In recent years, procurement professionals have witnessed dramatic changes to the procurement and supplier management function. Today’s business environment demands that procurement play a more strategic role in the organization with an emphasis on “unlocking the power of procurement” in order to meet the current—and future needs—of the business, stakeholders, customers and yes, even the suppliers.

1. How to Move from Good to Great:
10 Steps to Unlock the Power of Procurement
Mickey North Rizza
BravoSolution, Vice President of Strategic Services

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What You Will Learn
My promise to you:
Present you with a wealth of information to help you
Unlock the Power of Procurement
Make sure you understand:
- Conventional procurement is dead
- The top challenges driving the need for strategic procurement
- Your suppliers must be at the center of your procurement process
- Going from good to great strategic procurement by leveraging technology

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The Next Generation of Procurement
Conventional
Procurement
Optimized
Procurement
Comprehensive
Procurement
Unlocked
Procurement
The Next Generation of Procurement
Unlock Procurement
ValueCaptured
Procurement Maturity
As procurement organizations mature and basic goals are achieved with conventional procurement initiatives,
evolving organizations realize there are greater opportunities to deliver organizational value.

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What’s Driving the Change to Unlocked Procurement?

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Become Unlocked!
Unlock the Power of Procurement
Use the Right Keys and Move from Conventional Procurement

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1. Moving from ‘e’fficient to ‘e’ffective and Value Driven
Efficiency Metrics Effectiveness and Value Metrics
Cost Savings/Cost Avoidance
• realized savings as a % of identified savings
• refunds, credits and rebates from suppliers
• value of improved warranties
• value of negotiated additional benefits
Supplier & Industry Development
• potential local suppliers identified
• # of new sources of particular goods and services
• # of suppliers in supplier development programs
Supplier Performance
• on-time delivery
• quality
• negotiation
• cost targets
Efficiency of Internal Procurement Systems & Processes
• % of electronic procurement spend
• % of Pcard spend
• % of spend under contract
• requisition to order cycle time
• source to contract execution cycle time
• order to delivery cycle time
• procurement operation costs as a % of managed spend
• reduction in transactions & inventory management costs
TVM: Highest Value to Cost Ratio (evaluates & minimizes risk)
Value Creation: Economics and Societal Benefits Relative to
Costs
Profitability Increase
Time to Value
Returns to Shareholders
# and Types of Ideas/Patents Generated & Implemented
per Supplier
# and Types of Ideas/Projects in the Innovation Pipeline with
Projected Value
Net Present Value of New Product Portfolio
ROI on Innovation Projects
Revenue Increase
Improvements of EVA, ROIC, ROA
Source: ISM, CIPS, Spend Matters

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Strategic Procurement Ensures Efficiency and
Effectiveness
Conventional procurement operates
in information and process silos
Strategic procurement drives value through an
integrated lifecycle process and supplier lifetime value

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Operating Principles
2. Moving from Reactive to Proactive
Reactive
• Procurement is a cost center
• Procurement receives a specification
• Procurement rejects defective materials
• Procurement reports to Finance or Operations
• Procurement responds to market conditions
• Problems are the supplier’s responsibility
• Price is the main variable for decision
• Emphasis is on yesterday and today
• Technology systems are independent of suppliers
• Negotiation is win/lose
• Plenty of suppliers = security
• Plenty of stock = security
• Suppliers’ communication is one way—”do as I say”
• Process, cycle time and efficiency are metric-focused
• Technology-enabled; low adoption
• Procurement receives information and acts upon it
• Procurement’s main target is cost savings
• Information is power
Proactive
• Procurement can add substantial value
• Procurement & suppliers contribute to the specification
• Procurement avoids defective suppliers
• Procurement is strategic, reporting to CEO
• Procurement influences the market
• Problems are a shared responsibility with the supplier
• Total cost and value are the major decision factors
• Emphasis is on strategy and business plans
• Technology systems may be integrated with suppliers’ systems
• Negotiation is win-win or better
• Plenty of suppliers = lost opportunities
• Plenty of stock = waste
• Suppliers’ and Buyers’ communication at all levels of the organization
• Efficiency and effectiveness are the baseline; metrics are valued
• Technology-enabled, optimized business processes
• Procurement actively pursues outcomes with the business & suppliers
• Procurement can impact revenue, profitability, ROIC and ROA
• Information is valuable if shared

