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Hey Nineteen: Procurement’s Playbook for 2019

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This video is a recording of the webcast “Hey Nineteen: Procurement’s Playbook for 2019“ that was hosted by Zycus in association with The Hackett Group and SIG. The webcast features a presentation by Christopher Sawchuk, The Hackett Group on the findings of the recent Hackett study “Procurement Key Issues 2019” and a case study presentation by Brittany Muirhead, Brookdale Senior Living on the application of “Assisted Sourcing” as a part of their digital transformation journey. The webcast also features insights from Richard Waugh, Zycus on application of technologies like AI, RPA in procurement for greater compliance, visibility and savings.

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Hey Nineteen: Procurement’s Playbook for 2019

  1. 1. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay About Zycus – Comprehensive Source-to-Pay Suite Recognized by Leading Analysts
  2. 2. 2019 PROCUREMENT KEY ISSUES STUDY INSIGHTS Christopher Sawchuk, Principal & Global Procurement Advisory Practice Leader The Hackett Group
  3. 3. | 3© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Agenda  What enterprise development areas do Procurement see as critical?  What is driving these critical development areas?  How is Procurement addressing these areas?  What is Digital Transformation’s role?
  4. 4. | 4© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Check out this webinar at  https://zyc.us/2GNw7jJ
  5. 5. | 5© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Capabilities like improving analytical, modeling and reporting skills will be crucial to supporting enterprise objectives [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] [CELLRANGE] Critical development zone* 5 Critical Development Priorities Low/Moderate Importance Low Moderate/Hig h Abilityto Address Critical Critical development area Source: 2019 Key Issues Study, The Hackett Group
  6. 6. | 6© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Procurement will be focused primarily on modernizing application platforms and improving analytical capabilities in regards to supporting enterprise goals 54% 50% 39% 39% 36% 32% 32% 27% 27% 25% 20% 20% 14% Modernize application platform(s) Improve analytical capabilities Reduce operating cost Measure/manage performance and value Accelerate adoption of software tools Optimize resources placement (BU, corporate, GBS, COE) Align skills/talent with business needs Invest in hiring/training/retaining top talent Leverage category management Improve procurement function agility* Improve customer centricity Leverage supplier relationship management (SRM) Data and systems security C Percentage of procurement organizations with major improvement program planned or ongoing Critical development area* C C C C C Source: 2019 Key Issues Study, The Hackett Group Several capabilities that fall into the critical development area (high importance, but low ability to address) are excluded from planned initiatives, indicating a gap in priorities from business needs.
  7. 7. | 7© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Key Findings In order to support the enterprise, procurement ranked the following development areas as critical: 1. Improve Analytical Capabilities 2. Align skills/talent with changing business needs 3. Improve customer-centricity 4. Improve agility 5. Leverage Supplier Relationship Management More than two-thirds of organizations rank all of these as a low ability to address and 75% have no programs in place to develop these areas
  8. 8. | 8© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Agenda  What enterprise development areas do Procurement see as critical?  What is driving these critical development areas?  How is Procurement addressing these areas?  What is Digital Transformation’s role?
  9. 9. | 9© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. (Digital) business transformation risk drivers Driver #1: Risk – Cybersecurity tops the risk ranking while talent will see the biggest increase in risk 48% 39% 36% 33% 31% 30% 30% 24% 72% 66% 56% 58% 36% 41% 39% 34% Cyber / information security Access to critical talent Intensified competition Disruptive innovation Reputational risk Regulatory risk Global trade barriers / tariffs / regulatory change Geopolitical risk 2018 Projected (2019-2020) 24% % Projected increase 27% 20% 25% 5% 11% 9% 10% Percentage of companies ranking as “high risk” Source: 2019 Key Issues Study, The Hackett Group
  10. 10. | 10© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Driver #2: Revenue growth is expected to increase 14% while operating budget and FTE growth is expected to decline. Thus, doing more with less. 5.0% 2.8% 2.7% 5.7% 0.9% 1.3% Revenue growth Number of staff (FTEs) Operating Budget 2018 2019 projected Efficiency Gap Productivity Gap 4.4%4.8% Source: 2019 Key Issues Study, The Hackett Group
  11. 11. | 11© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Driver #2 cont.: Procurement organizations project an overall increase in workload with the highest projections expected for corporate procurement and self-service 1.1% 1.8% 2.9% 4.1% 4.3% 4.5% 4.9% Outsourced Business unit Offshored (captive only, exclude outsourced) Global Business Services (GBS) Centers of excellence Self-service Corporate procurement Projected workload change 2019 Source: 2019 Key Issues Study, The Hackett Group
  12. 12. | 12© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Agenda  What enterprise development areas do Procurement see as critical?  What is driving these critical development areas?  How is Procurement addressing these areas?  What is Digital Transformation’s role?
