring procurement ‘s value proposition Source: www.bls.gov Page 4 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 5. Organizations hoped for growth, but also hedged their bets with still lower operating budgets and staff levels What is the Estimated Percentage Change that You Expect During 2009 and 2010 in Procurement for: Staffing Budgets Revenue 3.7% The jobless recovery (i.e., even fewer planned jobs going into 2010) -1.5% -1.7% -2.2% -2.3% -2.6% Change in Change in Operating Operating Revenue Revenue number of staff number of staff Budget Budget 2008-2009 2009-2010 (FTEs) 2009 (FTEs) 2010 2008-2009 2009-2010 Source: The Hackett Group 2010 Key Issues Study Page 5 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 6. What have you done in the last year? 1. Have you added high-value procurement services and related capabilities to your service portfolio? 2. Do you manage procurement processes as services? 3. Have you added higher-value metrics to your scorecard and gaining associated resources? 4. Have you helped the enterprise become more agile through better commercial risk management and improved variability of asset/cost structures? 5. Have you made procurement more agile to deliver more capacity and savings? 6. Have you extricated procurement staff from low-value processes? Are you obtaining maximum value (and minimizing distractions and risk) in p2p activities? 7. Are your key suppliers innovating with you? Page 6 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 7. Many Procurement organizations capitalized on the downturn to evolve Procurement‟s value proposition… Percentage of Procurement Organizations that Used the Recession to Make Themselves Stronger Influenced new spending areas and put in place new policies that 73% were not possible before Brought additional attention, focus, and resources to supply risk 57% as an enterprise risk issue Added higher-value procurement 'services' to your service 53% portfolio and increased your brand to the business Added higher-value metrics to your scorecard beyond cost 47% savings Extricated procurement staff from low-value processes, but also 40% increased resources in high-value procurement activities Helped critical suppliers through the downturn and garnered their 23% goodwill and commitments in preparation for the market upturn Freed up working capital without undue stress on your suppliers 13% (e.g., use of supply chain financing) Source: The Hackett Group 2010 Key Issues Study Page 7 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 8. So what will happen next? US Producers Price Index (all commodities) last 2.5 years 1 2 4 “Procurement‟s perfect storm” “Survival mode” 3 “The New Normal” “Proactive and What if nothing changes, can we sustain deliberate Will procurement‟s contribution quickly be ? focus: cost, this new normal? forgotten if a global recovery emergesbe Would the same purchasing efficiencies cash and risk” instead? available second time around, if we see a “double-dip”? Uncertainty Prevails, Agility Is Key Source: www.bls.gov Page 8 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 9. So What Do We Do Now? Page 9 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 10. How do we deal with uncertainty? Be Agile – ready to react to the environment Build your value proposition – more value in the right areas Drive performance – increase efficiency and effectiveness Get back to the basics – build capabilities Page 10 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 11. In this time of uncertainty, Procurement must evolve its value, build its execution capabilities and align performance Business Procurement Suppliers Procurement Value Spend / Supplier Value Business Environment “The New Normal” Procurement Value: Increased climate Evolve the Service Value of risk and “What do we aspire to be?” which Requirements Requirements & Spend becomes “What to execute?” volatility (and investments) Exploit emerging market Procurement Procurement opportunities Capability: Performance: Recalibrate the Service Execution Redevelop the Service Capability “What is the level of performance “What capabilities do we have Innovate or die (or for both efficiency and today or need to acquire to be acquired) effectiveness?” change?” Page 11 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 12. Every Procurement organization must define the value they want to deliver to their stakeholders Business Procurement Suppliers Procurement Value Spend / Supplier Value Procurement Value: Evolve the Service Value “What do we aspire to be?” which Requirements becomes “What to execute?” Requirements & Spend (and investments) Procurement Procurement Performance: Capability: Recalibrate the Service Execution Redevelop the Service Capability “What is the level of performance “What capabilities do we have for both efficiency and today or need to acquire to effectiveness?” change?” Page 12 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 13. It starts with “doing the right things” as procurement INFO RMA TIO N O RG ANIZATIO N Procur ement Service Deliver SERVICE PLACEME NT PRO CESS SO URCIN ENABLIN G PRO CESS DESIG N continues to evolve its value proposition… SKILLS & G TALENT y TECHNO L OGY Value Proposition Role of Procurement …ultimately stimulating good demand and Leading increasing business value derived from spend Safely harnessing the power of supply markets for competitive advantage “Influence the (and supply markets) rather