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Procurement Models for the Future
 

Procurement Models for the Future

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Presentation made at the SMART supply chain conference,

Presentation made at the SMART supply chain conference,
Rajat Dhawan

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    Procurement Models for the Future Procurement Models for the Future Presentation Transcript

    • Did You Know!
      That now is the time to take the lead – only a handful of pioneers have started investing in 4 areas of procurement excellence!
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Procurement and Supply Chain Strategy
      Procurement Models for the Future
      Jyoti Bhattacharjya & Yujie Cai
      University of Sydney
      David Walters
      Professor, SCM
      University of Sydney
      Raj Dhawan
      Consultant, SCM
      Accenture
    • What to Expect Today
      Learn about future trends in procurement
      Learn what high performers in procurement do
      Self-assess the maturity level of your procurement organisation
      Discuss and reflect what needs to be done to transform your procurement organisation
      Learn about immediate next steps
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Agenda
      Context
      setting
      Self Assessment
      Future Trends
      Discussion &
      Analysis
      • What lies ahead
      • Technology
      • Process
      • Organisation
      • Technology
      • Process
      • Organisation
      • Current state
      • Target state
      • Group discussion
      • Live analysis
      • Results and debrief
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Discussion Framework
      1
      Technology
      Advanced Analytics
      2
      Risk Management
      Process
      3
      Closed-loop Spend Management
      4
      Organisation
      Capability Gaps
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Procurement Maturity Continuum
      leaders
      Procurement
      Process
      Technology
      laggards
      Organisation
      Future
      Current Maturity Levels
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Agenda
      • Maturity
      • Self Assessment
      • Future Trends
      TECHNOLOGY
      TECHNOLOGY
      PROCESS
      ORGANISATION
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Technology: Introduction
      Use of technology in procurement
      What really matters
      How to get where you need to be
      Includes
      Use of technology
      Requisition to Pay
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Technology: Maturity Continuum
      Technology Use
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Technology: Maturity Continuum
      Requisition to Pay
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Technology: Self Assessment
      Self Assessment is anonymous

