Procurement beyond 2014: Opportunities, challenges and prerequisites.

Transcription

1 Procurement beyond 2014: Opportunities, challenges and prerequisites. Peter Schmid Partner, SCM / Procurement CIPS, 4 th December 2013

2 Future trends are challenging existing procurement organisations in all industries to adapt, change and add more value. New World Order ~80% of the worldwide middle class will come from emerging countries %-30% %-40% %-60% % of procurement spend in emerging market Demographic Change 8.4bn people will live on earth in 2030 with the average age rising by 5.1 years % 17% 19% -1% Asia Africa Americas Europe Growth 2010 to 2030, % World population growth (UN projections) Era of Sustainability By % of global power will be provided from renewable energy Social Media Marketing In 2016, spend on advertising through social media in US will rise to $5bn. Brand image building Regulation pressure 80% ~30% Influence of global procurement ~85% Shift of motivation to green procurement initiatives 75% 85% 95% Trad. Media Digital Media Consumer Empowerment The Consumer isn t a moron; she is your wife. --- David Ogilvy Design for supply 37% Agile manu. Strategies 34% 53% 57% Importance Performance Gaps to improve agility 1

3 In addition, Supply chains are becoming increasingly complex and 3rd party spend is on the rise. External spend is rising and Supply / Value chains are becoming more complex 3 rd party spend in % of total cost Logistics platform Design 75% Trend 75% 72% 64% Commercial partner (royalties) Assembly Supplier Headquarters Supplier Supplier Manufacturer Shipping agent Packaged Foods Fashion & Apparel Tabacco Beverages Assembly & sales (owned) Sales bureau (commission) Key challenges Cost efficiency Direct Cost Indirect Cost Cash efficiency Working Capital SC Financing Tax efficiency Corporate tax VAT Compliance Labour Tax Legal Fraud Risk Mgmt Procurement Accouting Sustainability CSR CO 2 Footprint 2

4 So, all aces in the hands of Procurement? YES, but: in many companies, Procurement is not yet seen as a value adding partner of strategic importance. Even Procurement outsourcing is on the agenda! Execution Management Sustainability Tactical sparring partner Collaborative procurement and target alignment Early involvement Life Cycle Manager Strategic value partner Added Value RISK Outsourcing of Procurement Comprehension of business requirements Expert with market Know-how Servant Enhanced administration Coordinator Mediator within supply chain Maturity Level 3

5 The key lies in taking Procurement to the next level: World-class procurement drives corporate value - from profitability to innovation and delivery excellence. Realized procurement savings p.a. in % EBIT Margin (%) Laggards 6.2% % +279% 7.2% 1.9% Laggards Excellence Delivery performance (%) 97.5% 76.4% Savings Delivery Evolvement of procurement maturity 1.8 Laggards Low Profit Mid High Excellence Excellence 14.2% New Products Introduced (Ø) Innovation Laggards Excellence Revenue from New Products (%) Laggards Excellence Time to Market (Ø months) Laggards 38 Lead Time Revenue +667% 23.0% Excellence 15 * SMI & BrainNet Fortune 500 procurement maturity survey -60.5% 3.0% Laggards Excellence 4

6 From good to great: Excellence in Sourcing Governance is not just about cost & quality anymore. Compliance management is now in the spotlight. COMPLIANCE TO INCREASING REGULATION Tax-efficient Procurement Company-Network Sustainable Supply Chain Global Procurement Academies Total Supply Chain Transparency Budget Effectiveness Smart BPO Purchasing Compliance Training Central Procurement Demand Management S2P- Process Model BPO = Business Process Outsourcing; S2P = Source to Pay Supplier Risk Management IMPACT ON CORPORATE FINANCIAL PERFORMANCE 5

7 Procurement impact depends entirely on the level of professionalism of the organization. Performance enhancement therefore plays a key role in our approach Direction setting and governance Meeting regulatory requirements Establishing the right organisation size and structure Achieving the correct skills and capabilities Structured analysis of procurement and its interfaces Clear insight into the level of maturity across the organization Benchmarking against leading practice and peers The technology enablement of key processes The availability and transparency of data and info. The existence and efficiency of support processes Roadmap designed for implementation 6

8 How to get there? First of all, you need to understand where you are today compared to peers. Industry Gaps Overall Gaps Dimensions Comparison Main reasons for gaps Strategy & Change Management Regulation & Compliance Governance & Control Structure People Category Management Cycle Source to Contract Operational Process Supplier Lifecycle Management Systems & Technology Master Data & BI-PI Laggard Foundation Established Leading Excellence Procurement is viewed as an administrative function with no mandate. Only basic creditworthiness checks are carried out with no further review over time. Policies are in place but few consequences for non-adherence. There are clear roles, but no alignment with other functions. Role descriptions are clear, but no skill development plan in place There are category plans, but detached from other business plans. Spend analysis is ad-hoc and there is no market analysis. Policy not widely known. Processes not well documented and approval process often manual. Supplier performance measurement is in place but risk review and mitigation is weak. E-Rfx in place, but supplier risk management systems are lacking. Transparency is lacking processes not sufficient to ensure consistency. Foundations have been put in place but development required to maximise benefit Project Example Average maturity grade Industry-specific benchmark Overall benchmark 7

9 KPMG / BrainNet Center of Excellence in Strategic Sourcing & Procurement overview (SS&P) Together, KPMG and BrainNet form one of the leading SCM and Procurement consultancies worldwide. Procurement & supply solutions Operations & manufacturing Logistics Financial supply chain management North America KPMG 130+ Procurement & Supply Chain Specialist South America KPMG 85+ Strategy UK & Ireland KPMG 105+ Analysis & Design Nordics KPMG 10+ South Africa KPMG 10+ Mainland Europe KPMG 210+ Execution Global coverage: > 400 specialists India KPMG 47+ Australia KPMG 30+ Training China Asia Pacific KPMG 30+ KPMG 40+ Singapore KPMG >3.000 >500 > Implementing the Future of Procurement & SCM Sourcing Advisory Differentiators Savings Initiatives Training Participant Days Projects Delivered Different categories sourced Procurement Professionals bn USD spend analyzed Value Levers Client Awards Months for ROI 1 Best in Class Client Experience 8