Digitize or Die: Procurement's Transformation Imperative. Curtiss-Wright Paul Stasko Senior Director, Supply Chain

Transcription

1 Digitize or Die: Procurement's Transformation Imperative Curtiss-Wright Paul Stasko Senior Director, Supply Chain Zycus Inc. Richard Waugh VP Corporate Development

2 Digitize or Die: Procurement s Transformation Imperative

3 About Zycus Comprehensive Source-to-Pay Suite 2017 Gartner Magic Quadrant Strategic Sourcing Suite Vendors Strong The Forrester Wave: eprocurement, Q2 2017; CLM, Q Challengers Contenders Strong Performers Leaders Zycus CLM Zycus P2P Current Offering Weak Weak Strategy Strong

4 Agenda Digitizing Source-to-Pay The Digitization Imperative Digitization Dividend: Best-in-Class Advantage Value of Integrated Approach to Digital S2P Transformation Case Study: Curtiss-Wright Transformation Strategy and Approach Best Practices/Lessons Learned What Comes Next? Added Value Beyond S2P Improving Customer-Centricity Measuring and Promoting Value to the Business Harnessing Emerging Technologies (AI/RPA/IoT/Blockchain)

5 The Digital Transformation Imperative At its Core, Digital Transformation will reduce the cost to execute business services functions.. for Procurement the value of digital goes far beyond cost savings to better business enablement Percentage procurement process cost reduction attributable to digital transformation Value Beyond Cost Savings: Enhanced Value Above Spend Cost Reduction Decision Support: New Insights And Intelligence Shift Effort: Commercial And Supply Relationships Business Alignment: Enhance Agility And Internal Customer Experiences Source: The Hackett Group, Digital Transformation Framework

6 Benchmarking Best-in-Class Source-to-Pay Performance P-Card Spend% Avg. -.66% BIC % Discount Spend% Avg. -.02% BIC -.10% SUM Avg. 57% BIC 91% Spend w/line Item Visibility Avg. 38% BIC 99% Source: Ardent Partners Benchmark Source: Hackett Group Benchmark Cost per Invoice Avg. - $4.84 BIC - $2.23 Cost per PO Avg. - $17.18 BIC - $4.93 Spend Sourced Avg. 47% BIC 67% Sourcing Savings Avg. 6.8% BIC 7.7% Source: Ardent Partners Benchmarks Invoice Approval Cycle Avg. - 5 Days BIC - 3 Days Maverick Spend Savings 8% On-Contract Spend Avg. 54% BIC 69% Source: Ardent Partners Benchmark Sourcing Cycle Avg. 75 Days BIC 45 Days Source: Hackett Group Benchmark Suppliers w/failing Scores BIC 3.8% Suppliers per $1B Avg. -17,899 BIC - 6,795 Contracting Cycle Avg Days BIC - 40 Days SM Productivity Savings 20% Source: Hackett Group Benchmarks Source: Aberdeen Group Benchmark Source: SpendMatters Benchmark

7 Best-in-Class Advantage Realized Savings Spend Analysis esourcing Contract Management Supplier Management Procure-to-Pay Savings Management Best-in-Class $1B Spend $2.5M Supplier Management Cost 75K POs 150K Invoices % More SUM 20% Incremental Spend Sourced.9% Higher Savings Capture Rate 15% Higher Compliance to Contract 20% Lower Supplier Management Cost Best-in-Class Cost per Transaction Best-in-Class Discount Capture Rate Best-in-Class Advantage $200M Incremental Spend Sourced $15.5M Incremental Savings Identified $10.7M Retained Sourcing Savings $.5M Supplier Management Cost Savings $1.3M Transaction Cost Savings $1.1M Early Pay Discounts $13.6M Incremental Realized Savings

8 Best-in-Class Advantage Source-to-Cash Cycle Time RFX Award Best-in- Class Best-in-Class Achieve Higher NPV of Savings Realized 53 Days Faster Industry Average Contract 45 Days Sourcing Cycle 75 Days Order Invoice 40 Days Contracting Cycle 1 Days Order Cycle 3 Days Invoice Cycle 49 Days 2 Days Pay 89 Days 16 Days 142 Days

9 Best-in-Class Advantage Technology Adoption

10 Many Organizations Plan to Deploy Single Platform S2P Which modules constitute a full S2P Suite? What are the use cases enabled through a single integrated S2P suite? 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Source: Key Issues Study, The Hackett Group, 2018

11 Connecting the Dots.for a Single Version of S2P Truth Control Layer Request Management Request and track Contract creation Project/Savings Management Create, track and manage sourcing/savings projects Strategic Layer Create events from requests Transfer Attachments, T&Cs, Pricelist for Contract creation Create, track and manage contracts Create and invite potential suppliers Review past performance before inviting suppliers Spend Analytics Create sourcing projects Sourcing Contracts Refer supplier data Supplier Management Supplier Performance Operational Layer Convert PRs to RFP and award POs eprocurement Validate contract terms for catalogs, PO to contract matching Update preferred vendor lists einvoicing Refer master data for creating invoices Review supplier scores before ordering Review supplier history

12 Source-to-Pay Case Study

13 About Curtiss-Wright Created in 1929 from the consolidation of Curtiss Aeroplane and Motor Company, Wright Aeronautical (founded by Glenn L. Martin and the Wright Brothers as Wright-Martin) $2B+ revenue In ,000+ employees 160+ locations worldwide 9,000+ active suppliers

14 Supply Chain Transformation Strategy 80% of our time is spent on only 5% of our spend! ProCard MRO Integration P2P Our focus is moved to where the vital spend is! C- Level Spend A- Level Spend Pareto everything. Save on the A items and simplify the process on the C items.