      Identify current state using
      Identify target state (2-yr horizon) using

      ILLUSTRATIVE

      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Advanced Analytics
      Overview
      The process of using quantitative methods to derive actionable insights and outcomes from data.
      Involves the capture and use of data to support fact-based decision making and gaining competitive advantage
      Typicallyreporting on what has happened in the past
      Using predictive analytics based on historical data to ascertain what will happen in the future
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Advanced Analytics
      Sophistication Levels
      Optimization
      “What’s the best that can happen?”
      Predictive Modeling
      “What will happen next?”
      Predictive Analytics
      “What if these trends continue?”
      Forecasting/extrapolation
      “Why is this happening?”
      Statistical analysis
      Competitive Advantage
      Alerts
      “What actions are needed?”
      Query/drill down
      “What exactly is the problem?”
      Descriptive Analytics
      What?
      “How many, how often, where?”
      Ad hoc reports
      Standard Reports
      “What happened?”
      Source: Competing on Analytics: The New Science of Winning, Davenport / Harris
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Sophistication of Intelligence
      Copyright © 2011 Accenture All Rights Reserved.
      Source: Competing on Analytics: The New Science of Winning (Davenport / Harris)
    • Future: Advanced Analytics
      Evidence
      Improved understanding of stocks and flows
      • When to order and how many
      • Accurate information on volume leading to better negotiating power
      • Lesser chances of going out of stock or having excess
      • Improved communication with business units and vendors
      Source: When to Map and When to Model, PhD thesis, Univ of Sydney, Rajat Dhawan
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Advanced Analytics
      Conclusion
      Native ability
      to comprehend complex procurement issues is limited – too many variables to process
      Fact-based decision making
      leads to better results – accurate, measurable, resulting in lower costs and greater savings.
      • Analytical tools
      • improve our ability to capture right information, process it and help in informed decision making.
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Advanced Analytics
      Implementation Challenges
      Organisation
      Top leadership awareness and support
      Partnership with business units
      Skill-set not available
      Processes
      One-off versus operationalised
      Systems
      Right technology not available; antiquated
      Technology not usable
      Data
      Data in multiple systems
      Data not captured; existing data not analysed
      Source: Analytics Coming of Age, Procurement Professional (CIPSA), Apr 2011, Rajat Dhawan & Olaf Schatteman
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Agenda
      TECHNOLOGY
      • Maturity
      • Self Assessment
      • Future Trends
      PROCESS
      ORGANISATION
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Introduction
      Key processes in procurement
      What really matters
      How to get where you need to be
      Includes
      Sourcing and Category Management
      Contract Management
      Supplier Relationship Management
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Maturity Continuum
      Sourcing and Category Management
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Maturity Continuum
      Contract Management
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Maturity Continuum
      Supplier Relationship Management
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Maturity Continuum
      Supplier Added Value Activities that Increase Customer Productivity Performance
      Performance Management: Revenue Growth and Market Response
      Maximise the performance of key management ratios (ROI, working capital productivity, marketing, etc) by creating value adding processes that reduce risk.
      Working Capital Efficiency
      Use service (frequency, reliability and accuracy) to accelerate transfer payments and lower inventory holding costs and cash flow generation.
      Fixed Capital Effectiveness
      Use service to improve the return on investment or to the lower investment in facilities
      Business Performance and Productivity Drivers:
      Supplier
      Responses
      CostManagement
      Reduce value-in-use (acquisition) -costs; installation, operating costs, staff training, and maintenance costs etc.
      Risk Reduction
      Collaborative activities such as R&D and industry procurement activities not only reduces costs but increases quality and reliability through component standardisation and therefore customer confidence
      Optimising the Use of Time
      The effective (strategic) use of time is reflected in time-to-market and competitive advantage gained. The efficient (operational) use of time is the time response to customer requests (quotations, orders, deliveries, returns, etc) and its competitive impact
      Customer Satisfaction
      Create order winning product-service criteria based on customer facing processes (value drivers) – rather than order qualifying criteria
      Source: Walters (2011)
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Maturity Continuum
      Supplier Relationship Management
      Financial Operating Response Management
      Inventory productivity
      Receivables Payables Cash2Cash Cycle
      Operating cash Working capital cycle efficiency
      Synchronised Operating and Cash Cycles
      Operational Efficiency: SRM
      Procurement and Manufacturing Operations Response Management
      Per cent throughput Relative manufacturing cycle time
      Relative manufacturing costs/revenues Per cent on time delivery
      Lead time flexibility response Order flexibility response
      Order cycle time (P/A) Resources utilisation (P/A) Wastage
      Resources productivity (P/A)
      Inter-organisational “Operations” Network Facilities
      Source: Walters (2011)
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Maturity Continuum
      Identifying and Targeting the Customer(s) - Managing the Response
      Demand Chain Analysis
      Value Delivery Considerations & Implications
      Demand
      Chain
      Profile
      Value
      Proposition
      Target
      Customer/Market
      Customer
      Value Drivers
      Managing Value Chain Network Planning & Performance
      Marketing
      and Sales Operations
      Value
      Delivery:
      Distribution
      Customer Services Management
      Product-service specification and design
      Procurement, Manufacturing and Inventory Management and “Production”,
      Response Management: Integrating and Coordinating Resources
      Supplier Relationship Management
      Customer Relationship Management
      Competitor Relationship Management
      Source: Walters (2011)
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Process: Self Assessment
      Self Assessment is anonymous