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Procurement Service & Delivery
3. Scattered vs. Optimized Procurement Service &
Delivery
• Lack of focus (e.g.,
business unit requirement)
• Communication barrier
(e.g., with internal
stakeholders)
• Common supplier’s
different behavior in terms
of geographic
or market segments
DisAdvantages
Centralized
Advantages
• Reduced purchasing cost
(bulk purchase)
• Consolidated supplier
database
• Strategic focus and
improved planning
• Better communication with
internal stakeholders
• Swift response
• Easily managed cultural,
geographical, political,
taxation, etc., issues
• Loss of better supply
opportunity
• Lack of standardization
• Operational against strategic
focus
Center-Led
Advantages
Decentralizeda
DisAdvantages

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4. Conciliator vs. Opportunistic

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Spend Management Supply Market
Addressable Spend
Procurement Control
Under Contract
5. Extreme Spend Focus vs. Supply Market Focused
Internal Facing External Facing

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6. IT Investment with Little Adoption vs. IT Investment
with Maximized ROI
Low Adoption Maximize ROI
• NIH - Not Invented Here
• Cool tool but doesn’t solve the business problem
• Set the expectations and then they are not met
• Do not plan for the business process to be different
• Stick vs. carrot
• Make the business case
- Efficiency
- Asset utilization
- Customer response
• Set expectations
• Find a Partner not a vendor
• Plan beyond go-live
• Measure the impact & change
• Show the ROI

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7. Missing Knowledge and Talent vs. Talent and
Knowledge Orrganized for Success
Waverly labs

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8. Little Organization Alignment vs. 360° Business
Alignment
Alignment
Uncover What is Holding You Back
65% of organizations have an agreed-upon strategy
14% of employees understand the organization’s strategy
< 10% of all organizations successfully execute the strategy
Source: Larry Myler & Rosariolongo

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30% of Misalignment is
due to the data
65% of Misalignment is
due to different definitions
5% of Misalignment is
due to different drivers
8. Little Organization Alignment vs. 360° Business
Alignment

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9. Reward Focused vs. Risk Eliminator
Reward vs. Eliminator
Types of Supplier Relationship Management
Supplier collaboration
creates new value
beyond the contract
Supplier performance
management moderately
improves value...
Basic management allows
value to escape..
Value
Time
Contract
Signed
Currently 60% of Procurement‘s
supplier focused time
Adapted from CEB

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10. Low Supplier Focus vs. Supplier & Partner Focus
LOW HIGH
LOWHIGH
Source: ©2015 Vested®
Potential to Create Value
Dependency/Risk

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10 Steps to Unlock the Power of Procurement
Start the Movement and Unlock the Power of Procurement
Conventional Procurement Unlocked Procurementto
1. ‘e’fficient, learning how to be ‘e’ffective
2. Reactive
3. Scattered Procurement Service & Delivery
4. Conciliatory
5. Extreme Spend-Focus
6. IT Investments with Low Adoption
7. Missing Knowledge & Talent
8. Little Organizational Alignment
9. Reward-Focused
10. Low Supplier Focus
1. e’fficient, e’ffective, & Value-Driven
2. Proactive
3. Optimized Procurement Service Delivery
4. Opportunistic
5. Supply Market-Focused
6. IT Investments = Maximized ROI
7. Knowledge & Talent Organized for Success
8. 360° Business Alignment
9. Risk Eliminator
10. Supplier & Partner Facilitator

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Met the Objectives
Presented a wealth of information & examples to help you
Unlock the Power of Procurement
- Conventional procurement is dead
- The top challenges driving the need for strategic procurement
- Your suppliers must be at the center of your procurement process
- Going from good to great strategic procurement by leveraging technology
Stay tuned for future ‘in-depth webinars’ to assist you on your journey
going from good to great.

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Questions?

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Contact Information
Mickey North Rizza
BravoSolution, VP, Strategic Services
m.northrizza@bravosolution.com
Twitter: @MNorthRizza
Visit us at BravoSolution.com