a procurement leaders guide to enabling agility
TRANSCRIPT
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A Procurement Leader’s Guide to Enabling Business Agility
Presented By:
October 26, 2016
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Agenda• Introduction: 2015 in Review • 2016 Key Issues: Agility in procurement
• Developing procurement’s culture and talent • Building an agile information and technology architecture• Enabling an agile service delivery model
• Closing Thoughts• About Tradeshift
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Introductions
Vishal PatelDirector, Solutions MarketingTradeshift
Christopher SawchuckPrincipal, Global Procurement Advisory Practice LeaderThe Hackett Group
Christopher SawchukPrincipal, Global Procurement Advisory Practice Leader
The Hackett Group
A PROCUREMENT LEADER’S GUIDE TO ENABLING BUSINESS AGILITY
5© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
In 2015, procurement’s #1 priority was to elevate its role to a trusted advisor
72%Ranked elevating the role of procurement to a trusted advisor as a critical or major objective in 2015
Source: Key Issues Study, The Hackett Group, 2015
Consistently deliver on the basics
Hire and retain high-caliber staff
Increase agility
Develop category management strategies
Deliver high-quality market insights and research
Build better awareness of procurement’s services
Discover and recommend innovative suppliers
Prove value through small projects
Improve the overall buying experience
Other
N/A
77%
64%
61%
57%
53%
47%
36%
35%
35%
5%
4%
Stakeholders are not always seeking innovation
CostQualityPerformance
In past Key Issues studies, respondents have indicated that becoming a trusted advisor to the business is a critical objective. Which capabilities will help the most to achieve this
status?
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In 2016, the priorities are similar; agility is top of mind… but procurement is struggling to address it
Source: Key Issues Study, The Hackett Group, 2016
74%74% ranked improving agility as a critical or major objective in 2016
36%Only 36% said they have a high ability to improve agility today
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To adapt, procurement must weave agility into every aspect of its service delivery model
Service Delivery Model 2.0
Intensify-ing
competi-tionDisruptive innovation
Extreme Volatility
The In-sight
Impera-tive
The Digi-tal Impera-
tive
The five forces of change
Make and implement decisions quickly
Respond rapidly to changes in business demands and priorities
Forecast and plan continuously to identify future risks and opportunities
What’s required for agility?
Developing procurement’s culture and talent is critical to
fostering agility
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The characteristics of an agile procurement culture
Agile procurement organization
Low agility Agility enabler High agility
Change averse culture, preserve status quo, focus on resource utilization
Embrace change, view change as an opportunity, focus on business outcomes
Talent tied to specific roles, common talent management strategies for all roles, limited learning and development
Flexible talent placement, talent management tailored to needs of roles, continuous learning and development
Bureaucratic decision-making, lacks empowerment, fosters inappropriate risk taking
Delegated decision-making authority, change-oriented leadership, calculated risk taking
Leadership
Culture
Talent
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Culture: At the US BPC, Pfizer’s presentation highlighted the importance of driving positive change through its culture champion network
If interested, the highlights from this presentation are available in a Hackett research paper.
11© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
What makes it agile?
“Our most important asset is our people. We’re trying to approach recruitment differently than in the past. I’m not convinced we necessarily need to hire only people who have done sourcing before. Rather than hiring for experience, we look for candidates with the right skills to succeed. Sometimes you need a combination of skills and experience, but ultimately, I want people with an entrepreneurial spirit, who want to build something new, are quick learners and logical thinkers, but who can also build relationships. We can train them in our sourcing process, but softer skills are more difficult to teach.”
Frederic Khalil VP, Head of Source-to-Pay and Corporate Services Guardian Life Insurance Company of America
Leadership: Guardian recruits and develops future leaders by fostering an entrepreneurial spirit, focusing on relationship skills (versus sourcing expertise)
"Outside the box" recruiting(offshore and onshore)
Cross-training and lunchbox training Career track program
Recruit,train and develop careers
Single mission Shared cascading objectives Team events (incl. Community
volunteering) Physical seating
Build “One Team”
Department meetings Intellectual capital building Process improvement Corporate projects volunteering
Foster ownershipand initiatives
Newsletters Recognition and rewards program Department trophy ceremony
Reward andrecognize performance
Source: Guardian
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Talent: Mead Johnson’s four-phased approach to building procurement’s credibility includes continuously developing the ‘softer side’ of procurement
Phase
1
Phase
2
Phase
3
Phase
4
Set up a diverse team to support innovative thinking External experience brings new ideas and best practices to the team Diverse backgrounds (finance, engineering, IT) provide additional tools
Global oversight through Global Collaboration Councils Long-term strategies, productivity assessments, risk
management strategies Best practice, regional support, cross regional leverage, global RFPs,
category SME
Continue developing soft skills Harvard Business School Online training Culture Crossing seminar, global effectiveness, influencing, negotiation
global leadership, team building
Business advisors supporting regional initiatives Thought leadership Viewed as strategic partners who add value
What makes it agile?