      Identify current state using
      Identify target state (2-yr horizon) using

      ILLUSTRATIVE

      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Risk Management
      Risk
      More needs to be done to manage risk
      • the political, environmental, and economic instability of late will stay, and leaders recognise that risk must be proactively managed.
      Future leaders will need to:
      • Realise risk issues have a greater cost impact, and take up far more time, than most buyers’ efforts to capture savings through negotiation.
      • Address supplier and price volatility risks when developing procurement strategies.
      • Apply a comprehensive, end-to-end approach to anticipating, monitoring and mitigating risk.
      • Use of a “risk management framework”—a comprehensive, end-to-end approach to anticipating, monitoring and mitigating risk.
      Source: Procurement Mastery Research, Accenture, 2011
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Risk Management
      Five ‘Essentials’ of Risk Management
      • Organisation & Governance
      • Design a well-defined organisation structure with explicit roles and responsibilities and accountabilities to decisions and identify risk ownership.
      • Risk Management Processes
      • That identify critical supply categories and vendors. The processes should capture risks and include monitoring activities to identify potential problems. They must be consistent throughout the organisation.
      • Risk Analytics
      • To identify, measure and monitor operational risks. They should comprise metrics that allow a company to see when and where an operational risk exists and focus it with related management initiatives. Analytical tools should also quantify the impacts of risk items.
      • Risk Reporting
      • That delivers focused, relevant and timely information that enables management to make informed decisions Ideally analytics should help management predict an event or risk.
      • Information Management and Data Governance
      • Should help maximise performance by integrating and coordinating processes across organisational boundaries, and regions. It requires managing and making internal and external information transparent to management to achieve an enterprise-wide perspective of risk that contributes to better decision making.
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Model
      Appoint Senior Category Owners, aligned with Procurement Category Mgt
      Define consumption policies, optimized specifications and optimal sourcing strategies
      Create bottom-up budget starting from a zero base, adhering to strict policies
      1
      Visibility
      2
      3
      Closed
      Loop
      Category Ownership
      Zero-based Budget
      5
      4
      Control & Monitoring
      Procurement
      Provide full transparency on ‘who-spends-how-much-on-what’
      Track actual variances against the budget and document during monthly meetings to ensure budget achievement by year end
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Translate into Buying Channels and “I need” portal and transfer to Procurement Middle Office - BSC
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Visibility
      The visibility is created by mapping the key financial transactional data into a matrix made of Cost Categories and Business Functions
      Functions defined by Organisational structure
      ILLUSTRATIVE
      Cost Category structure
      Cost Centers
      GLAccounts
      DetailedTransactional Data
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Category Ownership & Policies
      Each Cost Category owner is responsible for identifying and prioritising significant opportunities in their area which are easy to implement
      Low Hanging Fruit
      ILLUSTRATIVE
      High
      Size of opportunity
      Priority
      for
      Implementation
      • Define maximum CRM spend by segment
      • Enforce max. phone allowance
      • Do not allow business class for flights < 6h
      • Define POS maximum spend by segment / Only purchase in POS Catalogue
      • Challenge Consultant spend not supported by strategic plan
      • Implement new car policy and review entitlement
      Medium
      • Reduce # travels to same destination
      • Challenge sponsorship costs vs. brand equity building
      • Optimize office space in sales centers
      • Define mandatory agency fees list
      Low
      • Challenge Market Research expenses
      • Centralize all office supplies procurement
      • Enhance Employee Referral Program and E-recruitment
      Ease of implementation
      High
      Low
      Medium
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Zero-based Budget
      At the end of the process, the Category Owner will present its conclusion to the Budget Holder and they negotiate on the Final budget. The scope will drive the effort
      ILLUSTRATIVE
      Category owner
      Send New Proposal
      Send New Proposal
      Budget
      Quantified Opportunities To Optimize Budget
      Final agreement on the Budget
      Budget holder
      Negotiation Rounds
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Procurement
      Actual consumption is triggered by the “I need” portal in which policies and how to order/work with procurement is guided in the so-called buying channels
      “I need” Portal
      • Policies and how to order/work with procurement is guided in the so-called buying channels
      • Preferred suppliers are presented
      • Prerequisites and other useful information can be consulted
      Procurement Middle Office
      • Invoices are booked by the back-office in the right cost category
      • Often requiring chart of account changes/ training of AP people to properly book invoices
      • The back-office also acts as supplier helpdesk
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Control & Monitoring
      Each month a cascade of meetings takes place where analyses and actions are filtered up through to the Cost Category Owners for review and action
      Workday of Week 3 *
      ILLUSTRATIVE
      1
      2
      3
      4
      5


      Executive Team Meeting
      Global
      0,5-1h
      Analysis of variances at Sub-Category level
      Category Meeting
      e.g. Services Meeting
      1h
      Analysis of variances at regional level per Category
      Regional Meeting
      Region
      e.g. EMEA Meeting
      1-2h
      Site Meeting
      Analysis of variances at site level per Category
      Country
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      e.g. Country Meeting
      Copyright © 2011 Accenture All Rights Reserved.
      1-2h
      * Depending on the month closing cycle the monthly routine will start as of week 2 or week 3
    • Agenda
      • Maturity
      • Self Assessment
      • Future Trends
      TECHNOLOGY
      PROCESS
      ORGANISATION
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Organisation: Introduction
      What is the role of procurement organisation in managing spend
      Centralised versus decentralised structures
      How to get where you need to be
      Includes
      Procurement Strategy
      People & Workforce
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Organisation: Maturity Continuum
      Procurement Strategy
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Organisation: Maturity Continuum
      People and Workforce
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Organisation: Self Assessment
      Self Assessment is anonymous

