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Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
Procurement Models for the Future
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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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  • 1. Did You Know!<br />That now is the time to take the lead – only a handful of pioneers have started investing in 4 areas of procurement excellence!<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 2. Procurement and Supply Chain Strategy<br />Procurement Models for the Future<br />Jyoti Bhattacharjya &amp; Yujie Cai<br />University of Sydney<br />David Walters<br />Professor, SCM<br />University of Sydney<br />Raj Dhawan<br />Consultant, SCM<br />Accenture<br />
  • 3. What to Expect Today<br />Learn about future trends in procurement<br />Learn what high performers in procurement do<br />Self-assess the maturity level of your procurement organisation<br />Discuss and reflect what needs to be done to transform your procurement organisation<br />Learn about immediate next steps<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 4. Agenda<br />Context<br />setting<br />Self Assessment<br />Future Trends<br />Discussion &amp;<br />Analysis<br /><ul><li>What lies ahead
  • 5. Technology
  • 6. Process
  • 7. Organisation
  • 8. Technology
  • 9. Process
  • 10. Organisation
  • 11. Current state
  • 12. Target state
  • 13. Group discussion
  • 14. Live analysis
  • 15. Results and debrief</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 16. Discussion Framework<br />1<br />Technology<br />Advanced Analytics<br />2<br />Risk Management<br />Process<br />3<br />Closed-loop Spend Management<br />4<br />Organisation<br />Capability Gaps<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 17. Procurement Maturity Continuum<br />leaders<br />Procurement<br />Process<br />Technology<br />laggards<br />Organisation<br />Future<br />Current Maturity Levels<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 18. Agenda<br /><ul><li>Maturity
  • 19. Self Assessment
  • 20. Future Trends</li></ul>TECHNOLOGY<br />TECHNOLOGY<br />PROCESS<br />ORGANISATION<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 21. Technology: Introduction<br />Use of technology in procurement<br />What really matters<br />How to get where you need to be<br />Includes<br />Use of technology <br />Requisition to Pay<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 22. Technology: Maturity Continuum<br />Technology Use<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 23. Technology: Maturity Continuum<br />Requisition to Pay<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 24. Technology: Self Assessment<br />Self Assessment is anonymous<br />√ <br />Identify current state using<br />Identify target state (2-yr horizon) using<br />√ <br />ILLUSTRATIVE<br />√ <br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 25. Future: Advanced Analytics<br />Overview<br />The process of using quantitative methods to derive actionable insights and outcomes from data.<br />Involves the capture and use of data to support fact-based decision making and gaining competitive advantage<br />Typicallyreporting on what has happened in the past<br />Using predictive analytics based on historical data to ascertain what will happen in the future<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 26. Future: Advanced Analytics<br />Sophistication Levels<br />Optimization<br />“What’s the best that can happen?”<br />Predictive Modeling<br />“What will happen next?”<br />Predictive Analytics<br />“What if these trends continue?”<br />Forecasting/extrapolation<br />“Why is this happening?”<br />Statistical analysis<br />Competitive Advantage<br />Alerts<br />“What actions are needed?”<br />Query/drill down<br />“What exactly is the problem?”<br />Descriptive Analytics<br />What?<br />“How many, how often, where?”<br />Ad hoc reports<br />Standard Reports<br />“What happened?”<br />Source: Competing on Analytics: The New Science of Winning, Davenport / Harris<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Sophistication of Intelligence<br />Copyright © 2011 Accenture All Rights Reserved.<br />Source: Competing on Analytics: The New Science of Winning (Davenport / Harris) <br />
  • 27. Future: Advanced Analytics<br />Evidence<br />Improved understanding of stocks and flows<br /><ul><li>When to order and how many
  • 28. Accurate information on volume leading to better negotiating power
  • 29. Lesser chances of going out of stock or having excess
  • 30. Improved communication with business units and vendors</li></ul>Source: When to Map and When to Model, PhD thesis, Univ of Sydney, Rajat Dhawan<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 31. Future: Advanced Analytics<br />Conclusion<br />Native ability <br />to comprehend complex procurement issues is limited – too many variables to process<br />Fact-based decision making <br />leads to better results – accurate, measurable, resulting in lower costs and greater savings.<br /><ul><li>Analytical tools