  13. 13. | 13© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Critical development areas 1. Improve analytical capabilities 2. Align skills/talent with changing business needs 3. Improve customer-centricity 4. Improve agility 5. Leverage supplier relationship management
  14. 14. | 14© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Ongoing or completed analytics-related initiatives in the procurement function Procurement organizations have several ongoing analytics initiatives but are focused on AI and talent Analytics initiatives by lifecycle stage • Establishing analytics COEs represents the most completed analytic initiative, yet at more than half of procurement groups it is only in the exploration stage or still in progress. • Master data management is the largest area of activity at present. Poor MDM has led to challenges in managing processes, due to inefficiencies and poor decision-making based on bad data. • Most organizations are either exploring AI/cognitive computing or have a project underway in this area. Today predictive insights are provided by algorithmic models that improve classification, prediction and data recognition. 23% 23% 31% 15% 19% 15% 19% 19% 31% 58% 46% 35% 19% 31% 27% 31% 31% 46% 19% 19% 46% 73% 38% 42% 35% 27% 4% 4% 8% 12% 15% 15% 23% Develop or improve capability to analyze different structured and unstructured data types Develop AI/cognitive computing based predictive analytics capability Acquire or develop new analytical talent and skills in procurement Upgrade or adopt advanced new analytical toolsets to support procurement analytics Establish or improve data stewardship, data governance and Master Data Management (MDM) Redesign / implement modern data architecture to supporting advanced analytics Develop or improve data visualization capability level Consolidate and/or rationalize existing analytical tools used in procurement function Establish procurement analytics center of excellence No imminent plans Exploring Ongoing initiative Completed initiative
  15. 15. | 15© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Critical development areas 1. Improve analytical capabilities 2. Align skills/talent with changing business needs 3. Improve customer-centricity 4. Improve agility 5. Leverage supplier relationship management
  16. 16. | 16© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Thriving in the digitally enabled workforce will require these skills Business Acumen Understand key business drivers Knowledge of factors, priorities and business demands Identify problems and prioritize alternatives Relationship Management and Collaboration Advanced interpersonal skills Positively influence decisions Open and approachable Supply Risk Management Expertise Assess and prioritize business and category-specific risks Measure, prioritize, and address risk Develop risk mitigation plans for high-priority drivers Data Analysis and Modeling Process data and extract relevant information Knowledge of analytical tools and methodologies Translates analyses into actionable plans Strategic Mindset Develop strategic frameworks and visions Anticipates market changes Address challenges and outline future direction Savings and Financial Analysis Translate savings and value improvements to P&L impact Develop tools to track, measure and forecast savings Analyze supplier financial statements for detailed insights Agility and Change Orientation Welcomes change Comfortable with shifting priorities Able to deal with ambiguity Creativity and Innovation Create diverse and novel ideas, or novel combinations of ideas Create and recognize new patterns/categories Curiosity, broad interests, constructive criticism Agile and Trusted Business Advisor
  17. 17. | 17© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. What makes talent management different? TALENT MANAGEMENT AND ENTERPRISE PERFORMANCE ARE POSITIVELY CORRELATED 48% Higher Return on Equity 17% Higher Return on Assets 13% Higher Net Profit Margin 13% Higher EBITDA $ GETTING IT RIGHT MATTERS % RETENTION Effective talent management reduces uncontrolled attrition, lowers costs and provides more consistency in customer service SKILLS Skills and competencies over and above technical skills are essential to successfully manage interactions with clients and deliver customer excellence efficiently CAREER DEVELOPMENT Active preparation for career development to move people from role to role and business to shared services and vice versa DEMAND MANAGEMENT Workforce needs to be flexible and knowledgeable to meet varying customer demand for services RECRUITMENT Having an attractive value proposition provides an edge in competitive locations TRAINING Is valued by employees, increases competencies, improves morale and productivity and the ability to add value to business customers Source: HR Benchmark, The Hackett Group, 2018
  18. 18. | 18© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Critical development areas 1. Improve analytical capabilities 2. Align skills/talent with changing business needs 3. Improve customer-centricity 4. Improve agility 5. Leverage supplier relationship management
