Procurement Leaders of Tomorrow

Transcription

1 Procurement Leaders of Tomorrow CIPS East Anglia Branch AGM March 23, 2016 Robyn Wright, A.T. Kearney, FCIPS

2 Agenda Assessment of Excellence (AEP) in procurement State of procurement Overview of results Organizational leaders Individual leaders A.T. Kearney xx/00000/unique Identifier 2

3 A.T. Kearney s Assessment of Excellence in Procurement is the preeminent global benchmark in the Procurement space Assessment of Excellence in Procurement (AEP) snapshot Focus of the Study House of Purchasing and Supply launched Focus on e- Procurement Global Coverage Inaugural year 1999 Performance-Driven Procurement Procurement at a Crossroads Value Beyond Cost More than 1,500 companies have participated in AEP to date many multiple times 2014 Key facts Preeminent and worldwide unique study used by Procurement organizations to identify the latest marketplace trends The 2014 Assessment of Excellence in Procurement study is the eighth in the series that began in 1992 Average participant revenue of $15B Enriched by our experience of 1,600+ largescale procurement transformation projects and 1,800+ procurement practitioners worldwide 1 Provides detailed results and guidance to define roadmaps to excellence 2014 tracked to 350+ participants Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney Engagements since 2002 A.T. Kearney xx/00000/unique Identifier 3

4 The AEP initial benchmarking group represented a broad mix of geographies and industries The initial benchmarking group includes the 170 participants that completed the questionnaire between February and May 2014 Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 4

5 Procurement stature had solidified and slightly increased Procurement Organization Stature (% Companies Selecting Fully Agree ) 53% 55% 41% 46% 32% 32% 19% 19% 23% 22% 25% 13% Mandate communicated and accepted Extended mandate to explore broader value creation opportunities Leadership for all key expenditure areas Extended mandate to identify and recommend new business opportunities Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 5

6 Agenda Assessment of Excellence (AEP) in procurement 2014 State of procurement Overview of results Organizational leaders Individual leaders A.T. Kearney xx/00000/unique Identifier 6

7 Leaders have a formula for procurement excellence Team Excellence Category Excellence High Performance Teams as the catalyst for business alignment Supplier Excellence Category Strategic Category Sourcing Strategic is the Sourcing most powerful as the most cost powerful reduction cost lever reduction lever and to drive durable results Supplier Relationship Management as the new differentiator for competitive advantage Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 7

8 What does excellence look like today? Category Excellence Supplier Excellence Team Excellence Procurement Leadership Characteristics Visibility into >95% of annual spend at the transaction level Influencing >75% of total spend and actively sourcing 70% of this each year, resulting in 6% benefits on spend influenced Robust sourcing process using demand management and advanced techniques, esourcing and analytics Defined SRM process and team accountabilities, yielding > 95% compliance Supplier segmentation that identifies top 1% for collaborative innovation or extraordinary risk management At least one third of Procurement value stems from SRM Seat at the executive leadership table influencing enterprise strategy and pursuing both cost and value beyond cost objectives Centralized/center-led team of high potential talent with procurement and domain expertise; Automated transactional activities so 75% of team focuses on strategic efforts Performance management vetted by CFO that informs business plans Balanced scorecard that measures cost reductions, value beyond cost, talent, and stakeholder satisfaction To achieve highest returns, Leaders invest in people and tools and can achieve annual returns of up to 15:1 A.T. Kearney xx/00000/unique Identifier 8

9 Leading procurement organisations have stronger engagement across their enterprise, and closer strategic alignment Connection between Procurement Strategy and Business Plans (% Companies selecting Totally ) 100% 62% 48% 70% Procurement strategy aligns with overall business strategy Procurement actively contributes to development of individual BU & regional strategies Business stakeholders proactively invite procurement to discuss business plans Business stakeholders and procurement mutually agree on budgets and targets for external expenditures 62% 27% 15% 27% Leaders Typical Companies Source: AEP 2014; A.T. Kearney A.T. Kearney xx/00000/unique Identifier 9

10 Category Excellence as the most powerful source of cost reduction Employing the power of the Purchasing Chessboard Developing long-term plans that reposition the company for key categories A.T. Kearney xx/00000/unique Identifier 10

11 Low Supply Power High Although leaders use more methods, there is still significant untapped potential in the use of collaborative methods The Purchasing Chessboard (% Leaders selecting Systematically used ) Average # of methods Systematically Used Leaders Typical Companies Change Nature of Demand Seek Joint Advantage with Suppliers Key: 90% Manage Spend Leverage Competition among Suppliers % 10% Low Demand Power Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 High A.T. Kearney xx/00000/unique Identifier 11

