Susanne Wrage. ASP New York Chapter January 22, 2009

Transcription

1 Cascading down the Strategic Planning Process to Procurement: How Market Intelligence can create market opportunities, drive alignment and improve implementation. ASP New York Chapter January 22, 2009 Susanne Wrage 1

2 Agenda Intro Integrative Strategy Development How MI Can Help Bridge the Gap Between Procurement and Strategy Development 2

3 Intro 3

4 About The Speaker Susanne Wrage, Research Director Leads Denali Intelligence s research, strategy, and product development Formerly global market intelligence manager at Alcoa, covering over $8B of indirect and capital spend Developed Denali s offshore market intelligence research operations Denali Intelligence is the leading provider of category-specific, subscriptionbased market intelligence reports for sourcing professionals Subscription Services Include: Selection of 80+ category reports, refreshed semi-annually Weekly Market News Monthly Commodity Price Updates Analyst Support for Ad Hoc Research 4

5 Alignment of Strategic Planning with Procurement Question : Do you think that strategic planning and procurement are aligned in your organization? A. Yes, absolutely; they are fully integrated, and work in lockstep B. Yes, mostly, there are a few hiccups, but we are getting there C. Somewhat, it s an area that we re currently working on improving D. It s a major challenge, and we need to figure out what to do about it 5

6 Integrated Strategy Development 6

7 Integrative Strategy Development Corporate Strategies Business Unit Strategies Be the low-cost producer within our industry Be the low-cost producer for product line x Supply Management Strategies Category Strategies Goal: Reduce material cost by 15% by the end of the year Possible sourcing strategies to achieve goals: Total cost of ownership; low-cost country sourcing, outsourcing need to be in sync with overall strategy and goals 7

8 Integrative Strategy Development Possible Disconnects Corporate Strategies Business Unit Strategies Supply Management Strategies Category Strategies You say: Be the low-cost producer within our industry Procurement may hear: Cut cost by whatever means possible Procurement may do: Negotiate down purchase price Focus on short-term cost savings Corporation may experience: Short-term cost decrease for some products, coupled with quality issues or with higher process cost and issues at a plant level 8

9 Lack of Alignment Creates Friction Planning Horizon One-year view vs. 3-5 years Sustainable growth vs. cost savings Incentives Assumptions Economic indicators, cost curves, trends 9

10 How MI Can Help Bridge The Gap 10

11 Market Intelligence is One of Three Common Types of Corporate Intelligence Competitive Intelligence Business Intelligence Market Intelligence Business Intelligence (BI) - A broad range of applications and technologies for gathering, storing, analyzing, and providing access to data to help make better business decisions Competitive Intelligence (CI) - The process of obtaining and analyzing competitive information to help make the organization more competitive relative to its existing set of competitors and potential competitors Market Intelligence (MI) - The process of gathering and analyzing information relevant to a company s supply markets specifically for the purpose of supporting accurate and confident decision making in the procurement process 11

12 How do Market Intelligence from a Sourcing Professional s and from a Strategic Planning Perspective differ? MI topic Procurement Focus / Twist Strategic Planning Focus / Both Twist Industry Structure Market growth Market size & growth Companies Industry Structure Financial o Concentration, and supply risk, market capabilities size, growth rate Demand Analysis Cost Driver Analysis Category Pricing Trends & Forecasts Supply Risk Outlook Industry Trends SWOT, detailed CI Demand Industry-level Customer segmentation Market Forces Analysis User is customer User is producer / service Market Forces Analysis provider Cost / Price Analysis Detailed cost driver analysis Forecast Price Revenue, profit, market growth Risk Supply risk Business risk Industry Trends Emerging alternatives Possible threats Geography Supply markets Customer markets 12

13 Alignment of Planning Horizon Planning Horizon MI can provide... Insights into longer-term forecast (market growth, prices) Incentives Assumptions...and consequently help Stretch focus from short-term cost savings to longer-term planning (contract length, focus on total cost of ownership, backward integration) Focus on sustainable competitive advantage (more focus on process cost, leveraging across locations, implementing technology) 13

14 Example: Backward Integration and Long-Term Contracts MI facts Caustic Soda is about 13% of the cost structure of alumina, major input to primary aluminum Caustic Soda prices increased by 97% between March 2007 and November 2008 Price mainly driven by tight market, not by increasing input cost Source: Bureau of Labor Statistics In August 2008, Alcoa World Alumina closed a 10-year supply agreement, with calcium chloride (CaCl 2 ) and caustic soda producer CariSal (Port of Spain, Trinidad). CariSal's CaCl 2 and caustic soda production facility is set to come online at Point Lisas, Trinidad by early Most of the plant's caustic soda will be exported exclusively to Alcoa World Alumina. Alcoa has first option on future volume increases. 14

15 Alignment of Incentives Incentives Planning Horizon Assumptions MI can provide... Comparison to market price (such as LME for copper and other base metals; survey-based transaction prices, or producer price index) Benchmarking: what are other, comparable organizations doing in this area? (how are they responding to a tight market)...and consequently help Improve risk management Push the limits of what is considered average or world class Align expectations 15

16 Alignment of Planning Assumptions Incentives Planning Horizon Assumptions MI can provide... Macro-economic factors and indicators (GDP growth, inflation, currency exchange rates) Market trends for expanded set of geographic areas (e.g. emerging economies)...and consequently help Identify regions for emerging demand and supply of critical raw materials Ensure resources (equipment, project mgmt) are ready for capacity ramp-up Find the right window of opportunity when entering new (emerging) markets 16

17 Examples GDP growth forecast 2009 (published Jan. 2009) EIU: -2.2% White House Board of Economic Advisors: 0.6% Wall Street Journal Blue Chip Economic Indicators: -0.4% When manufacturing companies start adding capacity, they will need equipment all at about the same time If growth plans and Procurement aren t in sync, project delays can follow, and windows of opportunity may be missed. Source: MHIA 17

18 Wrap-Up Integrated Strategic Planning Doesn t Happen Automatically Strategic Planning and Procurement oftentimes lack alignment Market Intelligence is no silver bullet, but it can help create alignment in the areas of planning horizons, assumptions, incentives, and, as an outcome, create more compatible communication patterns. 19

19 Questions Please Contact Me If You Have Any Further Questions Susanne Wrage, Research Director Phone: Information contained in Denali Intelligence reports, analyses, graphs, charts, tables and publications may be based upon, or have been obtained from, a variety of sources that Denali Intelligence believes are accurate, including aggregated, non-attributable marketplace data, although Denali Intelligence does not warrant such information. Denali Intelligence reports, analyses, graphs, charts, tables and publications may also reflect the judgment of the particular author at the time issued and are subject to change without notice. 20