2020 LinkedIn Slides

We help companies that sell to buy better

2020 LinkedIn SlidesheyProcurement 2020 Album©

www.heyProcurement.com

Copyright© 2020 heyProcurement (HeyCKW Pty Ltd ABN 28 631 566 697). All rights reserved. No part of this document may be reproduced or

transmitted in any form without the prior approval. Any quotation from this document must be attributed to the author..

Procurement Services and Advisory

http://www.heyprocurement.com/

Our ServicesWe provide ‘end to end’ Procurement services and advisory to

organisations, focusing on:

Procurement of goods and services: Category strategy development, tender and negotiation, contract development, dispute

management, post contract governance and contract renegotiation (following our framework the

PASSAGE©)

Procurement function improvement: Functional improvement, benchmarking, training and recruitment support

Selling and Business Development: Consulting support and advice to the

healthcare, mining, refining and smelting sectors. Our services support clients in sales and marketing,

tender strategy development, operational & process improvements (Lean), asset management,

outsourcing, supply chain and logistics risk management.

Our Framework

Why present a category management framework?

Procurement is a cyclical process, often project based where

contracts end with products and/or services looking to be re-

acquired.

The annual procurement plan, often approved by the business, is the starting point

for the procurement function.

In that context, procurement must partner with the budget owners, the outcome

owners and many other stakeholders with an interest in the result. This is best

executed under a clear and coherent framework.

P - Planning



Tomorrows solutions are all around us.

Generate ideas now, but keep the process simple…

Copyright © 2020 heyProcurement

3 weeks 6 weeks 2 weeks 1 year

Determine base

performance and

identify

performance gap

Set Targets

Generate ideas

Evaluate ideas

Sell the ideas

Plan ideasImplement

and track

ideas

Communicate

• Explain the context and purpose

• Seek contributions from all areas

• Communicate progress/feedback on ideas

• Recognise contributions

SG*

*SG – Steering Group (Senior business leaders that own the process and result)

Simple process to generate ideas

SG* SG*

Simple reporting

2020 Q1…what was that all about…..


2020 Q1 Plan➢ Roll out 2020 Plan

➢ Develop L2, L3 and L4 planning tasks

➢ Align processes for 2020 (ICT and ERP etc)

➢ Refresh Fact Base for key categories

➢ People systems up date wrt STIP/ LTIP

2020 Q2 Plan➢ Review key contracts under contract

management framework

➢ Conduct C-Suite Relationship meeting

➢ Category Sign off for 2020 market approach

Boom………..Major

supply chain

disruption, War rooms,

SOS (Security of

supply). Teams move

from plan to react (full

contingency mode).

Also: flexibility

emerges, innovation,

new energy and new

relationships with a

taste of things to

come…..

Sustaining team

Improvement Team

Re-cut the Plan

Procurement Onwards…… post Corvid19

Strategic

Suppliers ‘In

the tent’

Analytics

Kill the

Committees.

Small

‘approval’

teams

Re-

Forecasting

Robust ‘In Country

Procurement

Strategy

Rapid refresh

of Category

Management

Supply Chain

review

Contract

Management

(a habit)

Budget

Transparency

Benefit

Tracking

Procurement

Training

(Users and

Practitioners)

Organisations will (and

should) look to Procurement

for:

1. leading indicators of supply

risk

2. on going monitoring of key

supplier ‘health’

3. an integrated and more

mobile buying process

4. a ‘Closed Loop’ approach to

contracts (not just sourcing)

5. monitoring added and

destroyed value

6. confidence and leadership

A - Analysis



The battle inside the ‘long tail’…..


Supply Side Risk: Vulnerability Elements

1. Dependent on few key suppliers

2. Part of supply base financially unsecure

3. Lead time extensions

4. Quality issues (not to specification)

5. Poor adherence to agree schedule and order combination

6. Risk to supply due to government directives

7. Poor or no performance measures

8. Low supplier sophistication for planning and forecasting (S&OP)

9. Poor supplier transparency

10. Poor Low level of supply chain network

11. Accreditation claims

12. Minimal provision of manufacturing data

TYPICAL SUPPLY SIDE RISKS

Travel restrictions currently limit ‘go see’ checks for supply; Supply

Chain Risk Assessment now more important than ever!Copyright © 2020 heyProcurement

Risk Review: The mode you are in will change…

• Promote

• Produce

• Predict

• Purpose

• Portfolio

• Profit

• Plan

• Prepare

• Pilot

• People

• Protect

• Preserve

Today..Very

Soon…

Get ready to…

Further out..