12 Leaders are showing the way forward 3X greater linkage with business units Expanded use of leadership practices Generated 2x higher ROSMA A.T. Kearney xx/00000/unique Identifier 12

13 ROSMA SM Top Quartile performers drive nearly 2X greater results ROSMA SM Financial Results Delivered Comparison (as a % of total spend) 6.0% +88% 3.2% +78% 1.8% Top Quartile Middle 50% Bottom Quartile 1. Value refers to the financial results delivered. Top quartile performers deliver 6% vs. 3.2% from middle-tier. Source: A.T. Kearney 2014 AEP Full Survey Data and 2013 ROSMA SM Performance Check A.T. Kearney xx/00000/unique Identifier 13

14 Leaders make far greater use of leadership practices AEP Scores Most /all formally and systematically adopted Some aspects adopted Little or no systematic application Overall AEP Score Supply Management Strategy Org. Alignment Sourcing & Category Management Supplier Relationship Management Operating Process Management Performance Management Knowledge/ Information Management Human Resources Management Strategic Direction Value-Adding Processes Key Enablers Leaders Typical Companies Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 14

15 Leaders are far ahead in developing and communicating a robust understanding of SRM, internally and with key suppliers SRM Process (% Companies selecting Robust understanding and vocabulary) 77% 84% 40% 26% 27% 9% Within Procurement Across your Company With key suppliers Leaders Typical Companies Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 15

16 Leaders focus on key suppliers for joint supplier improvement initiatives Joint Supplier Improvement Initiatives (% Companies selecting Most or All for strategic suppliers) 67% 75% We conduct an internal process to identify value creation hypothesis in advance of engaging the supplier We have a jointly-agreed implementation plan that includes specified improvement recommendations 27% 21% Leaders Typical Companies Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 16

17 Typical Value Seller Leaders collaborate with critical suppliers to increase value by over 10% across the extended value chain Breakthrough Collaboration Demonstrated Possibilities Innovation Planning Supply / Manufacturing Distribution Operations Buyer Improved cycle time by 40-60% Sales growth of 10-15% Decreased forecasting errors by basis points Reduced Materials cost by 10 20% Lower total system inventory by 10 20% Benefit from transportation synergies and savings 7 15% Enhance instock (in-store) by basis points Source: A.T. Kearney Client Examples 2014 A.T. Kearney xx/00000/unique Identifier 17

18 As a result, leading organisations are more prepared to mitigate changing market dynamics and disruptive technologies Changes that could affect Company Procurement Strategy (% Companies selecting Fully prepared response plans for) 81% 70% 70% 63% 41% 37% 24% 15% 17% 7% 10% 10% Significant shifts in supply-demand balance within the supply industry Economic or demographic trends affecting supply industry capacity Market Dynamics Leaders Source: AEP 2014; A.T. Kearney Typical Companies New processes that significantly change the types or quantities of goods and services required Emergence of new technologies and non-traditional suppliers that increase market competition Emerging technologies that could significantly alter the companys products or markets Disruptive Technologies Pace of adoption of new technologies by customers A.T. Kearney xx/00000/unique Identifier 18

19 Leaders recognize the importance of risk management Risk Management Process (% Companies) 89% 59% 55% 84% 51% 76% 67% 31% 40% 17% Systematically using risk management methods to generate value Plan formally considers the alignment of supply risk with business risk tolerance and sustainability Plan includes scenario analyses to take advantage of opportunities that may arise Plan includes contingency planning to identify/mitigate risks Tracked benefits/losses from supply continuity and supply chain risk mitigation Strategic Sourcing Leaders Typical Companies Category Management Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 Performance Management A.T. Kearney xx/00000/unique Identifier 19

20 Leaders have more accessible, up-to-date spend data to enable advanced spend analysis Data Access (% Companies) 52% 68% 73% Real-time Data Fully automated access Spend data refreshed monthly 24% 39% 46% Leaders Typical Companies Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 20

21 But since 2011, most Procurement organizations have hit a wall Procurement benefits have slowed Use of leadership practices has shown little improvement Procurement influence and reach has levelled off A.T. Kearney xx/00000/unique Identifier 21

22 Procurement influence over spend is levelling off Procurement Influence over Spend (as a % of Spend) 73% 72% 71% 68% Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 22

23 Procurement benefits are returning to the historical average Procurement Benefits (as a % of Influenced Spend) 7.9% 7.2% 3.9% 4.3% Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 23

