the power of procurement - cips · management and strategic sourcing processes with a competitive...

The Power of Procurement CIPS Thames Valley 20th June 2012

Key findings from the Global Procurement Benchmarking survey

Andrew Williamson & Mick Davies

KPMG LLP

© 2012 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

2

About the survey

• Collaboration with CPO Agenda

• Support key CPOs

• 1,200 organisations targeted


3

About the survey

• Survey structured one two levels:

1. Core metrics on scope, spend, resources, etc

2. Self-assessment of key behaviours

• Participants received a bespoke comparative report


4

Response received

Manufacturing & CPG, 16%

Public Sector, 15%

TMT, 13%

Financial Services, 10%

CPG & Retail, 10%

Energy, 9%

Health, 6%

Others, 21%

Response Rate Breakup by Industry

UK, 42%

US, 14%

Canada, 5%

Others, 39%

Response Rate Breakup by Country

Almost 600 responses received in first year


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Key Findings

Five key areas where procurement needs to ‘raise its game’:

1. Partnering with the organisation

2. Delivering more than cost savings

3. Finding the optimal operating model

4. Prioritising supply chain risk management

5. Leveraging technology


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Have we really earned a place at the top table when:

• Most functions influence less than 60% of spend (across both direct and indirect categories)?

• Over 30% have no involvement in make versus buy or outsourcing decisions?

• Few have fully engaged the organisation in developing procurement strategy?


Partnering with the organisation Percentage of spend under management – indirect spend


Partnering with the organisation Level of involvement in ‘Make vs. Buy’ decisions


Partnering with the organisation Strategy and business partnering

Level 1 – Foundation 0-30 Level 2 – Established 31-60 Level 3 – Leading 61-80 Level 4 – Excellence 81-100 ■ Procurement is primarily reactive –

responding to organisation requirements as and when they arise.

■ Procurement’s strategy only covers a limited number of procurement goals and objectives.

■ Internal stakeholders have been identified. ■ Stakeholder consultation is limited to but

consulted only on an ad-hoc basis.

■ Procurement’s strategy and stakeholder engagement plan are documented and supported by a defined programme of projects to deliver strategic objectives.

■ Procurement staff’s objectives are aligned to the procurement strategy and associated delivery plans and takes into consideration current stakeholder relationships.

■ Key organisational stakeholders fully engaged in the development of procurement’s strategy and formal process to obtain regular feedback on stakeholder satisfaction.

■ Procurement’s strategy supports the wider organisational strategy, reflecting its purpose, values and objectives.

■ Procurement’s strategy is developed with input from technical, functional, environmental, quality, and regulatory specifications.

■ Procurement’s strategy is integrated with other functional strategies and contain a 3-5 year roadmap

■ Procurement’s vision and strategy are clearly articulated and well understood across the organisation.

Direct Indirect

6%

33%

30%

11%

17%

22%

20%

100%

50%

33%

44%

67%

67%

50%

67%

80%

38%

33%

22%

33%

22%

29%

11%

6%

4%

4%

0% 20% 40% 60% 80% 100%

Not for profit

Utilities, ENR, chems, pharma and infrastructure

Transport and logistics

TMT and business services

Retail

Public sector organisations

Manufacturing

Health

Financial services

12%

33%

27%

25%

15%

20%

22%

8%

100%

53%

33%

50%

50%

54%

55%

78%

83%

29%

33%

19%

25%

31%

20%

8%

6%

4%

5%

0% 20% 40% 60% 80% 100%

Not for profit




Retail


Manufacturing

Health

Financial services


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Why aren’t we delivering more?

• Less than 3% of respondents claimed to have achieved ‘excellence’ in Strategic Sourcing and Category Management

• Only 51% of functions currently lead Supplier Relationship Management

• Only 17% of functions lead demand management activities (29% do not participate in this activity at all)


Delivering more than costs savings Maturity of category management and strategic sourcing

Level 1 – Foundation 0-30 Level 2 – Established 31-60 Level 3 – Leading 61-80 Level 4 – Excellence 81-100

■ The organisation has basic category management and strategic sourcing processes documented.