S - Strategy



H2 2020: Transformation in Isolation…..

1. Transformation

Two

2. Reduce Cost

3. Reduce Supply Chain

Risk

4. Reduce Contract

Management Leakage

5. Reduce Transactional

Activity

1. TRANSFORMATION (2) IN ISOLATION: Transformation

programmes that had somewhat ‘Dropped off’ pre-Corvid

are now back with vigour and Transformation II is shaping

(and testing) how teams and systems will ‘digitally’

function in a permanent ‘work from home’ mode.

2. SAVINGS: Procurement functions are in ‘cost reduction’

focused and likely to be in this mode to the end of 2020 –

savings targets are being closely monitored an is a key

lever.

3. RISKS: Buyers are paying special attention to supply chain

risk and inventory risk. The shock of Q1 2020 is still raw;

with near zero overseas travel activities such as problem

solving or inspections at off-shore factories a constraint

the focus on risk and quality is top of mind.

4. SCRUTINY: Increase scrutiny of existing contracts and

contract management is on the up with increased ‘desk

based’ reviews an easy task via Zoom or other platforms.

5. OUTSOURCE: The debate of ‘on shore/offshore’ will be

back; makes sense for low risk, low value and high and

transactional items to go off shore

Total Cost of Ownership (TCO):

Commercial

Specification Lever

Demand Lever

What you see and below….. What buyers will look at/ do:

• Bid competitively and negotiate

• Develop a fact base on spend and true product costs to gain a negotiations

insight

• Reduce supplier fragmentation to capture volume discounts

• Look to changes in supplier utilization, capacity, labor, and underlying

material costs. They will also work with suppliers on innovation

• Seek insights through internal and external data

• Optimize product specs to minimize total cost

of ownership and set up teams or be part of a Community of Practice

• Develop process to determine who can buy what, when, from where, and

how – spend control

• Run and provide guidance session to educate internal stakeholders

• Optimize process flows to reduce cost, e.g. logistical processes or

elimination of duplicated quality controls

• Implement tracking tools and reporting to ensure savings flow to the

bottom-line and be very focused on EBITDA impacts

• Optimize payment cycle to optimize reduction in unit prices vs. carrying

cost etc.

Process Lever

Buyers and sellers can benefit from working together to develop efficient and effective supply chains through

understating the TCO approach to business……...

Understanding the Specification:

• Review changes since the last RFP to the Scope/ Specification (what went

well/ not so well)

• Have changes within the industry occurred that may lead to improved

results by researching the specification

• Is there a clear breakdown for the ‘cost’ for a premium scope v’s a fit for

purpose scope?

• What options are offered by the Supplier?

• What’s are the trade off?

• Is the Scope/Specification bespoke or are there options?

Note: Challenging is never easy and often creates tension

between buyer and the internal user. It’s important that the

buyer respects the needs of the end user but should look to

‘call out’ any opportunities early too.

It’s not uncommon for the ‘Scope/Specification’ (across both services or goods) to be issued under tender to be

the ‘gold standard’. While challenging the Scope/ Specification is never popular with internal client asking the

question is not unreasonable of the buyer as it may lead to cost savings or even improvements.

Scope (a)Scope (b)

Cost to the

supplier to

produce the item

Opportunity post

specification

review

Potential Impact to price

Cost reduction due to

specification change

Some areas to review (not an exhaustive list)

S - Sourcing



RFP: When is it used

Chaotic

Complex

Complicated

Simple

Request for Information

Expression of Interest

Request for Proposal

Request for Tender

Request for Quote

New

Mine

Supply

Existing

Mine

Supply

A - Agreement



Instant Deal: Tips to get you going…..

Today everything is instant - food, communications, transport and many other items in our ‘instant world’ but ‘the deal’ has its own lifecycle. Often deals (sellers and buyers) are well planned but some are not and need to be executed NOW. If you can’t avoid the ‘instant deal’ consider the below:

1. Internal Sign Off

•Deals have as much complexity internally (sign off) as they do externally -look at ways to obtain pre approval by your management and get yourself some ‘time credits’. Inform legal as soon as possible.

2. Know the history

•Look at what ‘got us here (look at why this is urgent)’; you will need to know the background and implications of a sub optimal outcome.