24 Most companies have not yet been able to overcome internal barriers to engaging suppliers in innovation Barriers to Innovation (% Companies selecting Primary or Secondary ) 84% 83% 76% 72% Lack of internal capacity to successfully leverage suppliers All 2014 Participants Lack of systems / measures to show the respective value contribution that can arise from supplier innovation Lack of internal transparency and understanding of needs Lack of willingness to invest time, resources, or money in developing partnerships with suppliers Harnessing supplier innovation capabilities adds expertise and technical knowledge to complement internal resources Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 24

25 Most companies have not yet been able to overcome internal barriers to engaging suppliers in innovation Barriers to Innovation (% Companies selecting Primary or Secondary ) 84% 83% 76% 72% Lack of internal capacity to successfully leverage suppliers All 2014 Participants Lack of systems / measures to show the respective value contribution that can arise from supplier innovation Lack of internal transparency and understanding of needs Lack of willingness to invest time, resources, or money in developing partnerships with suppliers Harnessing supplier innovation capabilities adds expertise and technical knowledge to complement internal resources Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 25

26 Attention to supply risk management has dropped off since 2011 Risk Management Process (% Companies) 57% 61% 52% 64% 57% 53% 43% 44% 27% 26% Systematically using risk management methods to generate value Plan formally considers the alignment of supply risk with business risk tolerance and sustainability Plan includes scenario analyses to take advantage of opportunities that may arise Plan includes contingency planning to identify/mitigate risks Tracked benefits/losses from supply continuity and supply chain risk mitigation Strategic Sourcing Category Management Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 Performance Management A.T. Kearney xx/00000/unique Identifier 26

27 Although innovation is less important than cost, half of leaders have a major open innovation effort underway Importance of Innovation vs Cost Target Open Innovation Capability (% Companies) (% Companies selecting Major Effort ) 77% 57% 23% 32% 48% Innovation Lower than Cost 11% Innovation Equal to or Higher than Cost 0% No Innovation Target 20% Leaders Typical Companies Note: Open Innovation refers to actively leveraging the capabilities and expertise of others to accelerate innovation; increasing access to solicited and non-solicited inputs so that prioritized wants are secured Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 27

28 To effectively steer procurement innovation processes, KPIs should cover all value levers along the innovation life cycle Innovation Value Life Cycle Levers along the innovation life cycle Leading KPIs preferred to lagging KPIs in order to drive actions and executions, and measure activities, not just results Source: A.T. Kearney A.T. Kearney xx/00000/unique Identifier 28

29 A combination of internal procurement KPIs and supplier survey feedback are needed, focused on early interaction and ideation Examples for KPIs with mirrored internal : external view Innovation Lifecycle Stage Strategy development Innovation portfolio value optimisation (ideation) Internal View (Procurement KPI) Quality of existing category innovation strategy Quality and range of ideas from the external market External View (Supplier Survey KPI) Strategy presentation to suppliers Quality of ideation process and feedback to ideas (supplier view) The Majority of procurement innovation KPIs will focus on the early stages of the innovation process: There is more to be gained from effective supplier interaction and ideation in early stage Portfolio management; Later stage idea management (during development and launch) is owned by R&D (with the classical KPIs, e.g. time to profit, ) Source: A.T. Kearney Client report A.T. Kearney xx/00000/unique Identifier 29

30 Going forward, Procurement faces two paths with distinct implications A.T. Kearney xx/00000/unique Identifier 30

31 Stare at the wall? Loss of credibility Diminished stature Reduced impact on company performance A.T. Kearney xx/00000/unique Identifier 31

32 Vault the wall? Strong brand Enhanced capabilities Greater business impact A.T. Kearney xx/00000/unique Identifier 32

33 Agenda Assessment of Excellence (AEP) in procurement 2014 State of procurement Overview of results Organizational leaders Individual leaders A.T. Kearney xx/00000/unique Identifier 33

34 If you are going to Vault the Wall, you have a choice on whether to adapt within or shape your function A.T. Kearney xx/00000/unique Identifier 34

35 Good individual leadership in companies do three things especially well ALIGN the organisation The ability to align, inspire, and enable teams, to create coalitions for change, to embody the organisation s values ANTICIPATE the market dynamic The ability to lead from the front, anticipating customer and other stakeholder needs The Triple A of Leadership Move to ACTION The ability to take the difficult decision and focus on what matters A.T. Kearney xx/00000/unique Identifier 35

