The document discusses emerging trends that are transforming the purchasing function. Traditional large organizations are losing their thought leadership role as legacy technologies and bureaucratic processes have hindered innovation. New segments and smaller companies are demonstrating more innovative approaches. For purchasing professionals, skills in areas like change management, technology adoption, and global experience will be increasingly important. Emerging technologies like cloud, mobile, IoT, and data analytics are shifting expectations and enabling more consumer-like and responsive processes.
1. Traditional big organization Purchasing Departments are no
longer thought leaders as constraints of legacy technology and
bureaucratic inertia have foiled attempts to harness emerging
technology and align with supply base shifts.
Bill Kohnen Initial Release V1.0
October 2015
2. Organization
Technology
Supply Base
3 Year Trends Changing Purchasing
Bill Kohnen Initial Release V1.0
October 2015
Cloud
Open
Systems
Mobile IOT M2M
Purchasing As
a Function is
Transformed
3. The Organizational Themes for 2015
• Thought Leadership coming from new
segments
• Traditional Purchasing Departments shrink
despite Supply Chain and Purchasing being
more important
• Real Introspection and Change at Large
Purchasing Organizations
4. The Technology Themes for 2015
• Expectation of consumer like process and
systems that are responsive to constant
change
• Mobile, Mobile, Mobile
• Cloud based tools enable transactions
anytime, anywhere and meet immediate core
needs with short term ROI
• Disengagement from expensive legacy
solutions
5. Supply Base Themes for 2015
• Further disruption in the supply base for traditional corporate spend
categories at both the direct supply and wholesale level
• Continued push toward open systems and solutions optimized for task
without additional items. Legacy suppliers will fight this.
• Continued shift to everything as a service or subscription
• Continued Logistics and Communications improvements enable truly
global sourcing and fulfillment for all
• Indirect Spend once again has attention of CPOs
• Traditional Sales People Disappearing
6. Themes for 2015 and Beyond
• Move towards open software for purchasing
• Emergence of Application based purchasing tools as a first step
• Internet of things and machine to machine interface will ultimately
eliminate all tactical manual transactional activity for planning,
purchasing and logistics
• Purchasing as a separate function may disappear and merge with IT,
Operations, Accounting and Sales Operations
• Advanced printing technology will replace 50% of need for actual
shipment of parts for some industries
7. Skills for Purchasing Pros
• Core Purchasing skills still valuable but applied
to process and technology
• Project and change management
• Ability to quickly learn, apply and leverage
technical knowledge for direct materials,
indirect and internal process
• Global experience even for companies with
primarily domestic end market focus
8. Skills for Purchasing Pros
• Category experts will continue to see
opportunity for high pay direct jobs and
increasing as consultants.
• Transferable relationships with suppliers
where Category experts more directly and cost
effectively replace need for companies to
engage with expensive consulting firms
9. Skills For Purchasing Pros
• With Rapid Change and also growth in
importance of importance of Purchasing and
Supply Chain professionals should be
aggressive in reviewing the performance of
and opportunities available ,I n their present
organizations
• See appendix for one possible approach to
that
10. Purchasing Professional Compensation
Trend and Forecast
200
180
160
140
120
100
80
60
40
20
0
Relative Compensation
1985 1990 1995 2000 2005 2010 2015 2020 2025
Compensation
Year
Real Salary Growth
Back to 2005 Level
11. CPO Challenges
• Adoption of Technology Enablers in Purchasing
• Massive changes and disruptions with other
functions within their own organizations
• Creating complete transparency across supply
chain
• Alignment of supply chain resources with
organizations strategic goals
• Escaping the grip of expensive legacy systems and
process which constrain opportunity and
innovation
12. Questions and Discussions
• Why the shift in thought leadership
The typical big companies that appeared on Purchasing Magazine cover
stories may have never really been that innovative to begin with and just had
big spend numbers, leverage and more resources to be early adopters of
enterprise systems. Now those legacy systems constrain innovation and all
have pretty big gaps in core purchasing areas. Also US companies stopped
supporting training and professional memberships. Alternatively small to mid
sized companies and those outside of the US do not have legacy constraints
and innovate out of necessity and interest .
• What will eliminate the barriers that have held back innovation and
technology adoption?
