This document outlines an agenda for a procurement meeting that includes: conducting a practical exercise to review organizational structure, metrics, challenges, and technology; discussing the top challenges facing Chief Procurement Officers; reviewing traditional versus upgraded procurement organization models; assessing technology basics and opportunities for leveraging technology; prioritizing key performance indicators; considering partnerships with suppliers; and managing risks.

2. Agenda
 Practical Exercise
 Top Challenges
 Organization
 Technology
 Metrics/KPI
 Partnership
 Risk Mitigation
 Priorities

3. Exercise
Choose one of your Organizations:
- Draw your basic Procurement Organizational Structure –
Buyers, Strategic Sourcing, etc.
- Top 5 Metrics or KPI measured
- Identify Top 3 Challenges for Procurement
- Identify what Technology you leverage best and why
- 3 Strategic Initiatives
Break Out in Groups of 2 or 3
Review

4. Top Challenges of a CPO
CPO Survey: Deloitte 2013
 Misaligned Objectives
 Lack of Resource
 Lack of Internal Engagement
 Lack of Influence
 Data Quality
 Availability of Data
 Tech Capability
 Capability
 Lack of Soft Skills
 Leadership Skills

5. Traditional Procurement Organization
Buyers
Category
Managers
Strategic
Sourcing
Administration
Contracts
Management
TACTICAL PURCHASING STRATEGIC PURCHASING
FTE COSTS
Siloed effects resulting in:
 “The ERP (fill in blank) sucks!”
 “I have no visibility of that contract!”
 “Operations are cowboys!”
 “Vendor set up is slow!”
 “WTF#$@$ !!! was Sourcing thinking!”

6. • Evolve from Single-role discipline to a multi-disciplined teams
• Become Agile based on need of the business
Strategic Alignment with Business

7. Upgrading the Organization
Multidiscipline
Commodity
Manager
Source
Contract
Buy
Vendor
Relationship
Reporting:
Metric/KPI

8. Investment into the Organization

9. Technology Basics
Supplier Master Standardization & Accuracy Item Master Standardization & Accuracy
 Procurement must understand and control the Master Data
 Proficiency in Reports and knowledge of metric calculations
 Proficiency of System Process Flows

10. Technology Leveraging
 Procurement must understand business process and how it relates
mechanically to the Technology. P2P Process in ERP.
 Leverage existing Technology and partner with the IT Group (they are our best
friends)
 Leverage B2B – Supplier Self Service, eCatalogs
 Investments in Tech
Technology Cost per FTE invested
World Class: $24,507
Average: $12,476
Percent of Organizations with 75% or greater
utilization of their primary application / ERP
functionality

11. Standard Hierarchy of KPI’s
 Traditionally Procurements and
Supply Chain try to tackle the
entire pyramid.
 Start with Financial Driven Ones

12. Financial Based Metrics
= Total Cost Savings / Total Procurement Costs

13. Partnerships
Driving suppliers to innovate
World-class procurement groups are very
effective at harnessing the intellectual
capital of their suppliers to bring new and
innovative solutions to bear, helping to
influence (not just support) the business
strategy. In 2014, the average
contribution of supplier innovation efforts
to companies‘ total revenue is 3.5%
Incremental Revenue from supplier base
innovation (as a percent of total revenue)

14. Risk Management
Challenge Companies
Percentage
Procurement is held responsible for risks but does not have a
mandate or the resources
94%
Mostly react to risk to ensure regulatory compliance 89%
Struggle to fund supply risk management compared to hard dollar
ROI projects
49%
Until there is a major event, we will not invest seriously in supplier
risk management
26%

15. Prioritizing Initiatives

16. Sources & References
• Procurements New Operating Model, Booz & Co.
• Five Characteristics of World Class Procurement in 2014, The Hackett Group
• The CIPSA-Hackett Group procurement value, performance and capability study
• Enabling Trade Valuing Growth Opportunities, World Economic Forum
• Apply the Gartner Maturity Model to Drive Supply Management Value – The Gartner Group

17. World Class is both Effective & Efficient
Effectiveness
• Economic
Return
• Process
Quality
• Performance
Efficiency
• Process
Costs
• Productivity
• Cycle Times