  • 32. improve our ability to capture right information, process it and help in informed decision making.</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 33. Future: Advanced Analytics<br />Implementation Challenges<br />Organisation<br />Top leadership awareness and support<br />Partnership with business units<br />Skill-set not available<br />Processes <br />One-off versus operationalised<br />Systems<br />Right technology not available; antiquated<br />Technology not usable<br />Data<br />Data in multiple systems<br />Data not captured; existing data not analysed<br />Source: Analytics Coming of Age, Procurement Professional (CIPSA), Apr 2011, Rajat Dhawan &amp; Olaf Schatteman<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 34. Agenda<br />TECHNOLOGY<br /><ul><li>Maturity
  • 35. Self Assessment
  • 36. Future Trends</li></ul>PROCESS<br />ORGANISATION<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 37. Process: Introduction<br />Key processes in procurement<br />What really matters<br />How to get where you need to be<br />Includes<br />Sourcing and Category Management<br />Contract Management<br />Supplier Relationship Management<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 38. Process: Maturity Continuum<br />Sourcing and Category Management <br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 39. Process: Maturity Continuum<br />Contract Management <br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 40. Process: Maturity Continuum<br />Supplier Relationship Management<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 41. Process: Maturity Continuum<br />Supplier Added Value Activities that Increase Customer Productivity Performance<br />Performance Management: Revenue Growth and Market Response<br />Maximise the performance of key management ratios (ROI, working capital productivity, marketing, etc) by creating value adding processes that reduce risk. <br />Working Capital Efficiency<br />Use service (frequency, reliability and accuracy) to accelerate transfer payments and lower inventory holding costs and cash flow generation.<br />Fixed Capital Effectiveness<br />Use service to improve the return on investment or to the lower investment in facilities <br />Business Performance and Productivity Drivers:<br />Supplier<br />Responses<br />CostManagement<br />Reduce value-in-use (acquisition) -costs; installation, operating costs, staff training, and maintenance costs etc. <br />Risk Reduction<br />Collaborative activities such as R&amp;D and industry procurement activities not only reduces costs but increases quality and reliability through component standardisation and therefore customer confidence<br />Optimising the Use of Time<br />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<br />Customer Satisfaction<br />Create order winning product-service criteria based on customer facing processes (value drivers) – rather than order qualifying criteria<br />Source: Walters (2011)<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 42. Process: Maturity Continuum<br />Supplier Relationship Management<br />Financial Operating Response Management<br />Inventory productivity<br />Receivables Payables Cash2Cash Cycle<br />Operating cash Working capital cycle efficiency<br />Synchronised Operating and Cash Cycles<br />Operational Efficiency: SRM <br />Procurement and Manufacturing Operations Response Management<br />Per cent throughput Relative manufacturing cycle time<br />Relative manufacturing costs/revenues Per cent on time delivery <br />Lead time flexibility response Order flexibility response<br />Order cycle time (P/A) Resources utilisation (P/A) Wastage<br />Resources productivity (P/A)<br />Inter-organisational “Operations” Network Facilities <br />Source: Walters (2011)<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 43. Process: Maturity Continuum<br /> Identifying and Targeting the Customer(s) - Managing the Response<br />Demand Chain Analysis<br />Value Delivery Considerations &amp; Implications<br />Demand<br />Chain<br />Profile<br />Value <br />Proposition<br />Target<br />Customer/Market<br />Customer <br />Value Drivers<br />Managing Value Chain Network Planning &amp; Performance<br />Marketing<br />and Sales Operations<br />Value<br />Delivery:<br />Distribution<br />Customer Services Management<br />Product-service specification and design<br />Procurement, Manufacturing and Inventory Management and “Production”,<br />Response Management: Integrating and Coordinating Resources<br />Supplier Relationship Management<br />Customer Relationship Management<br />Competitor Relationship Management<br />Source: Walters (2011)<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 44. Process: Self Assessment<br />Self Assessment is anonymous<br />√ <br />Identify current state using<br />Identify target state (2-yr horizon) using<br />√ <br />ILLUSTRATIVE<br />√ <br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 45. Future: Risk Management<br />Risk<br />More needs to be done to manage risk <br /><ul><li>the political, environmental, and economic instability of late will stay, and leaders recognise that risk must be proactively managed.</li></ul>Future leaders will need to:<br /><ul><li>Realise risk issues have a greater cost impact, and take up far more time, than most buyers’ efforts to capture savings through negotiation.