3. Develop NOAP (Negotiation on a Page)

•Develop a ‘NOAP’ (negotiation on a page). Circulate internally for quick review and make sure ALL are aware of the ‘instant deal’ (needs and risks).

4. Authority and Authorisation

•. Be sure the other party can transact on agreement too - talk to the right person on the other side.

5. Communication

•Keep your key internal stakeholders up dated frequently - more than you would normally. Up date the NOAP and have ‘legal’ ready to go.

Emotion in ‘motion’: it’s natural and OK…..


Relief

Hope

Despondency

Fear

Anxiety

Thrill

Excitement

Optimism

Optimism

Panic

Source: AMP Capital Investors 2009 Global Financial Crisis paper

Post RFP/ Tender Feedback:

Let the suppliers in the ‘tender’ know ‘why’ they were not successful. Where the ‘buyer’ asks for participation

and determines who has the tender package it’s incumbent on the buyer to close out the process and provide

the ‘why’ they were not successful.

• When the Buyer does provide feedback it’s

not the time for the seller to be defensive

or argue their point either.

• It’s predominantly a one way chat, which

may not be easy, but the alternative of

‘radio silence’ is even worse.

G - Governance



Contract

Management

Framework

Governance and Oversight

Policy and standards that guide decisions and processes of the business

Documents: Contract Framework, Procurement Policy and Risk Management Framework

Guiding Principals: Governance, Transparency, Cost and Risk Management

Contract

Formalise the KPI

over the term of the

contract

Documents:

Contract (inc Scope

of Work) and other

site documents

Guiding Principals:

Accountability, Responsibility

(RACI model)

Contract Management Framework

Measure

How performance will be

measured including: Description

and targets

Documents: Performance KPI as

per the Contract or Scope of

Work

Guiding Principals: Predictability , Cost and

Risk Management

Monitor

The process of expectations as

to how information will be

reported, collected and used to

inform decisions

Documents: Contract

Management Meetings (agenda

and meeting notes inc Report

templets

Guiding Principals: Collaboration and

Partnership and Responsiveness

Manage

The actions, agreements and

plans to be taken to maintain

achievement of performance or

correct under or non-

performance

Documents: Performance Plans

inc: Improvement plan, recovery

plan and closure plan

Guiding Principals: Predictability,

Recognition and Responsiveness

Control of

risk and cost

management

<Name of Supplier>

<Success Story>

• Xxxx

• Xxxx

• Xxxx

• Xxxx

• Xxxx

• Xxxx

• Xxxx

• xxxxxxx

• xxxxxxx

Background

• xxxxx

• xxxxxx.

People Involved

Results achieved

For more information please contact [<[email protected])]

Picture

Graph/ other data table

E - Evaluation



Back to basics…….check your invoices

Tips:

➢Now and again have a

detailed look at your

invoices, perform periodic

checks.

➢ Mistake are made as well as

other ‘additions’.

➢The PO may match to the

invoice total but that does not

mean it’s correct

➢Check the PO, GRN and Invoice

frequently

➢ Invoices are a good source of

information too

Colin is a procurement professional with over 30 years experience in the mining, metals and manufacturing sectors in both commercial and operational disciplines. Colin had a distinguished global career with mining and metals giant, Rio Tinto, based in Europe, Asia and Australia.

As a highly respected subject matter expert in procurement, Colin was responsible for high-spend strategic contacts for both Rio Tinto’s mining and smelting divisions where he applied his skill to ‘disrupt’ traditional supply lines by developing strategies that create competition and embed sustained long term value.

In addition Colin was part of a major commercial transformation team that achieved $1 Billion in cost savings at Rio Tinto Coal and its iron ore divisions.

Colin is the founder of heyProcurement© currently consulting into the healthcare, mining and metals sector.

Colin Lloyd WilliamsFounder and Director

Procurement Professional Direct and Indirect

Education:

1999 – 2002: University of Wales – MBA

1998 – 1999: University of Glamorgan, Wales -

Postgraduate Diploma in Management

2007 – 2008: Australian Institute of

Management - Diploma in Management

Relevant Experience:

• Strategic procurement

• Supply Chain Management

• Large scale corporate transformation

• Leadership and Management

• Sales and Marketing

• Operations management

• Asset management

• Category Management

• Facilitates Management

• Supplementary labour

• Raw Materials

• Operating Model Assessment

• Transformation Panel Advisor

• Transformation War Room Advisor