15 Transformation Phasing Follows Best-Practice Approach Step 1 Step 2 Step 3 Step 4 Map external spend Negotiate Strategic Agreements Manage compliance Manage Supplier Relationships Spend analysis E-Sourcing P2P CLM VMS Supply Base Management Source: Gartner Best Practices for Sequencing Procurement Solution Investments

16 Step 1: Deployed Spend Analytics to Achieve World-Class SUM Spend Analysis Benchmarks Source: Hackett Group CW World-Class for Direct Leveraging Spend Analytics to Target World-Class for Indirect Application Normalized Spend Taxonomy Across 40+ Disparate ERPs/Part # Schemas Multi-dimensional Spend Cube Supplier, Category, Part, $, Compliance Value Direct Materials Direct Services Indirect Materials Indirect Services Triage and Prioritize Savings Projects Pinpoint Non-Compliance for Root Cause and Remediation

17 Step 2: esourcing Event Savings Fund S2P Transformation esourcing Benchmarks Direct Cost Savings as % of Spend Indirect Direct vs. Indirect Spend 75/25 Historical Cost Savings Correlate to Industry Averages Strategy % of Spend Competitively Sourced Prioritize Direct Materials due to Greater Spend Leverage Maximize Savings Impact by Balancing Scale ($, # BUs) with Ease of Execution Value Source: Hackett Group Per Project Event Savings Exceed World- Class Savings Rate Utilizing Automation to Target World-Class Spend Sourced and Savings

18 Initial Events Yield Superior Savings Results Auction 1 : Machined Parts Category Total No. of Parts 25 No. of Suppliers 17 Machined Parts Event Value in USD $ 3,800, Auction 2 : Machined Parts - Category Total No. of Parts 24 No. of Suppliers 12 Machined Parts - Ottawa Event Value in USD $ 841, Negotiated Rate for Event in USD $ 1,342, Negotiated Rate for Event in USD $ 505, Savings Value in USD $ 2,457, % of Savings 64.68% Strategy: Single Item Lots Savings Value in USD $ 335, % of Savings 39.93% Strategy: 24 Item Lot

19 Step 3: Address P2P Challenges Multiple ERPs Non-Compliant PPV Non-Standard Approvals 20% 80% 80% of Time Spent on C-Level Spend High-Volume Paper Processes Tax Compliance Visibility Lacking

20 P2P Transformation Goals Procure-to-Pay Better, Faster, Cheaper A key component of the Finance Transformation is the ability to transition the end-to-end procure-to-pay process from a heavily manual and paper based environment to an environment that introduces best in class automation or EDI (Electronic Data Interchange) between our business partners. Change from Cost Center to High-End Value Add Re-engineer the P2P process to be a strategic advantage to: Create process efficiencies and improve effectiveness, and Enhance spend management, contract compliance, and cash management capabilities Inextricable value partners Critical to align strategies of procurement and payables to maximize the end-to-end value stream. Disparate strategies and lack of communication and transparency between AP and procurement prevents smooth processing of purchase orders and invoices. Multiple touches vs. Once & Done Based on the volume of paper that CW processes including invoices, paper checks, supplier contracts, exceptions and discrepancies, incongruent systems over AP and procurement produce excess costs, slow processing times, and inconsistent quality.

21 Step 4: Create a Culture of Compliance Contract Management Supplier Management Savings Management Aggregate agreements in central, searchable repository Proactively monitor compliance preempt auto-renewals Streamline on-boarding, governance Standardize performance and risk management disciplines Establish consistent savings project methodologies Create transparent savings pipeline visibility

22 Project Summary Objective Global Support Execution To adopt a specialized sourcing and category management solution To implement the best-value procurement solution rather than managing routine classification and spend-reporting tasks To enable price discovery and cost reductions and improve supply market knowledge To bring template and repository standardization To enable Auctions related to direct materials To increase buying reach Stakeholders from United States of America Interfacing with 4 ERPs (with multiple instances) across multiple legal entities Extensive UAT conducted offsite Weekly Webex meetings and Calls to solve customer queries Tool awareness to Buyer s and Supplier s Step1: Understanding the process of the Customer (KYC) and consulting the best practices to implement Live Auctions Step 2: Designing strategies for 3 different Auctions Auction 1 & Auction 3: Each Pricing Lot consisting of only 1 Item Auction 2: 1 Pricing Lot consisting of 24 Items Step 3: Finalizing majority of the requirements prior to the Requirement Gathering Workshop Step 4: Configuration of requirements directly on the Production Setup Step 5: Collaboration with cross functional teams Go Live in 3 months 15,000+ Suppliers Onboarded 50+ BUs 200+ Active users 50+ Contracts Uploaded