than just reducing Business Strategy” spend magnitude. VALUE MGT Increase value (and required capabilities) Reducing unneeded demand activity, Customer relationship Exceeding complexity, immediacy and DEMAND management; money management; “Support the variability… MANAGEMENT demand/specification influence Business Strategy” …by reducing total supply Cost modeling; supplier/market analysis; supplier management; costs (not just supplier TCO REDUCTION profits). SRM; supply planning; project management; risk mgmt Achieving “Reduce Costs” PURCHASE COST Negotiations, n-step And at the right price… REDUCTION sourcing process Right goods and Site-level tactical services at the right SUPPLY ASSURANCE sourcing, ordering Lagging time at the right and expediting “Firefight” place… Page 13 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 14. To ensure you are investing enough time in strategic activities INFO RMA TIO N Procur ement Service SERVICE PLACEME NT PRO CESS SO URCIN G you must measure the right things PRO CESS O RG ANIZATIO N DESIG N Deliver SKILLS & ENABLIN G TALENT y TECHNO L OGY Capabilities Performance Measurement Value Level via Investment in „Services‟ Percent of firms measuring value element Percent of time spent on procurement activities on primary Procurement scorecard by non-transactional FTEs 40% Supporting 18% VALUE Strategic Initiatives 25% MGMT 27% DEMAND 21% Managing Demand MANAGEMENT 20% 15% 50% Reducing TCO REDUCTION 23% Total Cost of Ownership 26% 77% PURCHASE COST Reducing Purchased Costs 17% REDUCTION 19% 43% Assuring Supply 15% SUPPLY ASSURANCE Current Allocation Desired Allocation Source: The Hackett Group Procurement Value Proposition and Capability Study, 2010 Page 14 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 15. Achieving high performance requires an increase in the level of efficiency and effectiveness Business Procurement Suppliers Procurement Value Spend / Supplier Value Procurement Value: Evolve the Service Value “What do we aspire to be?” which Requirements becomes “What to execute?” Requirements & Spend (and investments) Procurement Procurement Performance: Capability: Recalibrate the Service Execution Redevelop the Service Capability “What is the level of performance “What capabilities do we have for both efficiency and today or need to acquire to effectiveness?” change?” Page 15 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 16. Hackett Value Grid™ − the foundation for how Hackett defines INFO RMA TIO N O RG ANIZATIO N Procur ement Service Deliver SERVICE PLACEME NT PRO CESS SO URCIN G PRO CESS DESIG N world-class performance ENABLIN SKILLS & G TALENT y TECHNO L OGY EFFECTIVENESS Hackett Value Grid™ (Procurement) EFFICIENCY  Economic return  Process costs  Supply base leverage & performance  Productivity  Role of procurement  Cycle times  Costs per transaction  Process quality  Staffing Levels Examples: Examples:  16% lower Cost of Procurement as a % of  144% higher spend cost reductions spend  90% higher spend cost avoidances  28% lower Direct - PR Cost as a % of Direct Spend  58% less suppliers per $B  19% lower Indirect - PR Cost as a % of  22% less suppliers that represent 80% Indirect Spend of direct spend  32% lower Purchase Operations cost as a % of spend  10% less suppliers that represent 80%  12% higher Span of Control of indirect spend  174% more POs processed per FTE  54% faster Direct Receiving cycle time  50% higher spend influence in direct  63% less cost per PO materials/services  23% less FTEs per $1B of spend  33% higher spend influence in indirect – 39% less direct FTEs per $1B direct spend materials/services – 29% less indirect FTEs per $1B indirect spend – All cost, FTE, and wage rate data available at  42% less PO Pricing errors a process group level * Many of these metrics are also available at a more granular spend category level below the indirect/direct materials and services levels But Procurement performance must start with the Value of the Procurement “services” promised…and delivered Source: The Hackett Group 2010 Page 16 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 17. Procurement organizations used the recession to improve along INFO RMA TIO N O RG ANIZATIO N Procur ement Service Deliver SERVICE PLACEME NT PRO CESS SO URCIN ENABLIN G PRO CESS DESIG N traditional metrics – and saw the payoff in ROI SKILLS & G TALENT y TECHNO L OGY Effectiveness: Total spend cost savings Total spend cost savings (reduction and avoidance) as a percent of 8% 7.0% annual spend 7% 6% 5.5% 4.9% 5.2% 4.8% Return on investment 5% 4.4% Ratio of total spend cost savings to the cost of 4% 3.1% procurement, 2010 2.7% 2.3% 2.3% 3% 2.1% 2.0% 2% 11.3 1% 0% 2005 2006 2007 2008 2009 2010 Non-World-Class World-Class Efficiency: Cost of procurement Procurement cost (labor, outsourcing, technology, other) as a percent of spend 174% 1.2% 1.10% 1.07% 1.04% 4.1 0.98% 1.01% 1.0% 0.85% 0.85% 0.80% 0.81% 0.83% 0.82% 0.82% 0.80% 0.8% 0.74% 0.74% 0.68% 0.64% 0.61% 0.63% 0.64% 0.60%0.62% 0.6% 0.4% Non-World-Class World-Class 0.2% 0.0% 1996 1998 2000 2002 2004 2005 2006 2007 2008 2009 2010 Non-World-Class Page 17 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 18. Once service mix (value) and performance levels are established, capabilities can and must be built Business Procurement Suppliers Procurement Value Spend / Supplier Value Procurement Value: Evolve the Service Value “What do we aspire to be?” which Requirements becomes “What to