Purchasing Future Trends 2014


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A Preliminary look at what trends will impact Purchasing Professionals in 2014. A continuation of popular series of discussions presented globally for the last 5 years by experienced purchasing professional Bill Kohnen. Primarily used as basis for further discussion at conferences and workshops.

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Purchasing Future Trends 2014

  1. 1. In 2013 said “Traditional Purchasing organizations and jobs will transform more in the next 5 years than the previous 100 years” Transformation Moving at a faster pace than initially predicted Bill Kohnen Initial Release V1.0 October 2014
  2. 2.  Development/Trends ◦ Open Everything ◦ Measurement ◦ Subscriptions ◦ Logistics ◦ Traditional Consultants losing relevance ◦ Value of Category Subject Expertise  Traditional Purchasing reached its apex some time ago ◦ Changes in skills and approach  Answers to common questions  Sample CPO/Supply Chain Leader 3 year Road map Bill Kohnen Initial Release V1.0 October 2014
  3. 3.  Disaggregation of proprietary hardware, software and networks is all providing companies direct benefits: ◦ Cost ◦ Flexibility ◦ Environmental ◦ Technology  The concept of open standards defined by users has produced fast and tangible benefits for IT hardware buyers even if they do not actively participate in the „Open discussion and development”  Truth be told traditional Purchasing can not take much credit for this. Most of this was driven by people at relatively new companies that were rapidly growing that did not have traditional purchasing (Google, Facebook, Amazon etc.) ◦ The people there questioned why they had to accept things as is ◦ Big OEMs did not respond very well to them ◦ They went out own their own and created alternatives  The Open Concept along with other factors suggest as cloud computing, and new market entries are all ready resulting in traditional OEM corporate suppliers starting to lose leverage. Bill Kohnen Initial Release V1.0 October 2014
  4. 4. Category Companies Source of Disruption Servers/Routers HP/Dell/Cisco Open Computing Enterprise Software Oracle/SAP Cloud Based Software Office Supplies Office Depot/Staples Entry of Amazon and Walmart.com Corporate Travel American Express Open booking Web based solutions Traditional Corporate Spend Categories That Will Change Bill Kohnen Initial Release V1.0 October 2014
  5. 5.  Shift in measurement enabling organization  Avoid the trap of traditional cacophony of kpi‟s that only Purchasing people care about: The Important Goals are:  Alignment with broad corporate goals  Enablement of Strategy  Capturing revenue Bill Kohnen Initial Release V1.0 October 2014
  6. 6.  Everything as a service  Payments and contract terms different and do not match very well with most current corporate payable and receivable processes. Bill Kohnen Initial Release V1.0 October 2014
  7. 7.  Consumer like expectations for fulfillment  Free 2 day Delivery  Complete tracking transparency  Options for same day delivery Bill Kohnen Initial Release V1.0 October 2014
  8. 8.  Traditional consultants still plying trade but nothing new from the lot of them in a couple of years.  A good CPO with small focused team can accomplish much more than an army of suited consulting experts Bill Kohnen Initial Release V1.0 October 2014
  9. 9.  Expert Level Category Manager positions continue to show signs of promise for experienced Purchasing professionals ◦ Suggestion for Experienced Purchasing Managers and Directors looking for position: Rebrand yourself as an experienced technical expert in the category you are best at.  Some reports that real high level experts salaries approach and exceed that of Department Managers. ◦ (this is not uncommon in other fields like Sales and Engineering) Bill Kohnen Initial Release V1.0 October 2014
  10. 10.  Being an expert with excel, access, worksheets etc.  Focus on cost savings.   Purchasing centric individual quantitative measures of how many transactions and how fast.  Blaming other departments for inability to deliver better results  You must sit at your desk and process transaction. (Better to get rid of your desk altogether) Bill Kohnen Initial Release V1.0 October 2014
  11. 11.  Must Acquire at least some level of Category Expertise and Stay current even if not directly responsible for the category  Do not focus or sign up for the traditional “nibbling” minor cost savings goals of 2% to 5%  Identify more disruptive / disaggregation driven total cost savings of 30% or more  If you are involved in tactical Purchasing own, understand and manage the process rather than just participate in it. Bill Kohnen Initial Release V1.0 October 2014
  12. 12.  Traditional Corporate Purchasing leaders and professionals must face up to the following: ◦ High impact ideas and action are coming from people outside the normal purchasing structure from developing companies ◦ Even in the realm of more traditional approaches thought leadership has become global ◦ All current traditional metrics and measure are barely relevant. Stop chasing after these metrics yourself and certain stop paying big money to consultants to provide you rehashed scorecards and ay to improve. ◦ Operational Purchasing is not something most organizations will support. It will be outsources or big organizations may do this as a shared service Bill Kohnen Initial Release V1.0 October 2014