      Identify current state using
      Identify target state (2-yr horizon) using

      ILLUSTRATIVE

      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Workforce Capabilities
      Research shows that not even the leaders are doing well with workforce and organisation.
      Here's what some companies are doing to move out in front...
      Running powerful training programs that not only improve the skills of its employees but helps make the function – with procurement at its core – an attractive area to work and a breeding ground for talent for the company as a whole
      Capability development initiatives – continual improvement of on-the-job skills at every level
      Programs that focus on “learning how to learn”, as well as how to work competently with cross-functional counterparts in the safety, legal, finance, projects, engineering, and operational functions;
      Action learning programs – activities in which real business problems are solved in small groups
      Individuals targeted as high performers within procurement, finance, HR, operations, etc., are eligible for additional training, special projects, and networking opportunities
      Source: Procurement Mastery Research, Accenture, 2011
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Agenda
      • State of the Art
      • Roadmap to Target State
      • Future Trends
      TECHNOLOGY
      PROCESS
      ORGANISATION
      • Debrief & Next Steps
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Recap: Future Focus Areas
      1
      3
      Advanced Analytics
      Closed-Loop Spend Management
      4
      2
      Risk Management
      Workforce Capabilities
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Immediate Next Steps
      1
      3
      Advanced Analytics
      Closed-Loop Spend Management
      • Analyse what could you do with information; then work backwards to ensure you’ve got the right data and tools to extract, process and present intelligence
      • Invest in systems; ensure they are integrated
      • Create awareness; change culture from gut-feel to fact-based decision making
      • Consider processes that can be supported by data
      • Create visibility on the cost structure; review GL accounts and standardize across the company; key to enable consistent benchmarking and analysis
      • Reviewing policy compliance is the first step in finding savings
      • Increase number of "hands-free" transactions, improves contract / channel compliance and optimises the operational effort
      4
      2
      Risk Management
      Workforce Capabilities
      • Competition no longer matter of being Company vs Company it is value chain vs value chain
      • Organisational boundaries overlap those of partners encouraging trust and a free exchange of information/knowledge.
      • By adopting a collaborative approach with suppliers costly levels of inventory holding are lower and cycle times (operating and cash2cash) reduced.
      • Effective strategies are those that identify areas of risk and work to minimise its effects - build risk analysis into strategic analysis and decision making.
      • In the current environment market and financial risk are no longer constants or given they change rapidly - that's why the GFC caught many organisations unawares. 
      • Learn from experience
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Debrief
      Start focusing on the 4 future focus areas – this where the future lies!
      Get top-management support–Procurement/Finance/Board.
      Collaborate with business units – ensure they understand the change; share skills and information where possible.
      Revisit processes; enforce them.
      Revisit procurement technology landscape; learn to walk before you run.
      Gauge where you currently are and where would you like to be – have a plan for change.
      Get external support to kick-start changes/introduce rigour.
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Debrief: Technology
      Note: Results presented are aggregated by Technology maturity, and not by individual components within Technology. Detailed analysis available on request.
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Debrief: Process
      Note: Results presented are aggregated by Process maturity, and not by individual components within Technology. Detailed analysis available on request.
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Thank You
      Context
      • Maturity
      • Self Assessment
      • Future Trends
      • Debrief & Next Steps
      www.rajatdhawan.com
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Appendix
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Self Assessments
      Are anonymous
      Fill it to the best of abilities
      Demographic info is optional
      Detailed analysis
      Presentation summary
      Future work
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Advanced Analytics
      Continuum
      WHICH STAGE OF PROCUREMENT ANALYTICS IS YOUR ORGANISATION IN?
      Routinely uses analytics as a distinctive capability, takes an enterprise-wide approach, has committed and involved leadership, and has achieved large-scale results.
      Stage 5
      Analytical Competitors
      Applies analytics regularly, and realizes benefits across the organisation.
      Stage 4
      Analytical Companies
      Has established analytical capabilities, and has a few significant initiatives under way – but progress is slow and missing critical elements.
      Stage 3
      Analytical Aspirations
      Pockets of analytical activity, but they are uncoordinated and not focused on strategic targets.
      Stage 2
      Localised Analytics
      Organisation lacks one or several of the pre-requisites for serious analytical work.
      Stage 1
      Analytical Novice
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Risk Management
      Risk Management Framework
      Risk Management Framework
      Risk Anticipation
      Risk Monitoring
      Risk Mitigation
      Develop strategies to avoid/minimise exposure to risk
      Track potential risk set indicators
      Take quick and appropriate actions to minimise effects
      Procurement Strategy