  • 46. Address supplier and price volatility risks when developing procurement strategies.
  • 47. Apply a comprehensive, end-to-end approach to anticipating, monitoring and mitigating risk.
  • 48. Use of a “risk management framework”—a comprehensive, end-to-end approach to anticipating, monitoring and mitigating risk.</li></ul>Source: Procurement Mastery Research, Accenture, 2011<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 49. Future: Risk Management<br />Five ‘Essentials’ of Risk Management <br />• Organisation &amp; Governance<br /><ul><li>Design a well-defined organisation structure with explicit roles and responsibilities and accountabilities to decisions and identify risk ownership.</li></ul>• Risk Management Processes <br /><ul><li>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. </li></ul>• Risk Analytics <br /><ul><li>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.</li></ul>• Risk Reporting <br /><ul><li>That delivers focused, relevant and timely information that enables management to make informed decisions Ideally analytics should help management predict an event or risk. </li></ul>• Information Management and Data Governance<br /><ul><li>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.</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 50. Future: Closed Loop Spend Management<br />Model<br />Appoint Senior Category Owners, aligned with Procurement Category Mgt<br />Define consumption policies, optimized specifications and optimal sourcing strategies<br />Create bottom-up budget starting from a zero base, adhering to strict policies<br />1<br />Visibility<br />2<br />3<br />Closed <br />Loop<br />Category Ownership<br />Zero-based Budget<br />5<br />4<br />Control &amp; Monitoring<br />Procurement<br />Provide full transparency on ‘who-spends-how-much-on-what’<br />Track actual variances against the budget and document during monthly meetings to ensure budget achievement by year end<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Translate into Buying Channels and “I need” portal and transfer to Procurement Middle Office - BSC<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 51. Future: Closed Loop Spend Management<br />Visibility<br />The visibility is created by mapping the key financial transactional data into a matrix made of Cost Categories and Business Functions<br />Functions defined by Organisational structure<br />ILLUSTRATIVE<br />Cost Category structure<br /> Cost Centers<br />GLAccounts<br />DetailedTransactional Data<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 52. Future: Closed Loop Spend Management<br />Category Ownership &amp; Policies<br />Each Cost Category owner is responsible for identifying and prioritising significant opportunities in their area which are easy to implement<br />Low Hanging Fruit<br />ILLUSTRATIVE<br />High<br />Size of opportunity<br />Priority <br />for <br />Implementation<br /><ul><li>Define maximum CRM spend by segment
  • 53. Enforce max. phone allowance
  • 54. Do not allow business class for flights &lt; 6h
  • 55. Define POS maximum spend by segment / Only purchase in POS Catalogue
  • 56. Challenge Consultant spend not supported by strategic plan
  • 57. Implement new car policy and review entitlement</li></ul>Medium<br /><ul><li>Reduce # travels to same destination
  • 58. Challenge sponsorship costs vs. brand equity building
  • 59. Optimize office space in sales centers
  • 60. Define mandatory agency fees list</li></ul>Low<br /><ul><li>Challenge Market Research expenses
  • 61. Centralize all office supplies procurement
  • 62. Enhance Employee Referral Program and E-recruitment</li></ul>Ease of implementation<br />High<br />Low<br />Medium<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 63. Future: Closed Loop Spend Management<br />Zero-based Budget<br />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<br />ILLUSTRATIVE<br />Category owner<br />Send New Proposal<br />Send New Proposal<br />Budget<br />Quantified Opportunities To Optimize Budget<br />Final agreement on the Budget<br />Budget holder<br />Negotiation Rounds<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 64. Future: Closed Loop Spend Management<br />Procurement<br />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<br />“I need” Portal<br /><ul><li>Policies and how to order/work with procurement is guided in the so-called buying channels
  • 65. Preferred suppliers are presented
  • 66. Prerequisites and other useful information can be consulted</li></ul>Procurement Middle Office<br /><ul><li>Invoices are booked by the back-office in the right cost category
  • 67. Often requiring chart of account changes/ training of AP people to properly book invoices