“Culture Crossing” seminars help improve global collaboration, improve effectiveness
Global councils help break logjams to improve productivity
13© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Four characteristics of agile talent management in procurement
1. Training is conducted in the field, not in a classroom. It is creative, engaging, challenging and specific/based on real-life scenarios.
2. Staff is rotated within and between business units and geographies, developing potential future leaders who have a broad understanding of the entire value chain.
3. Recruiting and hiring draws from outside the typical pool of procurement and sourcing specialists. Softer skills like relationship management, intellectual curiosity and business acumen are highly valued.
4. Procurement’s culture is defined by successfully challenging the status quo, influencing leadership to try something different. It is a “constructive disrupter,” displacing traditional, less efficient processes with new, creative solutions that are able to scale with the future strategy.
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Ultimately, becoming more agile requires innovators, not optimizers
“A lot of procurement executives have been molded and developed in their careers to become optimizers, but we need innovators. In the past, managers often took
comfort in hiring like-minded people, which yielded a kind of group-think that is not sustainable. You may get a temporary lift for a few years when someone comes in
and optimizes something, but when you are challenged to change the model altogether, it is very difficult. Transformation requires people who bring individual
creativity and thinking to the table and are willing to raise controversial issues and consider alternative ideas.”
Ramsay ChuGlobal Head of Procurement
Rio Tinto Group
Building an agile information and
technology architecture
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Information and technology enabled agility
Information and technologyLow agility Agility enabler High agility
Calendar-driven planning, singular set of planning assumptions
Adaptive, dynamic planning process, multiple scenarios and dimensions to planning models
Ad hoc response to variances, disjointed KPIs, manage reactively based on lagging indicators
KPIs aligned with business strategy, proactive performance management based on leading indicators
Fragmented systems and data models, poor data governance, limited analytical tools
Mature systems, data models and governance, broad adoption of analytics
Fragmented, disjointed, single purpose (i.e. only invoicing) networks in place
Business networks span from source-to-pay and include broader trading partner collaboration
Risk forecasting and planning
Performance management
Information governance
Business network collaboration
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Risk forecasting and planning: A hallmark of procurement agility
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Agile procurement orgs have a strategy in place to take advantage of technology developments
Technology components Questions procurement should be asking
Internet of everything How can sensors, location based services, RFID, etc. help to make our supply chains more agile?
Social media Can social media be used as a tool to detect supplier risk patterns? Can we use it to collaborate across procurement?
Mobility Can we conduct the business of procurement on the move?
Analytics What predictive modelling capabilities should we invest in?
Cloud What do we need to know about the risks of sourcing cloud technology?
Cognitive computing How will this revolutionize spend analysis? Risk forecasting?
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Information
Talent
Develop
Plan
Source
Make
Enablingprocesses
Deliver
Performancemanagement
Service Customer Sell
Market
Customer-centric business networks: Agile procurement organizations are rethinking how supplier networks can be expanded to better connect the entire value chain
Information-driven decision making, customer-centricity, and operational responsiveness are all byproducts of having better end-to-end, real-time network visibility.
Source: The Hackett Group
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Beyond supporting transactions, networks can also be a source of market intelligence, knowledge sharing and collaboration
Suppliers
Research centers
Industry groups & trade associations
Internal business partners
Government agencies & NGOs
Customers
Universities/schools
Procurement
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Four characteristics of agile procurement technology and information architecture
Continuous risk forecasting and planning is a hallmark of agility. Procurement’s ability to react quickly to change hinges on how well its prepared.
Agility leaders have a plan in place for taking advantage of future developments in social, mobile, analytics, cloud and cognitive computing.
Agile supply chains are built on a network of real-time visibility. Supplier networks will evolve into more holistic business networks to enable faster, more educated insights.
An agile procurement technology footprint is characterized by an ecosystem of software solutions, including both mature P2P solutions and emerging vendors in areas like risk, mobile spend analysis and spot buying
Enabling agile service delivery
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Automation, COE and Outsourcing enabled agility
Agile service delivery
Low agility Agility enabler High agility
Labor intensive, fragmented systems, ‘swivel chair’ processing
Technology intensive, integrated transactional systems, high levels of “touchless” orders (automation)
Limited adoption of COEs, the scope of work only includes the most transactional tasks
COEs are used for more advanced work like spend analysis, market intelligence, tactical sourcing and risk forecasting.
Large, all encompassing projects spanning multiple functions (Finance, Procurement, HR). Business case based solely on labor arbitrage.