      Sourcing and Category Management
      Procurement
      Performance
      Requisition to Pay
      Supplier Relationship Management
      Process and Technology
      Workforce and Organisation
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Visibility
      Key Performance Indicators (KPIs) are defined to measure price and consumption, then benchmarked both internally and externally
      ILLUSTRATIVE
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Zero-based Budget
      Budget holders build their budget zero-base with great amount of detail, adhering to top down targets and strict global policies
      Travel Budget Template
      Budget Templates
      ILLUSTRATIVE
      • Are built for all (Sub-)Categories
      • Contain enough details to allow full understanding on the budget construction
      • Might have a different level of detail, depending on the Category
      • Contain enough attributes to enable powerful analysis and benchmarking
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Category Ownership & Policies
      Challenging cost is no longer a Finance-only activity; Category ownership creates a shared responsibility driving sustainable savings opportunities
      ILLUSTRATIVE
      …who has a set of responsibilities but is also empowered to make tough decisions
      For each category, an owner is appointed at the top level…
      • Have deep understanding of cost drivers
      • Challenge budgets, across all departments
      • Enforce disciplined execution
      • Drive fact-based cost savings
      • Monitor costs
      • Lead by example
      • Sustain savings
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Internal Business users
      Local User interface: Local Purchasing Representation
      Perform Requisitions & Fulfillment
      Execute local Contract
      Implementation
      Perform Customer
      Services (Helpdesk)
      Provide Sourcing
      Support
      Execute Spot Buys
      (<2.5k)
      Corporate Procurement – Zone(s)
      Roles: Cat. Leader and Manager
      Front Office:
      • Corporate/ BU/ Local Sourcing
      • Roles: Cat. Leader and Manager
      Finance shared service center (Back-Office)
      Execute
      Spot Buys
      (>2,5K)
      Sourcing
      Support
      LPR Helpdesk
      (future- > User)
      Optimize User
      Compliance –
      Satisfaction
      InvoiceProcessing
      PO & Fulfillment
      Services
      eSourcing
      Services
      Optimize
      Contracts
      Supplier
      Helpdesk
      Value Tracking/
      Budgeting
      Services
      Item- Master
      Data
      Mgmt
      Procurement Center (Middle Office)
      Suppliers
      Future: Closed Loop Spend Management
      Purchasing
      TO-BE Situation: An innovative operating model is at the heart of maximum procurement value at a low operating cost
      Procurement (Operational ) Processes
      Sourcing & Category Management
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Closed Loop Spend Management
      Control & Monitoring
      The variances against the budget are tracked and documented during monthly meetings to ensure budget achievement and actions trigger continuous improvement
      ILLUSTRATIVE
      OUTPUT REPORT
      INPUT REPORT
      DURING THE MEETING
      Updated and consolidated Variance Report
      Agreement on Action Plan, Responsible and Due date
      Variance Reports for the Category by Region
      Input from Finance
      Output from Category Team
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Workforce Capabilities
      What is the Customers’ Expectation of Value?
      What is the customer value to be delivered-: customer/market “value driver” characteristics?
      Market/segment volume?
      Who are the end- users? Is the product-service a candidate for imitation and commoditization?
      What are the preferred product-service format alternatives?
      What are the product-service production format alternatives?
      How active are competitors? Who are they? Do they have a presence in all of the market or specific segments?
      What are the market constraints
      (if any)?
      One
      Procurement and Manufacturing
      Product complexity
      The role of differentiation
      Market/production volumes Range & variety
      Production process options;
      Project? Job? Flow Line?
      Continuous Process?
      Procurement profile;
      Standard components (product, industry)
      Modular build?
      Exclusive/specific components?
      Industry purchasing group?
      Three
      Design and Development
      What is the required R&D expertise? What resources (assets, processes, capabilities and capacities are required for success?
      What are the investment implications (capital, capacity, forecast utilisation?)
      Are they already available?
      Who owns them? Where are they?
      Which of them are “core” to the
      customer/market opportunity?
      What are the competitive issues?
      Are there enablers that can create a CA
      What is the likely number of tasks the product will be expected to undertake?
      Two
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Workforce Capabilities
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.
    • Future: Risk Management
      Risk Exposure by Industry
      High
      Medium
      Low
      Transportation
      (Impact of Oil Prices)
      Oil, Gas and other Natural Resources
      Automotive
      30% of component suppliers in bankruptcy situation
      Aerospace and Defence
      (Single source supply)
      Electronics and High Technology
      High
      Chemicals
      Food
      (Impact of wheat & milk prices)
      Mining & Metals
      Manufacturing
      Pharmaceutical and Medical Products
      Low
      Construction
      Industrial Equipment
      Consumer Goods
      Retail
      Media and Entertainment
      Communication
      Medium
      Perceived Exposure to Price Fluctuations
      Perceived Exposure to Supplier Risks
      Source: High Performance in Procurement Risk Management (Accenture, 2010)
      Dhawan, Walters, Bhattacharjya
      Procurement Models for the Future
      Copyright © 2011 Accenture All Rights Reserved.