  13. 13. Traditional Corporate Purchasing clearly reached its apex some time ago and is in free fall. Alternative approach's driven by people and companies outside of the traditional corporate purchasing environment are leading disruptive innovation in the total Supply Chain. Highest level Executives see these new approach's as adding real value. Where does that leave corporate purchasing people now: ◦ At some point innovative approaches need structure and a process for operational execution. Potential value added there ◦ Category Technical Expertise will be important ◦ Try to become embedded in the leading disruptive technology projects in your organziation ◦ In some more conservative organizations probably can „ride things out” as is for several years. Bill Kohnen Initial Release V1.0 October 2014
  14. 14.  Where will the jobs be? ◦ Fewer opportunities for traditional Purchasing jobs. Technology companies doing lots of Purchasing are looking for people with non traditional skills. There will be pockets of traditional purchasing but little growth expected.  Surely there is still a need for todays basic Purchasing skills? ◦ Sure at smaller companies but even they will have easy access to advanced tools. More knowledge will need to be incorporated into systems. ◦ Also cloud based companies need input on what customers need ◦ BPO‟s and Shared Service center will be the focus for core basic purchasing knowledge.  What is the impact of Cloud? ◦ Enterprise software companies continue to struggle in the space and have not been tremendously successful with cloud acquisitions. The cloud based companies that have been successful see opportunity to add on services to what the offer. Expect better Purchasing modules from them soon.  What about Mobile? ◦ Across the board mobile computing is changing things. The purchasing process included. You will be using an AP to issue orders, check status, update info, manage negotiations. Bill Kohnen Initial Release V1.0 October 2014
  15. 15.  When it comes to automating tactical P2P process does that really mean outsourcing to a BPO or Corporate Services Center? The pace of outsourcing purchasing is moving even faster than expected for established organizations. ◦ Growing companies simply are not creating big traditional Purchasing Departments ◦ Process automation is important ◦ I would predict that in 5 years 50% of the worlds tactical purchasing transactions will take place at outsourced BPO and Shared service centers in the Philippines  If I am a Purchasing person now what else could I do? ◦ Customer Service and support ◦ Interestingly sales analytics and operations is an area where someone with background in some traditional purchasing analytic skills can do well ◦ Technology program management  Cost savings must still be important ◦ Tolerance and belief in the 5% per year savings is gone ◦ Finding and leading disruptive approach's to 30% or more savings is important and generally does not follow a schedule based on the calendar. Bill Kohnen Initial Release V1.0 October 2014
  16. 16.  How can we have customer service be important when we have to enforce rules? ◦ The process we create must build in compliance requirements however, Purchasing should be more active in challenging artificially set compliance barriers. (For instance signature levels that are to low)  I am confused is the future organization centralized or decentralized? ◦ Probably distributed is better term. Overall control of system design and content rules central but activities distributed outside of Purchasing.  What really is a Global view or Globalization ◦ Someone that has experience to go to a different region and set a new supplier. People from Bay Area have an advantage here also because of dealing with multi cultures everyday just like people in Hong Kong or Singapore. Compared to people from Korea, Japan, India etc.  Will the title CPO still be around? ◦ The position will continue o be around but probably the use of the title has peaked out. Some organizations have a Director of Supply Chain that in practice has more power and control than a CPO. Bill Kohnen Initial Release V1.0 October 2014
  17. 17.  Where is Purchasing thought being developed and by who? ◦ Most innovative ideas are being driven outside of traditional Purchasing ◦ Traditional Purchasing thought leadership now truly globalized..  What organizations will remain relevant? ◦ I think ISM is still the worldwide standard. A CPM is still valued around the world. Still I think there will be challenges from others especially based on UN standards that are established. There are training consultants in Asia making lots of money teaching these classes.  How portable are Purchasing skills today? ◦ Purchasing skills remain transferable across industry if on learns the specific industry jargon. It could be as process becomes more standardized and all things a commodity it can really making Purchasing as transferable as Finance or IT. Bill Kohnen Initial Release V1.0 October 2014
  18. 18. 2014 Flattened Organization with more Category Expertise Wean from Consultants Process tools cloud based easy to put in place and adjust AP based tools emerge Despite down play of cost metric huge total cost savings potential with “Open‟ concept Global Organizational Alignment around productivity and resource cost 2015 Global recruiting and development including retraining of current staff Subscription Models take hold across more Categories AP Driven Purchasing in Place Holistic Corporate measurement. Specific project happen faster but not tied to calendar year Sun Never Sets Operational Capability Strategic and Expert Level Knowledge More Dispersed 2016 Direct Staff primarily professional, Strategic. Self directed and aligned directly to revenue Syndicated Commerce tools generating revenue in addition to savings Integrated Data fully enables organizational best Total cost decision making Seamless Global Structure with differences in technical capabilities at locations by design and need People Technology and Metrics Global Bill Kohnen Initial Release V1.0 October 2014