36 and balance two complementary, yet distinct roles Operational Leadership Keeps the show on the road Captures peoples committed energy Motivates others by appealing to their own selfinterest Works within existing boundaries Change Leadership Inspires a change of course Captures peoples discretionary energy Motivates others by appealing to a higher value Works to change existing boundaries A.T. Kearney xx/00000/unique Identifier 36

37 Most leaders regularly engage with the entire Procurement department to discuss the 3-5 year vision Department-wide Discussion of Vision / Direction (% Companies) Leaders Frequency On an adhoc basis 16% Formally, with a regular schedule 84% Typical Company s Frequency Very rarely with the entire Dept 16% Never 4% On an adhoc basis 40% Formally, with a regular schedule 40% Source: A.T. Kearney Assessment of Excellence in Procurement 2014 A.T. Kearney 2014 A.T. Kearney xx/00000/unique Identifier 37

38 To deliver on these dynamics, leading organisations are more focused on advancing the capabilities of their procurement teams HR Practices (% Companies selecting Fully enterprise-wide ) 71% 68% 55% 32% Procurement has a formalized roadmap/plan to enhance human skills and capabilities Significant active investment in the procurement team/people to drive improvements Procurement routinely reviews mix of skills to advance the group towards procurement excellence Procurement has developed specialist career tracks beyond category expertise 20% 29% 15% 7% Leaders Typical Companies Source: AEP 2014; A.T. Kearney A.T. Kearney xx/00000/unique Identifier 38

39 At a Felows of the Future Event in 2014, we surveyed Junior rising stars and Fellows, with interesting results Most important responsibilities of a leader (% of respondents) 39% 36% 28% 28% 22% 24% 11% 12% Future proofing the function Building the next generation Moving teams to actions Leading & role modelling Fellows of the Future Fellows(2) 1. FoF: Fellows of the Future; 2. Fellows Source: Fellows of the Future A.T. Kearney xx/00000/unique Identifier 39

40 Long term or short term? Beyond your own skills, what most helps you operate successfully as a leader (% of respondents) 38% 31% 23% 19% 19% 15% 12% 12% 8% 8% 8% 8% 0% 0% Skills and expertise of the team Atmosphere of commitment & collaboration with team Culture of risk taking & support Wider peer network Understanding & support of seniors Data & systems Enhanced responsibilities Fellows of the Future Fellows 1. FoF: Fellows of the Future Source: Fellows of the Future A.T. Kearney xx/00000/unique Identifier 40

41 Future proofing and network support are key challenges for future CPOs Main challenges for CPOs of the future (% of respondents) 40% Speed of change and keeping a strategic focus very easy to become very short term and tactical Adding value in such a fast paced and demanding environment. If we aren't at the top of our game, our clients will just opt to automate and outsource us Winning hearts and minds at Board Level 33% Do more with a lot less 20% We need to train people to see the wood for the trees Re-energizing teams learn from the past 7% 0% Future proofing the function Moving teams to actions Building the next generation Leading & role modelling Gaining support of wider org and seniors Source: Fellows of the Future - Attending Fellows, Fellows Not signed up yet and Fellows of the Future A.T. Kearney xx/00000/unique Identifier 41

42 Fellows (aka leaders) should share more of their own informative learnings Select quotations biggest mistakes & what we wished we knew earlier The importance of networking More advanced techniques to engage more successfully with internal nonprocurement oriented colleagues who needed persuading towards smarter procurement or commercial success Don t try to do it all yourself Network, network, network The importance of networking at all levels Networking Self-confidence That confidence is half the battle Be bolder. Speak up more. Be authentic and true to your own values and beliefs. To have had the confidence to push ideas forward That I could of pushed the boundaries a bit more and been more confident. Success is not about procurement and supply chain theory - its about understanding people and what makes them tick. Whilst technical and professional knowledge is very important, effective leadership is equally about relationship management across the whole spectrum of internal and external activities Valuing the differences and variety in people Relationship Management Ability to Influence How to exercise power without antagonizing or alienating others Success doesn't have to be at the detriment of others and competition doesn't have to be underhanded I wish I had used my leadership abilities more fully instead of staying within the boundaries that I set myself. How to handle the politics and influence upwards. Source: Fellows of the Future - Attending Fellows, Fellows Not signed up yet? and Fellows of the Future A.T. Kearney xx/00000/unique Identifier 42

43 Thank you. Further information can be found on the links below, the Podcast including insight from Fellows of the Future event AEP overview Podcast discussing leadership in times of change A.T. Kearney xx/00000/unique Identifier 43