Continued move toward open systems and cloud solutions which will disrupt
old solutions and process. Also general trends related to big data, mobile,
Internet of things (IoT)
13. Questions and Discussion
• What do mean introspection by big Purchasing
organizations
Big companies have spend lots of money on purchasing systems
yet still miss on capturing savings negotiated and sustaining
gains. Furthermore, the core activities and concerns and
complaints of Purchasing functions have not changed much in
100 years. Past and most recent technology basically just
improved efficiency of 100 year old approaches that ultimately
are not responsive enough today. If Purchasing organizations do
not respond fast the functions will be distributed elsewhere and
literally purchasing as a separate entity could disappear like
drafting departments, secretarial pools etc…
14. Questions and Discussion
• What is the career path to be a purchasing leader?
Not only working in Purchasing. Experience in other functions and also
locations. Project Management and IT experience helpful
• You say Indirect spend is back on the agenda why and what are people
doing?
One reason is because it never goes away and even short term lack of attention
results in quick loss of previous gains. So back to being easy source of saving if
you can get right category managers and put tools in place to capture and
sustain savings
• Some have declared Strategic sourcing has squeezed all that there is from
suppliers already
Supply Chains are not static. Neither are products. It is an ongoing process that
works whether done manually or with the help of software tools. It does
require professional knowledge of process and project management.
15. Questions and Discussion
• Describe the future look of a purchasing group
Distributed, Global, Smaller, Broader Skills. Center led but team located globally. Staff
meeting important but also held globally.
• What is the relevance of China?
Reality is China is the worlds manufacturing engine but costs are rising and there will
be more focus on efficiency and process. This will mean purchasing professionalism
and use of tools will continue to increase creating opportunities for western
professionals in China.
• What non cost KPIs will be important
Corporate Social Responsibility, Contribution to customer satisfaction and growth
• What is the next buzzword or initiative we all will be chasing?
Transparency at all tiers of the supply chain . Consumer like interfaces.
16. Questions and Discussion
• Describe specific technology that will change
purchasing
Big Data, Cloud, Mobile, Machine to Machine, Printing,
Internet of Things
• What will the job situation be for Purchasing pros?
Continued strong opportunity for category experts.
General hiring picking up. Lots of activity for Indirect
Purchasing leaders that not only know the space but can
also put new process and technology in place.
17. Questions and Discussions
• Discuss future of sourcing
Indeed we have access to more information and sources than ever and
can identify these easily via the internet. However, the process of
actually engaging with and investigating suppliers still is arguably
getting harder as companies have reduced the level of sales staff.
Buyers have to work as hard as ever at sourcing.
• Discuss future of Supplier Relationships
Lots of focus on this from purchasing side but generally is addressing
things from old paradigm of Buyer and Sales person relationship.
Many suppliers are essentially eliminating sales and support with
automation. How can you have a relationship with an automated
system. It will become more important to actually visit key suppliers
and meet and build relationship with live people there.
18. CPO/Purchasing Leader Level
3 Year Roadmap
2015 Distributed Organization with
more Category Expertise
Internal and External
More time spent recruiting.
Disengagement from Legacy
Systems Move to cloud Aps
for pain point needs
Traditional Metrics continue
to lose relevance replaced by
insights from big data
analytics
Indirect as an area of focus
and value
SRM challenges as Suppliers
CRM changes
2016 Global recruiting and
development. lines blurring
between traditional
department and career paths
Integrated Cloud Solutions
AP Driven Purchasing in Place
Multi tier Supply Chain
Transparency takes hold
Emergence of M2M
Traditional corporate Indirect
suppliers disappear or leave
markets
Even for hardware and
commodity companies IT
related spend rivals direct
material spend
2017
Direct Staff professional,
Strategic. Self directed cross
functional and aligned directly
to revenue.
Recruiting and training take
up larger portion of time and
budget
Integrated end to end cloud
based solution drive
innovation and open
standards begin to emerge
Integrated Data fully enables
organizational best Total cost
decision making
Integration with key supplies
systems
Open or AP based integration
with others
Sourcing is still important
Organization
Technology and Metrics
Supply Base
Bill Kohnen Initial Release V1.0
October 2014
20. Assessment Tool
– How does your
Purchasing Department
Compare?
– More Importantly how
are things going for
YOU professionally and
should you make a
change?