  • 68. The back-office also acts as supplier helpdesk</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 69. Future: Closed Loop Spend Management<br />Control &amp; Monitoring<br />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<br />Workday of Week 3 *<br />ILLUSTRATIVE<br />1<br />2<br />3<br />4<br />5<br />…<br />…<br />Executive Team Meeting<br />Global<br />0,5-1h<br />Analysis of variances at Sub-Category level<br />Category Meeting<br />e.g. Services Meeting<br />1h<br />Analysis of variances at regional level per Category<br />Regional Meeting<br />Region<br />e.g. EMEA Meeting<br />1-2h<br />Site Meeting<br />Analysis of variances at site level per Category<br />Country<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />e.g. Country Meeting<br />Copyright © 2011 Accenture All Rights Reserved.<br />1-2h<br />* Depending on the month closing cycle the monthly routine will start as of week 2 or week 3<br />
  • 70. Agenda<br /><ul><li>Maturity
  • 71. Self Assessment
  • 72. Future Trends</li></ul>TECHNOLOGY<br />PROCESS<br />ORGANISATION<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 73. Organisation: Introduction<br />What is the role of procurement organisation in managing spend<br />Centralised versus decentralised structures<br />How to get where you need to be<br />Includes<br />Procurement Strategy<br />People &amp; Workforce<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 74. Organisation: Maturity Continuum<br />Procurement Strategy <br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 75. Organisation: Maturity Continuum<br />People and Workforce<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 76. Organisation: Self Assessment<br />Self Assessment is anonymous<br />√ <br />Identify current state using<br />Identify target state (2-yr horizon) using<br />√ <br />ILLUSTRATIVE<br />√ <br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 77. Future: Workforce Capabilities<br />Research shows that not even the leaders are doing well with workforce and organisation. <br />Here&apos;s what some companies are doing to move out in front...<br />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<br />Capability development initiatives – continual improvement of on-the-job skills at every level<br />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;<br />Action learning programs – activities in which real business problems are solved in small groups<br />Individuals targeted as high performers within procurement, finance, HR, operations, etc., are eligible for additional training, special projects, and networking opportunities<br />Source: Procurement Mastery Research, Accenture, 2011<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 78. Agenda<br /><ul><li>State of the Art
  • 79. Roadmap to Target State
  • 80. Future Trends</li></ul>TECHNOLOGY<br />PROCESS<br />ORGANISATION<br /><ul><li>Debrief &amp; Next Steps</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 81. Recap: Future Focus Areas<br />1<br />3<br />Advanced Analytics<br />Closed-Loop Spend Management<br />4<br />2<br />Risk Management<br />Workforce Capabilities<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 82. Immediate Next Steps<br />1<br />3<br />Advanced Analytics<br />Closed-Loop Spend Management<br /><ul><li>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
  • 83. Invest in systems; ensure they are integrated
  • 84. Create awareness; change culture from gut-feel to fact-based decision making
  • 85. Consider processes that can be supported by data
  • 86. Create visibility on the cost structure; review GL accounts and standardize across the company; key to enable consistent benchmarking and analysis
  • 87. Reviewing policy compliance is the first step in finding savings
  • 88. Increase number of &quot;hands-free&quot; transactions, improves contract / channel compliance and optimises the operational effort</li></ul>4<br />2<br />Risk Management<br />Workforce Capabilities<br /><ul><li>Competition no longer matter of being Company vs Company it is value chain vs value chain
  • 89. Organisational boundaries overlap those of partners encouraging trust and a free exchange of information/knowledge.
  • 90. By adopting a collaborative approach with suppliers costly levels of inventory holding are lower and cycle times (operating and cash2cash) reduced.
  • 91. Effective strategies are those that identify areas of risk and work to minimise its effects - build risk analysis into strategic analysis and decision making.
  • 92. In the current environment market and financial risk are no longer constants or given they change rapidly - that&apos;s why the GFC caught many organisations unawares. 