23 What Comes Next? Added Value Beyond Source-to-Pay

24 Multiple Initiatives Focused on Improving Customer-Centricity How can Procurement be more responsive to stakeholder s needs? Is procurement keeping pace with Enterprise-wide digitization, or do users lack a portal to the procurement process? Which processes/platforms encourage stakeholders to engage procurement early, extending influence and elevating procurement to trusted advisor status? 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Source: Key Issues Study, The Hackett Group, 2018

25 A Customer-Centric Approach: Request Management Process Use Cases Create Contract Requester Sends requests Approver Approves requests Procurement Manages & Processes Requests Create Sourcing Event Onboard a Supplier esourcing Reject inappropriate requests Features Configurable Flexiform Configurable Approval Workflow Conditional Logic / Rules Calculated Fields Delegation Comprehensive Reporting Pre-purchase Request Supplier Performance improvement PO Amendment Contract Amendment Task Assignment Initiating a Project Price or terms change request by Supplier Supplier Management/ P2P Contract Management Project/ Savings Management

26 Customer-Centric Case Study: Request Management irequest - Porsche Automated request management and tracking triages procurement s work queue empowers and engages end-users Sophisticated, conditional approval workflows (>175 conditions, 4-5 approvals per form) Conditional logic integrates IT security reviews with on-boarding requests Supports multiple request use cases, e.g. negotiate contract, run sourcing project, on-board supplier, capital appropriation project approval Customer- Centric Integrating Business Processes Extending Beyond Procurement Users Seamless process flow from request to execution e.g. approved request initiates activity in target module Also supports non-procurement (Hotel, Facilities, HR, IT) requests

27 Few Satisfied with Ability to Measure Business Value How can Procurement more effectively measure and communicate performance and value delivered to the business? In particular, how can Procurement align more effectively with Finance to ensure value contributions are acknowledged? Which processes/platforms can enable Procurement to create credibility with the C-Suite and sign-off from the CFO on value delivered? 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Source: Key Issues Study, The Hackett Group, 2018

28 Financial Savings Management Challenges/Solutions Challenges Most organizations tracking with spreadsheets/homegrown tools Existing tools lack Finance collaboration and approval workflow No standard definition of savings calculation and allocation methods exists, and lifecycle tracking visibility is missing Source: Gartner/Rutgers Survey Align: Import baseline spend from Spend Analytics Establish Finance-approved spend baseline and savings calculation formulae on common, enterprise platform Validate: Employ workflow to obtain validation from stakeholders Map savings projects to stakeholders and approvers Analyze: Segregate savings by type, e.g. cost reduction vs. avoidance, and accounting period Identify savings by project/sourcing strategy Map savings impact to P&L, Balance Sheet, Cash Flow Solution

29 Case Study: Financial Savings Management isave - Qualcomm 600+ Savings Projects Initiated $40-50M Annual Incremental Savings Realized To Date 000 s of Users 40 Power Users Create Savings Projects and Collaborate with 000 s of Stakeholders (600 Financial Analysts Alone) 25% Productivity Gain Category Managers Save 2 Hours per Day from Data Gathering Tasks Single Version of Savings Truth Standardized calculation/allocation formulae Full audit trail and version control Secure user access by BU/Div/Dept/Cat Fx conversion and multi-lingual UI Flexible/multiple savings types/definitions Approval workflow sign-off by budget owner and Finance Dashboard analytics and Financial Statement impact reporting: P&L/Budget/Balance Sheet,/Cash Flow Savings Tracking for Non-Procurement Platform applied to non-procurement savings projects (e.g. Reorg, ERP Consolidation, M&A), Budgeting/S&OP, Cash Flow Forecasting

30 Procurement Adoption of Emerging Technologies to Grow 3-5x 27% 18% 9% 56% 23% 33% 24% 18% 7% 63% 33% 30% 16% 11% 4% 35% 26% 16% 17% 11% Current 2-3 years Current 2-3 years Current 2-3 years Current 2-3 years Current 2-3 years 51% Internet of things Robotic process automation Cognitive computing/artificial intelligence 11% 43% 9% 9% Virtual assistants/chatbots Blockchain 35% 28% 7% Mainstream adoption Limited adoption Source: 2018 Key Issues Study, The Hackett Group

31 AI-Driven Source-to-Pay Spend Monitoring SmartAssist Suggestions Guided Buying Contract Management Procure-to-Pay Spend Mining esourcing Supplier Management Supplier Risk Monitoring Spend Analysis Financial Savings Management

32 Thank You

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34 Session # 10 Digitize or Die: Procurement's Transformation Imperative info@zycus.com Download the App: sig.org/app Tweet: #SIGspring18

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