CPO 2013 Discussion - Emerging Measures, Success factors, Redefinition of Strategic Spend, CSR and recommendation to attend PASIA World 2013

1. CPO Agenda for 2nd half 2013
Bill Kohnen
Discussion notes for Informal CPO Roundtable
Hyatt Hotel San Francisco CA June 2013

2. Agenda
• Emerging Key Measures
▫ Self reported cost savings not trusted anymore
• Success factors of top performing organizations
▫ People and how categories are defined
• Redefining Categories
▫ Need to add forward looking view
• CSR remains Important
▫ Becoming business practice and strong area for
professional development

3. Emerging Key Measurements are:
Cost of Goods Sold
EBITDA
0
20
40
60
80
100
120
2010 2011 2012 2013
COGS
EBITDA

4. ~ 70% of Purchasing Success Based on
• People
▫ Who you have
▫ Development
▫ Skills
▫ Support
• How Categories are Defined and Managed
▫ How you define what to focus on
▫ What you do with categories

5. People
• Organizations not doing a good job getting and keeping people with skills needed or
training them internal
▫ Core Procurement Skills
▫ Analytic Skills
▫ Business Acumen
▫ Managerial Skills
Why?
Salary part of issue
Poor understanding of needs by HR staff and Headhunters
Not investing in tools and training to support top people
For Example: Hiring a top person to identify million dollar total cost savings opportunities but expecting her to fly to Asia coach, stay
in a discount hotel while using a hand me down computer and expecting her to expense trips with personal credit cards.

6. How Categories are Defined and
Managed
• This does not require any particular technology
• Recent evidence suggests rethinking setting
categories based on 4 quadrant review.
• Refining Definition of Strategic sourcing
▫ Strategic Sourcing Methodology does deliver results
▫ However, as practiced this really covers operationally
and financially important suppliers in the short term
▫ Using 80/20 Rule and Single/Sole Source as criteria
do not identify areas that are really strategic

7. Emerging View of Categories
Operational
Importance
Strategic
Importance
Action Where Goal
Not Not Automate Consolidate Leverage
Basic core Purchasing Skills
Operations in LCC
Outsource or create
Shared Service
Organization
Operational efficiency
Cost
Yes Not Current Strategic Sourcing Tools
Based on historical data and
near term forecast
Regional Reporting into
CPO.
Cost
Manage Risk
Quality
No Yes Forward looking
Identification of opportunities
for mutual alignment with
suppliers
With CTO,
Bus Development
Design Centers
Enabling technology
Product Development
New revenue

8. Corporate Social Responsibility
• Remains important to companies with and
without brand image.
• Leaders are integrating into practice of:
▫ Supplier Management
▫ Supplier Audit
▫ Supplier Recognition
• An area where there are opportunities to develop
staff internal with rotational assignments or
teams to conduct reviews.

9. Upcoming Events
PASIA World is a high level event that worth attending if you can coordinate with other travel
to Asia or can send your staff in Asia there.
Semicon – July 8 to 10 San Francisco
▫ As industry picks up and 450mm becomes more clear may be some excitement this year.