  • 93. Learn from experience</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 94. Debrief<br />Start focusing on the 4 future focus areas – this where the future lies!<br />Get top-management support–Procurement/Finance/Board.<br />Collaborate with business units – ensure they understand the change; share skills and information where possible.<br />Revisit processes; enforce them.<br />Revisit procurement technology landscape; learn to walk before you run.<br />Gauge where you currently are and where would you like to be – have a plan for change.<br />Get external support to kick-start changes/introduce rigour.<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 95. Debrief: Technology<br />Note: Results presented are aggregated by Technology maturity, and not by individual components within Technology. Detailed analysis available on request.<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 96. Debrief: Process<br />Note: Results presented are aggregated by Process maturity, and not by individual components within Technology. Detailed analysis available on request.<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 97. Thank You<br />Context<br /><ul><li>Maturity
  • 98. Self Assessment
  • 99. Future Trends
  • 100. Debrief &amp; Next Steps</li></ul>www.rajatdhawan.com <br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 101. Appendix<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 102. Self Assessments<br />Are anonymous<br />Fill it to the best of abilities<br />Demographic info is optional<br />Detailed analysis<br />Presentation summary<br />Future work<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 103. Future: Advanced Analytics<br />Continuum<br />WHICH STAGE OF PROCUREMENT ANALYTICS IS YOUR ORGANISATION IN?<br />Routinely uses analytics as a distinctive capability, takes an enterprise-wide approach, has committed and involved leadership, and has achieved large-scale results.<br />Stage 5<br />Analytical Competitors<br />Applies analytics regularly, and realizes benefits across the organisation. <br />Stage 4<br />Analytical Companies<br />Has established analytical capabilities, and has a few significant initiatives under way – but progress is slow and missing critical elements.<br />Stage 3<br />Analytical Aspirations<br />Pockets of analytical activity, but they are uncoordinated and not focused on strategic targets.<br />Stage 2<br />Localised Analytics<br />Organisation lacks one or several of the pre-requisites for serious analytical work.<br />Stage 1<br />Analytical Novice<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 104. Future: Risk Management<br />Risk Management Framework<br />Risk Management Framework<br />Risk Anticipation<br />Risk Monitoring<br />Risk Mitigation<br />Develop strategies to avoid/minimise exposure to risk<br />Track potential risk set indicators<br />Take quick and appropriate actions to minimise effects<br />Procurement Strategy<br />Sourcing and Category Management<br />Procurement<br />Performance<br />Requisition to Pay<br />Supplier Relationship Management<br />Process and Technology<br />Workforce and Organisation<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 105. Future: Closed Loop Spend Management<br />Visibility<br />Key Performance Indicators (KPIs) are defined to measure price and consumption, then benchmarked both internally and externally<br />ILLUSTRATIVE<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 106. Future: Closed Loop Spend Management<br />Zero-based Budget<br />Budget holders build their budget zero-base with great amount of detail, adhering to top down targets and strict global policies<br />Travel Budget Template<br />Budget Templates<br />ILLUSTRATIVE<br /><ul><li>Are built for all (Sub-)Categories
  • 107. Contain enough details to allow full understanding on the budget construction
  • 108. Might have a different level of detail, depending on the Category
  • 109. Contain enough attributes to enable powerful analysis and benchmarking</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 110. Future: Closed Loop Spend Management<br />Category Ownership &amp; Policies<br />Challenging cost is no longer a Finance-only activity; Category ownership creates a shared responsibility driving sustainable savings opportunities<br />ILLUSTRATIVE<br />…who has a set of responsibilities but is also empowered to make tough decisions<br />For each category, an owner is appointed at the top level…<br /><ul><li>Have deep understanding of cost drivers
  • 111. Challenge budgets, across all departments
  • 112. Enforce disciplined execution
  • 113. Drive fact-based cost savings
  • 114. Monitor costs
  • 115. Lead by example