execute?” Requirements & Spend (and investments) Procurement Procurement Performance: Capability: Recalibrate the Service Execution Redevelop the Service Capability “What is the level of performance “What capabilities do we have for both efficiency and today or need to acquire to effectiveness?” change?” Page 18 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 19. The Service Delivery Model provides a framework to answer key INFO RMA TIO N O RG ANIZATIO N Procur ement Service Deliver SERVICE PLACEME NT PRO CESS SO URCIN ENABLIN G PRO CESS DESIG N questions SKILLS & G TALENT y TECHNO L OGY Who? Process Sourcing Where? What? Service Process Placement Design Service Delivery How? Information Components Enabling How? Technology Skills and Organization Talent How? Who? Page 19 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 20. Consider each component of the service your Procurement INFO RMA TIO N O RG ANIZATIO N Procur ement Service Deliver SERVICE PLACEME NT PRO CESS SO URCIN ENABLIN G PRO CESS DESIG N organization provides, to build an agile organization SKILLS & G TALENT y TECHNO L OGY Clear understanding of How and where Shared services (SSCs) In-house versus outsource which activities and processes and Centers of Excellence Onshore versus offshore processes are to take sub-processes are BU or Corporate Center Physical versus virtual place where sourced Process Sourcing Scorecards, KPIs, Decision-making Processes, master data frameworks BU-level exception- handling elements, and Single version of the Service Process standards rules, mappings, etc., reporting truth, global master Placement Design Enterprise-wide associated with data standards standards functional roles and Local standards responsibilities Service management Defined roles and Service Independent or responsibilities, Delivery integrated services organizational organization entities, structure Information Components Enabling and reporting lines Technology for service delivery Automation Skills in functions and Online self-service access Architecture of the Online and Web access business operations Skills needed to Skills and technology platforms Digitization Formal training and skills deliver and Organization Talent required to support Level of IT and systems development opportunities successfully service delivery integration Retention of top performers transform services Page 20 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 21. Procurement capabilities: Service Placement Shared Services and COEs are increasingly serving as the delivery model for Procurement services versus just the corporate versus SBU debate % Process Allocations to Model Type (by transactions for P2P; by spend for rest) Shared Services COE Corporate Center Local/BU Service Process Placement Sourcing Requisition & Purchase Order Processing 29% 11% 7% 53% Supply Data Management 29% 20% 14% 37% Information SDM Process Customer Management 19% 15% 17% 49% Design Components Supplier Scheduling 15% 3% 16% 66% Organization Supplier Management & Development 17% 26% 17% 41% Enabling Technology Skills and Receipt Processing 15% 7% 10% 68% Talent Compliance Management 10% 35% 9% 46% Sourcing Execution 8% 27% 24% 41% Function Strategy 6% 42% 16% 36% Sourcing & Supply Base Strategy 5% 43% 17% 35% Source: The Hackett Group Procurement Benchmark Page 21 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 22. Procurement capabilities: Process Sourcing Today, Procurement BPO is still heavily transactional, but market intelligence, tactical sourcing, and full category management are increasingly in play Percent of Firms Citing Processes Where BPO Will be Used as Major Strategy Service Process Placement Invoice processing Transactional 62% Sourcing PO processing and PO communications to Transactional 46% Information supplier SDM Process Design Market intelligence and supply risk data Components gathering New capability building 38% Supply data management (e.g., catalog Transactional 38% Organization management, supplier master updates, etc.) Enabling Technology Full category management of non-strategic Skills and Sourcing 31% spend areas Talent Tactical sourcing (non-recurring / spot / one- Sourcing 31% time buys / three-bids-and-a-buy) Supplier qualification and certification activities 27% Source: The Hackett Group Procurement Benchmark Source: The Hackett Group 2010 Key Issues Study Page 22 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 23. Procurement capabilities: Enabling Technology Investments are required, but utilization is the key to performance improvement Technology Cost per FTE, 2010 World-Class: $16,960 Service Non-World-Class: $13,118 Process Placement Sourcing Percent of organizations with greater than 75% utilization of primary business application functionality Information 88% SDM Process Design Components 55% 60% Organization Enabling Technology Skills and Talent Non-World-Class World-Class Source: The Hackett Group Procurement Benchmark Page 23 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 24. Procurement capabilities: Skills and Talent Talent is the number one area of focus across G&A in 2010 Percentage of Organizations with a High Degree of High Potential and Critical Staff with Formal Retention Plans 25% Service Process Placement Sourcing Information SDM Process Design Components 5% 400% Organization Enabling Technology Skills and Talent Non-World-Class World-Class A key success factor for world-class organizations is