21. Purchasing Assessment
For Organization
• Review 10 Critical Areas
• Rank 1 to 10
• Guidance given for Low
Mid Range and High
Scores
• Multiply total by 10
• Compare total score to
scale
For Individuals
• Review 10 Critical Areas
• Rank 1 to 10
• Guidance given for Low
Mid Range and High
Scores
• Multiply total by 10
• Compare total score to
scale
Both Assessment Tools developed based on proprietary Purchasing benchmarks including
objective and subjective inputs and multiple direct interviews.
22. Purchasing Individual Assessment
Area
Rank
1 5 10
Travel to interesting places with good
travel policy
No Some travel with stringent policiy
High impact and intersting travel with travel policy
supportive of you
Seminars and Training
Not
encouraged
and out of
pocket
When budget availible and limited
scope
Viewed as vital to continued improvement and
development. Minimum one seminar and one
training annualy. Global scope and locations
preferred.
Raise and Bonus No Small Raise Raise and Bonus Better than Last year
Recognition by Executives outside of
Ocassional Recognition from
No
C Staff Level
purchasing
Functional Executives
Nice work environment free coffee and
sodas
No Corporte Cube with Free Coffee
Innovative Workspace with food and refreshments
to make day nice
Occasional acceptable entertainment
from supplier
No
Lunch, Golf or Game ticket, candy at
Christmas
Offsite working seminars at interesting places,
Attend Supplier Sponsored Charity Events
Boss takes team to lunch or dinner
sometimes
Never Corporate Lunch at Christmas Sincere both at work and also when traveling
Good Purchasing system and resources
like computers, smartphone and
company credit card
Manual and
you provide
everything
Basic resources SAP or Oracle with Dell
Computer and reimbursed for cell
phone
Innovattive use of traditional ERP combined with
best in class cloud based Purchsing tools. Computers
and Smart phones with gloabal reach provided for
and paid directly by company
Flexible work hours when needed
Clock in and
out
Basically yes but not consistant in
organization and required to us vaction
or make up hours
Yes as focus is on results and team and not
rewarding just showing up
Good Coworkers
Rack and Stack
Competitve
work
enviornment
Friendly work Enviorment
Coworkers that have diversity of skills and talents
that work together to improve and exceed goals
23. Individual Assessment
Results
• Above 90 Dream
Job
• 70 to 90 Great
• 40 to 70 Normal
• 20 to 40 New Job?
• 0 to 20 Change
100
90
80
70
60
50
40
30
20
10
0
Individual Results
Dream Job Great place to be
opportunities for
even bigger things
Normal You can do Better Better ways to earn
a living
Score
Comment
24. Purchasing Organization Assessment
Area
RANK
1 5 10
Spend Categorized Not Sure what this means Focus on few perceived critical areas
Global data readily availble with spend leaders and teams
assinged with subject matter support as needed
Total Cost Do not measure Cost Savings Focus Total Cost view with link to revenue as well
Internal Measurement None Lagging Measures Leading Measures in place to track path to success
Supplier Site Visits Never Based on need and budget. Focused on audits Formalized results driven reviews on a regular cadence
Direct materials
Order and plan Manually as
needed Supplier Management approach with key Suppliers
Suppliers dirctly aligned with plans with transparent
communicatins
Indirect material Just place orders
Maanged Locally but primary decisionmaking with
requestors Streamlined Globally Integrated webbased tool
Training None Relevant training when budget availible
Global Program Fully Funded Including Seminars and
Experiential OJT
Place in Organization No Formal Purchasing Function Reports to Level below Executive Staff CPO Level
Supplier Performance
Measurement
No Only to meet audit requirements
Integrated Global System with real-time data focused on few
key measures
New Product Development Not Involved Brought in Occasionally Integrated as part of process
25. Purchasing Organization
Assessment Results
• Above 90 World Class
• 70 to 90 Great
• 40 to 70 Normal
• 20 to 40 Developing or
Stagnant?
• 0 to 20 Not Relevant
120
100
80
60
40
20
0
Organizational Result
World Class Great Normal Stagnant or
Developing
Purchasing Not
Relevent
Score
Comment
26. Combining Assessments for Action
• Consider
scores
together.
• In some cases
requires very
personalized
consideration
• Take Action if
needed
• Celebrate
now or when
you get what
you want!!!
Requires further self
review and adjustment.
Maybe temporary issue.
Try to fix things in 2014
but start networking.
Stay where you
are!!!
If you like Purchasing find
job at a new company. If
you like the company
move to new
department.
If you are happy no need
to change unless you
want growth
opportunity
Organization
Individual
100
100