  19. 19. | 19© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Most Procurement organizations lack an explicit customer management strategy Explicit customer management organization, formal service delivery model, and set of engagement processes, 2% Do not do it (ad hoc only), 24% Ensure alignment through "stakeholder management" processes in the strategic sourcing processes, 56% Formal customer management roles, processes, and tools to measure customer satisfaction, 18% How do you get "the voice of the customer" from internal spend owners? Source: 2017 Procurement Value Measurement Study, The Hackett Group, 2017 Improving the stakeholder experience:  Identify key stakeholder groups and individuals, their interactions and general attitude (segmentation)  Develop measurement approaches tailored to key stakeholder groups  Analyze stakeholder feedback, plan for action by leadership to own and deliver  Provide feedback to key stakeholder groups on customer satisfaction and action plans to address identified improvement needs
  20. 20. | 20© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Organizations that have adopted open marketplaces are seeing substantial benefits especially in improving the customer experience 10% 13% 13% 10% 5% 18% 13% 15% 15% 35% 30% 32% 34% 40% 25% 28% 29% 25% Improve operational efficiency of the purchase to pay process Reduce maverick spend / requisitioner non- compliance Effectively respond to unplanned and reactive sourcing or short-term needs Improved spend visibility Increase internal customer satisfaction Product cost savings from market-based pricing comparisons Shipping savings from reduced / free shipping rates Supply base consolidation from not onboarding low spend suppliers Technology enablement cost savings from not onboarding low spend suppliers If you have used open B2B marketplaces are you seeing substantial benefits? No Yes Source: 2019 Key Issues Study, The Hackett Group
  21. 21. | 21© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Critical development areas 1. Improve analytical capabilities 2. Align skills/talent with changing business needs 3. Improve customer-centricity 4. Improve agility 5. Leverage supplier relationship management
  22. 22. | 22© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Digital transformation is a key strategy for organizational agility improvement – more flexible and responsive, but also predictive • Move beyond just automating existing processes • Define completely new ways of doing things • Enable with new technologies (e.g., cloud, big data, RPA, social media) • Move beyond internally focused transformation • Design from the “outside in”, starting with customer needs • Design new ways to engage the customer (internal and external) • Embrace a fail fast philosophy • Execute pilots in targeted areas and scale up rapidly • Shift focus from discrete projects to continuous transformation New Ways of Doing Things A Customer- Centric Approach Velocity of Change
  23. 23. | 23© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Check out this webinar at  https://zyc.us/2GNw7jJ
  24. 24. | 24© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Critical development areas 1. Improve analytical capabilities 2. Align skills/talent with changing business needs 3. Improve customer-centricity 4. Improve agility 5. Leverage supplier relationship management
  25. 25. | 25© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Supplier Relationship Management has always been important, but objectives and practices need to evolve Traditional SRM Goals/Model  Establishing an enterprise wide and coordinated SRM program – SRM Center of Excellence (COE) for process management – Dedicated SRM staff versus part time  Utilizing broad and holistic supplier measurement systems – Addressing the execution of key business outcomes and capabilities – Focus on strategic suppliers, not all suppliers – Supplier metrics integrated with category management metrics  Focusing on being better customers – A “Voice of the Supplier” feedback process is utilized – Supplier development resources are provided to help suppliers Source: SRM Book of Numbers, The Hackett Group Next Level SRM Objectives  Facilitating supplier engagement – Structured buyer-supplier senior executive relationships - “supplier advisory boards”, best practice sharing – Extracting new ideas and technologies before competitors  Creating an explicit gain sharing and mutual cost reduction environment – Suppliers as the key to growth  Leveraging enabling technology – “CRM for SRM” functionality for supplier account management – Collaborative workspaces and applications – Supplier portals for supplier self-service information management – with attention to ease of use
  26. 26. | 27© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Agenda  What enterprise development areas do Procurement see as critical?  What is driving these critical development areas?  How is Procurement addressing these areas?  What is Digital Transformation’s role?