that • World-class organizations spend 18% greater time they fundamentally place a higher degree of importance training their staff than non-world-class and focus on developing cost analysis skills. organizations and have a workforce with 29% more Source: The Hackett Group Procurement Benchmark professionals. Page 24 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 25. What Are World Class Organizations Doing? Page 25 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 26. Ten Things Done Well by World-Class Procurement Organizations 1. Leverage the full capabilities of its supply markets Helps the firm safely harness the power of supply markets to get more value from external spending (i.e., gate opener –not just gatekeeper).Value can mean spending less, but also to get more utility from spend to influence (not just support) the business strategy. 2. Have flexible rather than rigid operating models Adapts its “service delivery” and transformation model to an extremely diverse set of budget owners (and functional partners) in the value chain rather than fixating on just how to organize, control the resources, or follow a rigid n-step sourcing process. It also takes a leadership role in helping construct not just product supply chains, but internal service chains as well. 3. Create clear value propositions that are understood and valued by stakeholders Creates a very clear value proposition and “brand” that can be understood, articulated, and championed by the spend owners themselves. Performs “customer management” processes to ensure that they’re getting most value from not just suppliers, but Procurement itself too. 4. Engage in business spend planning, not just “spent analysis” Works with the business to perform “spend planning” as part of financial/operations planning and budgeting, gaining earliest influence, and providing forward-looking economic spend/supply information rather than forensic “spent analysis” activity. 5. Explicitly align to the business through a project portfolio plan “Connects the Dots” in tying metrics, processes, and capabilities to this value proposition in the trenches (rather than working on these individually).There are currently too many disjointed activities within a typical Procurement project portfolio. Page 26 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 27. Ten Things Done Well by World-Class Procurement Organizations 6. Protect the business from supply risk and from itself Uses formal risk management and market intelligence techniques to provide the business not only with visibility into risk, but also with a governance structure and process to gain consensus with Finance /Business on which risks to treat and how to best systematically treat them with limited funds. 7. Shift the game from talent to knowledge Moves from a purely talent management model (“throw the best people at it”) to a knowledge management model by 1) shifting from current FTE staffing models to more flexible/variable resourcing models and 2) providing better IT support for better capturing and re-using knowledge/intelligence. 8. Turn data into information, intelligence, knowledge and insight. Uses information management as a weapon to transcend basic ERP/e-sourcing to a more thoughtful information architecture that helps manage extended supply chains and external intelligence. 9. Measure suppliers, but also tap their hearts, minds, and budgets Not only measures the suppliers through automated scorecards, but works collaboratively with suppliers to reduce total supply costs (not just supplier margins) and create innovations that will deliver economic value. Becomes a “Customer of choice” not just when you most need them, but also when they most need you. 10. Use P2P transactional processes as an asset – not a liability Provides not just “hands free” processes to make life easier for Procurement, but rather a failsafe “guided buying” experience to channel employees to preferred buy-pay channels. This implies integration between P2P and sourcing as well as a deliberate “P2P transactional channel optimization” methodology (i.e., think about applying Lean to the P2P “transaction factory‟). Page 27 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 28. Closing Thoughts Page 28 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 29. Especially When Uncertainty Prevails, we must… Continue to Evolve our Value… …and Do More with Less… …but we must Develop our Capabilities…. …To Be More Rapidly Flexible for Growth and Contraction Agility! Page 29 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
  • 30. The Hackett Group Contact Information 1117 Perimeter Center West Martin House Strawinskylaan 3051G, 1077 ZX Suite N500 5 Martin Lane Amsterdam, The Netherlands Atlanta, GA 30338 London EC4R 0DP 1001 Brickell Bay Drive Suite 3000 Torhaus Westhafen AMP Centre Miami, FL 33131 Speicherstrasse 59 50 Bridge Street 60327 Frankfurt am Main, Germany Sydney NSW 2000 One Magnificent Mile 980 N. Michigan Avenue 8, rue de Port Mahon Suite 1400 75002 Paris, France 8-2-120/112/88 & 89 Chicago, IL 60611 1st Floor, Aparna Crest Road 32, Banjara Hills 225 Washington Street 6183 Paseo del Norte #140 Hyderabad 500034 Conshohocken, PA 19428 Carlsbad, CA 92011 Chris Sawchuk Principal, Global Procurement Advisory +813 994 1822 csawchuk@thehackettgroup.com Page 30 Agile Procurement © 2010 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

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