Procurement Models for the Future

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Presentation made at the SMART supply chain conference,
Rajat Dhawan

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  • 1. 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.
  • 2. 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
  • 3. 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.
  • 4. Agenda
    Context
    setting
    Self Assessment
    Future Trends
    Discussion &
    Analysis
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 16. 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.
  • 17. 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.
  • 18. Agenda
    TECHNOLOGY
    TECHNOLOGY
    PROCESS
    ORGANISATION
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 21. 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.
  • 22. Technology: Maturity Continuum
    Technology Use
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 23. Technology: Maturity Continuum
    Requisition to Pay
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 24. 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.
  • 25. 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.
  • 26. 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)
  • 27. Future: Advanced Analytics
    Evidence
    Improved understanding of stocks and flows
    • 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
    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.
  • 31. 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
    • 32. 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.
  • 33. 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.
  • 34. Agenda
    TECHNOLOGY
    PROCESS
    ORGANISATION
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 37. 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.
  • 38. Process: Maturity Continuum
    Sourcing and Category Management
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 39. Process: Maturity Continuum
    Contract Management
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 40. Process: Maturity Continuum
    Supplier Relationship Management
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 41. 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.
  • 42. 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.
  • 43. 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.
  • 44. 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.
  • 45. 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.
    • 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.
    Source: Procurement Mastery Research, Accenture, 2011
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 49. 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.
  • 50. 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.
  • 51. 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.
  • 52. 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
    • 53. Enforce max. phone allowance
    • 54. Do not allow business class for flights < 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
    Medium
    • 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
    Low
    • Challenge Market Research expenses
    • 61. Centralize all office supplies procurement
    • 62. 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.
  • 63. 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.
  • 64. 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
    • 65. Preferred suppliers are presented
    • 66. Prerequisites and other useful information can be consulted
    Procurement Middle Office
    • 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
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 69. 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
  • 70. Agenda
    TECHNOLOGY
    PROCESS
    ORGANISATION
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 73. 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.
  • 74. Organisation: Maturity Continuum
    Procurement Strategy
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 75. Organisation: Maturity Continuum
    People and Workforce
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 76. 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.
  • 77. 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.
  • 78. Agenda
    • State of the Art
    • 79. Roadmap to Target State
    • 80. Future Trends
    TECHNOLOGY
    PROCESS
    ORGANISATION
    • Debrief & Next Steps
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 81. 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.
  • 82. 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
    • 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 "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
    • 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's why the GFC caught many organisations unawares. 
    • 93. Learn from experience
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 94. 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.
  • 95. 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.
  • 96. 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.
  • 97. Thank You
    Context
    www.rajatdhawan.com
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 101. Appendix
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 102. 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.
  • 103. 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.
  • 104. 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.
  • 105. 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.
  • 106. 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
    • 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
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 110. 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
    • 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
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 117. 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
    • 118. 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.
  • 119. 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.
  • 120. 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.
  • 121. Future: Workforce Capabilities
    Dhawan, Walters, Bhattacharjya
    Procurement Models for the Future
    Copyright © 2011 Accenture All Rights Reserved.
  • 122. 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.