■ Discipline around process adherence is poor with the processes not fully engrained within the organisation leading to sporadic use.

■ Developed category management and strategic sourcing processes exist and are engrained within the procurement department and the wider organisation.

■ Category leadership and team members from the wider organisation have clear roles and responsibilities assigned.

■ All spend is managed through category management and strategic sourcing processes with a competitive sourcing process mandated, (exceptions are subject to executive level approval).

■ Extensive collaboration on global categories/strategies.

■ Category management has a strategic place within the organisation as a generator of value with total buy-in from executive level.

■ Procurement are seen as market makers with target suppliers identified and engaged where necessary.

Direct Indirect

19%

33%

12%

11%

12%

22%

100%

69%

33%

69%

100%

89%

58%

78%

83%

13%

33%

19%

8%

17%

23%

0% 20% 40% 60% 80% 100%

Not for profit




Retail


Manufacturing

Health

Financial services

12%

33%

15%

6%

26%

11%

17%

100%

82%

33%

65%

100%

83%

47%

78%

58%

6%

33%

19%

6%

11%

11%

25%

6%

16%

0% 20% 40% 60% 80% 100%

Not for profit




Retail


Manufacturing

Health

Financial services


Delivering more than cost savings Supplier Relationship Management by cost reduction savings (direct spend)


Delivering more than cost savings Level of involvement in operational demand management


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Together we achieve more?

• Half of all respondents indicated that they had adopted either a centralised or centre-led operating model;

• Centralised and centre-led functions report the highest levels of cost reduction and spend under management


Finding the optimal operating model Managed Spend and Savings Generated by Operating Model (Indirect Spend)

Savings Generated Spend under management


Finding the optimal operating model Category Management & Strategic Sourcing by operating model type (indirect spend)


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We have barely started to properly address risk:

• 92% of respondents reported ‘foundation’ or ‘established’ maturity in risk management for indirect spend (82% direct spend)

• More than a quarter of respondents struggle to get beyond the basic level of maturity for Procurement risk management

• Only 44% of functions lead the contract management and audit process, while a similar number participate in it


Prioritising supply chain risk management Risk Management Maturity (indirect spend)

7/5/2012 18


Prioritising supply chain risk management Level of involvement in Contract Management & Audit

19


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Are we doing better on technology?

• The majority of organisations are only at the ‘foundation’ or ‘established’ level of maturity in their use of technology

• On average, most companies require manual intervention on less than 30% of their invoices

• Three quarters of respondents indicated they are at an ‘established’ level of maturity in MI, master data and reporting


Leveraging technology Systems & Technology Maturity (direct spend)

21


Leveraging technology Percentage of invoices paid without manual intervention (indirect)


Leveraging technology Maturity in MI, Master Data & Reporting (indirect spend)


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Conclusions

Five key areas of opportunity:







How can we improve?

A few questions to ask yourself:

1. Are you organised to deliver value for the organisation, not just cost savings?

2. Are key organisational stakeholders fully engaged in the development of your strategy and does it reflect the wider organisational strategy?

3. Do you actively lead SRM? Are you actively involved in demand management initiatives?

4. Is risk management an integrated part of your day-to-day operations, and contract management process?

5. Are Procurement processes automated? How well integrated is your e-Procurement solution?

6. Is there a consistent benefits tracking framework? Are benefits captured, realised and reported to relevant stakeholders?


Contact Details

Andrew Williamson

(07810) 830686 [email protected]

Mick Davies (07833) 696768

[email protected]

www.kpmg.com

mailto:[email protected]�



http://www.kpmg.com/�

© 2012 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. (Printed in the United Kingdom.)

The KPMG name, logo and ‘cutting through complexity’ are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

the power of procurement - cips · management and strategic sourcing processes with a competitive...

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