  • 116. Sustain savings</li></ul>Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 117. Internal Business users<br />Local User interface: Local Purchasing Representation<br />Perform Requisitions &amp; Fulfillment<br />Execute local Contract <br />Implementation<br />Perform Customer<br />Services (Helpdesk)<br />Provide Sourcing <br />Support<br />Execute Spot Buys<br />(&lt;2.5k)<br />Corporate Procurement – Zone(s)<br />Roles: Cat. Leader and Manager<br />Front Office:<br /><ul><li>Corporate/ BU/ Local Sourcing
  • 118. Roles: Cat. Leader and Manager</li></ul>Finance shared service center (Back-Office)<br />Execute <br />Spot Buys <br />(&gt;2,5K)<br />Sourcing<br />Support<br />LPR Helpdesk <br />(future- &gt; User)<br />Optimize User <br />Compliance –<br />Satisfaction<br />InvoiceProcessing<br />PO &amp; Fulfillment<br />Services<br />eSourcing<br />Services<br />Optimize <br />Contracts<br />Supplier<br />Helpdesk<br />Value Tracking/<br />Budgeting<br />Services<br />Item- Master <br />Data<br />Mgmt<br />Procurement Center (Middle Office)<br />Suppliers<br />Future: Closed Loop Spend Management<br />Purchasing<br />TO-BE Situation: An innovative operating model is at the heart of maximum procurement value at a low operating cost <br />Procurement (Operational ) Processes<br />Sourcing &amp; Category Management<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 119. Future: Closed Loop Spend Management<br />Control &amp; Monitoring<br />The variances against the budget are tracked and documented during monthly meetings to ensure budget achievement and actions trigger continuous improvement<br />ILLUSTRATIVE<br />OUTPUT REPORT<br />INPUT REPORT<br />DURING THE MEETING<br />Updated and consolidated Variance Report<br />Agreement on Action Plan, Responsible and Due date<br />Variance Reports for the Category by Region<br />Input from Finance<br />Output from Category Team<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 120. Future: Workforce Capabilities<br />What is the Customers’ Expectation of Value?<br />What is the customer value to be delivered-: customer/market “value driver” characteristics?<br />Market/segment volume?<br />Who are the end- users? Is the product-service a candidate for imitation and commoditization?<br />What are the preferred product-service format alternatives?<br />What are the product-service production format alternatives?<br />How active are competitors? Who are they? Do they have a presence in all of the market or specific segments?<br />What are the market constraints<br /> (if any)?<br />One<br />Procurement and Manufacturing<br />Product complexity <br />The role of differentiation<br />Market/production volumes Range &amp; variety<br />Production process options;<br />Project? Job? Flow Line? <br />Continuous Process?<br />Procurement profile;<br />Standard components (product, industry)<br />Modular build?<br />Exclusive/specific components?<br />Industry purchasing group?<br />Three<br />Design and Development<br />What is the required R&amp;D expertise? What resources (assets, processes, capabilities and capacities are required for success? <br />What are the investment implications (capital, capacity, forecast utilisation?)<br />Are they already available? <br />Who owns them? Where are they?<br />Which of them are “core” to the<br /> customer/market opportunity?<br />What are the competitive issues?<br />Are there enablers that can create a CA<br />What is the likely number of tasks the product will be expected to undertake?<br />Two<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 121. Future: Workforce Capabilities<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />
  • 122. Future: Risk Management<br />Risk Exposure by Industry<br />High<br />Medium<br />Low<br />Transportation<br />(Impact of Oil Prices)<br />Oil, Gas and other Natural Resources<br />Automotive<br />30% of component suppliers in bankruptcy situation<br />Aerospace and Defence<br />(Single source supply)<br />Electronics and High Technology<br />High<br />Chemicals<br />Food<br />(Impact of wheat &amp; milk prices)<br />Mining &amp; Metals<br />Manufacturing<br />Pharmaceutical and Medical Products<br />Low<br />Construction<br />Industrial Equipment<br />Consumer Goods<br />Retail<br />Media and Entertainment<br />Communication<br />Medium<br />Perceived Exposure to Price Fluctuations<br />Perceived Exposure to Supplier Risks<br />Source: High Performance in Procurement Risk Management (Accenture, 2010)<br />Dhawan, Walters, Bhattacharjya<br />Procurement Models for the Future<br />Copyright © 2011 Accenture All Rights Reserved.<br />

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