“As-a-service” outsourcing of select areas in bite sized, consumable parts. The business case is tied closely to performance.
Outsourcing
Centers of Excellence
Automation
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Automation: Agile P2P organizations are piloting robotic process automation (RPA) – especially in shared service centers Large outsourcing providers have begun to reap the
benefits of RPA as a way to lower their own operating costs. GBS and procurement shared service centers should explore the potential as well.
When does RPA make sense? – Stable, relatively static applications– Need to access multiple systems– Limited need for human intervention, exceptions
handling– Clear understanding of the current cost of manually
completing the work– High transaction volumes
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Centers of Excellence: Looking beyond transactional work, agility leaders use onshore COEs to reap the greatest return on MI investments
55% are not implemented or in the first stage of maturity
343xOnshore COE
183xOutsource
190xOffshore
COE
326xCategory Managers
The ROI of MI
31%
24%
26%
17%
3%
How mature is your market intelligence program today?
Not Implemented
Stage 1Lagging
Stage 2Achieving
Stage 3Exceeding
Stage 4Leading
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Outsourcing: Tactical sourcing desks free up valuable category manager’s time…
Knowledge Management
Category Mgmt & Strategic Sourcing of Direct Materials & Services
Supplier Performance Measurement
Supply Master Data Maintenance
Analytics
Internal Customer/Requisitioner support/help desk
Requisition and PO Processing Activities
Tactical Sourcing for Indirect Materials and Services
Supply Market Intelligence
Supplier support / help desk
Sourcing technology support
3%
4%
8%
14%
13%
14%
22%
23%
22%
24%
26%
3%
4%
1%
4%
6%
6%
3%
3%
4%
3%
7%
6%
8%
10%
18%
18%
20%
25%
25%
26%
27%
33%
Plan to Outsource All or Part Within 2-3 YearsColumn2
Which of the following activities are provided by procurement business process outsourcing (BPO) service providers?
Source: Key Issues Study, The Hackett Group, 2016
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… and can help reduce the tail, increase spend influence
Source: The Hackett Group
Savings
Suppliers
80% ofspend
20% 100%
0-2%3-4%5-7%
40% influenced by strategic sourcing 5% not
influenced 1
0% n
ot in
fluen
ced
10% influenced by buying desk 5%
e-catalogs
Tota
l spe
nd p
er s
uppl
ier
10% not influenced 15% not
influenced
10% maverick spendthat should have beenstrategically sourced
Candidatesfor spot buys
5% unknown
Example of tail spend at a company with only 55% spend influence
Good candidates for the tactical sourcing desk
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Three characteristics of agile procurement service delivery
1. Agility leaders are piloting Robotics Process Automation in P2P.
2. Centers of excellence are hubs of more advanced analytics including spend analysis, market intelligence and risk forecasting.
3. Outsourcing is being used to help address tail spend and increase influence by staffing tactical sourcing desks and maintaining catalogs.
Getting started
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Five recommended action items
1. Apply the agility test to your own service delivery model. Determine where the gaps are and how it needs to change to support procurement’s evolving role.
2. Take an honest inventory of procurement’s identity and culture. Is it an optimizer or an innovator? Is it operating seamlessly across cultural and geographical boundaries? Refresh recruiting, hiring and training with the idea that chaos is the new normal.
3. Even for non-regulated businesses, risk forecasting and planning is a hallmark of agility. Evaluate your current risk management program not only for depth but speed and agility. Benchmark cycle times to strike the right balance.
4. Invest in predictive capabilities, pilot emerging technology and work towards expanding single function supplier networks into interconnected business communities.
5. Consider outsourcing providers to help manage tail spend. Model the ROI on efficiency gains and compliance versus savings.
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The Business Commerce Platform
We provide our customers with solutions to buy and sell goods and services.
Our extensible platform allows you to tailor solutions to meet your company’s needs.
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Open & free for suppliers
App Ecosystem
Financial Solutions Dynamic Discounting, Supply Chain Finance, Virtual Cards
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End-to-End Business Commerce Platform
Supply Chain Collaboratio
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Financial Solutions
Third Party Apps
Procure-to-Pay (Direct & Indirect)
Supplier Management
Tradeshift Platform(Transactions, Collaboration, Compliance, Insights)
Customer
ERP and Legacy Apps
Suppliers
Tradeshift Platform
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Example of Extensibility / Agility
Forecast Collaboration
E-Logistics
Order Collaboration
Supply Chain Performance
Supply Chain Collaboratio
nBuild your own apps
Financial Solutions
Third Party Apps
Procure-to-Pay (Direct & Indirect)
Supplier Management
Tradeshift Platform(Transactions, Collaboration, Compliance, Insights)
Customer
ERP and Legacy Apps
Suppliers
Tradeshift Platform
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Q&A