  27. 27. | 28© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Impact of digital transformation on procurement performance and operating model Procurement roles, skills profiles and needs 32% 56% Current 2-3 years Achievement of enterprise objectives 32% 60% Current* 2-3 years* Procurement service delivery model 31% 78% Current 2-3 years Procurement performance (e.g. cost, quality, cycle-time) 40% 73% Current 2-3 years Percentage of procurement organizations reporting high or very high impact Source: 2019 Key Issues Study, The Hackett Group
  28. 28. | 29© 2019 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Digital transformation strategic maturity, alignment, execution and IT capability gaps IT capability gap Procurement organizations adequately supported by internal IT organization 57% 83% Current 2-3 years Strategic maturity Procurement organizations with digital transformation strategy in place and executing 58% 98% Current 2-3 years Execution gap Procurement organizations with competencies and resources in place to execute the strategy 37% 87% Current 2-3 years Alignment gap Procurement organizations with strategy aligned with enterprise strategy 67% 98% Current 2-3 years Source: 2019 Key Issues Study, The Hackett Group Level of impact of digital transformation
  29. 29. Chris Sawchuk Principal & Global Procurement Advisory Practice Leader The Hackett Group csawchuk@thehackettgroup.com Contact Information
  30. 30. Transformation Talk: “Assisted Sourcing” Drives Digitization at Brookdale Senior Living
  31. 31. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Assessing Procurement Pain Points Top Pain Points:  Procurement Spend Influence Limited  “Win Locally” Culture Presents Compliance Challenges  Granular Spend Visibility Lacking  Fragmented Supply Base Limits Leverage • What were the key challenges you faced prior to your Digital Transformation initiative? • What tools were available and where did you see the biggest gaps in your procurement technology infrastructure? • Where did you rate your pain level on the “Pain-O- Meter”?
  32. 32. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Addressing Stakeholder Perceptions of Procurement • Before starting your Digital Transformation journey, what was the perception of Procurement within your enterprise? • What tools or methods do you use to engage stakeholders and elicit feedback on their perception of Procurement’s performance?
  33. 33. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Benchmarking Spend Visibility 38% 99% Peer Top Performer Line-Item Spend Visibility Rate Source: Purchase-to-Pay Study, The Hackett Group, 2017 Ability to View Spend Data by Supplier • How did your spend visibility – at the Supplier and Line- Item Level – compare to the Peer Group and World-Class Benchmarks? • How did a lack of spend visibility impact your ability to influence spend?
  34. 34. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Benchmarking the Sourcing Process • How did your Sourcing cycle time compare to the overall benchmarks? • Which steps consumed the most time? Where were the choke points in the process? • What is ideal time allocation by step that would help to maximize the value created in the Sourcing process?
  35. 35. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Creating the Business Case for Digital Transformation • What were the key value drivers of your business case for Digital Transformation? • What were the key criteria you applied in the technology selection process?
  36. 36. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Getting the C-Suite On-board CIO CFO CPO • What were the “hot button” issues for each of these key executives that you had to address? • How were you ultimately successful in getting consensus? • What role does the C-Suite play beyond funding the initiative, in helping drive enterprise-wide adoption?
  37. 37. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Best Practices for S2P Transformation Sequencing Spend analysis E-Sourcing SBM Map external spend Negotiate Strategic Agreements Manage compliance Manage Supplier Relationships CLM VMSP2P Source: Gartner “Best Practices for Sequencing Procurement Solution Investments” • How did your approach for sequencing S2P Transformation conform to or differ from this best practice model? • When did you start the S2P Transformation process and how long did each step take?
  38. 38. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay Digitization’s Impact on Spend Influence, Efficiency • How has Digitization enabled Procurement to increase your Spend Influence? • How does Spend Visibility translate to “Assisted Sourcing” – i.e. what has been the impact on Sourcing effectiveness? • What efficiencies have you seen, e.g. spending less time compiling data vs. gaining insights from the Analytics? Source: The Hackett Group
  39. 39. Source to Pay Suite: Spend Analysis | eSourcing | Contract Management | Supplier Management | Savings Management | Project Management | Request Management | Procure-to-Pay What Digital Transformation Means for Procurement Four pillars support procurement’s digital business strategy Data and analytics form the foundation The Digital Business Strategy 2 Omnichannel, personalized stakeholder experience 3 Digitally enabled procurement workforce 4 “Smart” orchestration of source-to- pay services 5 Ecosystem of networked solutions 1 Analytics-driven insights Source: The Hackett Group • How is Procurement’s role evolving in the era of Digital Transformation? • How do analytics-driven insights underpin the Digital Transformation? • What are the next steps/major focus areas on your Digital Transformation Journey?
  40. 40. Check out this webinar at  https://zyc.us/2GNw7jJ
  41. 41. +1 866 563 9219 info@zycus.com www.zycus.com Thank You

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