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November 12-14, 2017
Bellagio Resort & Casino, Las Vegas
Key Issues in Procurement: What Are Procurement Leaders Focused on Achieving and What Capabilities Will Get Them There?
Statement of Confidentiality and Usage Restrictions
This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a
competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for
any purpose is strictly prohibited without the prior written consent of The Hackett Group.
Copyright © 2017 The Hackett Group, World-Class Defined. All rights reserved.
3© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Kurt Albertson is a Principal with The Hackett Group with program responsibility for North American
Advisory programs focusing on client relationships, business development, research and program
delivery. Mr. Albertson works with over one hundred Global 1000 companies leveraging research
and thought leadership to provide strategic direction and best practice business advice within
Procurement and Finance.
Prior to joining the Hackett Group Mr. Albertson spent six years as a management consultant in
Sourcing and Procurement during which he worked with executives from dozens of large
corporations on sourcing, business and technical strategies, organizational and business process
design, and cultural change.
Mr. Albertson also has five years of automotive experience working in manufacturing, quality, and
operations. In this role he designed and implemented global manufacturing processes and
supervised production operations.
Mr. Albertson has been quoted in the Wall Street Journal and other major publications, has been the
key note speaker at many national events, and travels globally to support client objectives.
Kurt Albertson – Principal, Procurement Advisory Practice
Contact Information:
770-225-7570
4© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Enabling World-Class: Hackett’s Solution PortfolioBenchmarking, Advisory, Business Transformation
▪ Unlimited inquiry access for members to Hackett experts for transformation steering
▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett Certified Best
Practices through the Best Practice Intelligence Center
▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events
▪ Enterprise, functional and process-based performance studies & value accelerators
▪ “Gold Standard” Benchmark – over 8,500 conducted, the empirical backbone for your transformation at the
SG&A Enterprise, Functional, and Process level.
▪ World-Class, Peer, and Custom Peer comparative metrics and best practices
▪ Ability to provide multiyear World-Class Program view of performance over time
▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP
▪ Finance
▪ Human Resources
▪ Information Technology
▪ Procurement
▪ Supply Chain and Operations
Membership
Advisory &
Research (Provides insights into World
Class Performance)
Benchmarking(Defines World Class
Performance)Hackett Perspective on World-Class Finance – Accelerating GBS | 9
Peer Group World Class
The World-Class Advantage – FinanceWorld-Class organizations always find a way to get there
IT Cost (per end user Equivalent)
Procurement Cost (% of spend)
Peer Group World Class
23%
$1.7K$2.2K
HR Cost (per employee)
Peer Group World Class
19%
0.59%0.73%$6.0K
22%
2014 Cost of Finance by Process Category (as a % of revenue)
Finance Cost (% of revenue)
Peer Group World Class
1.12% 46%
-59%-46%
-23%
0.60%$7.7K
0.39%
0.21% 0.23%
0.16%0.11%
0.17%
Transacting Control & Risk Planning & Strategy
Practice or
Outcome
Process
Taxonomy
Vision
Dimension
SDM
Component
Capability /
Enabler 1 - Lagging 2 - Achieving 3 - Exceeding 4 - Leading
Current
State
Assessment
PriorityFuture State
TargetAverage Gap
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree to which a
sourcing strategy
exists
Sourcing strategy is ad hoc or
nonexistent.
Sourcing strategies reflect and are
aligned with overall business
strategy and objectives, including
high level risk requirements.
Historical spend analyses are
regularly and routinely conducted
by market and across markets -
i.e. by specific commodity, service,
location and business.
Commodity management and
sourcing strategies define
appropriate purchasing and
payment processes and tools.
Contract terms, lengths, and
conditions are defined to drive
optimal benefits to the enterprise;
in terms of total life-cycle cost,
service, and quality.
Sourcing strategy is reviewed and
updated annually (or more
frequently) to reflect direct linkage
to the company's strategic growth
plans, market changes and
product innovations, production
plans and business
M&A/ventures.
2 - Achieving 2 - Medium 3 - Exceeding 1.00
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Breadth of supplier
universe
Supplier selection is based on
historical or personal
relationships; suppliers often
selected prior to Procurement’s
involvement in a project.
Projects are initiated to limit the
total number of suppliers and
bundle the spend volume.
Procurement is involved in the
supplier selection process.
Suppliers are often considered on
a regional or compartmentalized
basis.
Supplier universe is considered
by major commodity or service
area rather than in aggregate.
Suppliers are considered for
bundled and/or extended services
that may extend to multiple areas
of competency.
Supply universe is global and not
limited to traditional commodity
suppliers.
1 - Lagging 2 - Medium 2 - Achieving 1.00
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree to which
supplier risk is
measured and
managed within the
sourcing process
Risk not considered as part of
sourcing decisions or supplier
management.
Supply risk is considered as part
of category-specific sourcing
efforts and supplier performance
management processes.
Supply base risk is explicitly
factored into broader business
continuity objectives. Supplier
risk is considered beyond the
specific good or service being
sourced.
Procurement works with other risk
management staff, ensuring
alignment between internal
risk/return preferences, business
objectives, and both general and
specific supply market risks.
3 - Exceeding 3 - High 4 - Leading 0.90
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree of
contingency
planning performed
to assure supply
No supply contingency planning
exists.
Contingency plan exists in case of
supply shortage; alternate
suppliers and alternate locations
identified.
Alternative supply sources are
developed in conjunction with
current suppliers for key
purchases.
Back-up suppliers are required for
critical or strategic categories and
items, including formalized
contingency plans to ensure
seamless supplier transition and
application of penalties and
liabilities with supplier(s) at fault.
3 - Exceeding 2 - Medium 3 - Exceeding -0.55
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree of supplier
qualification in
place
No formal supplier qualification
process.
Simple processes in place to
register suppliers and inspect
supplier qualifications at time of
registration or category review.
Established supplier training
program on enablement
strategies and buyer’s
technologies. Formal program
exists to identify key qualification
metrics with stratification based
on category criticality and supply
alternatives.
Annual review of at risk suppliers
and suppliers of key categories.2 - Achieving 2 - Medium 2 - Achieving 0.37
Practice
Sourcing and
Supply Base
Strategy
Supply
Assurance
Process
Design
Degree of
effectiveness and
efficiency of price
refresh process
Quoting and price refresh process
is undefined and performed
manually and on an ad hoc basis.
Quoting and price refresh process
is defined and audited manually.
Quoting and price refresh
processes are structured to
minimize enterprise financial
impact to all parties.
Quoting and price refresh
processes are automated, nearly
error-proof,, with appropriate
controls in place..
2 - Achieving 2 - Medium 2 - Achieving 0.46
Practice
Sourcing and
Supply Base
Strategy
Purchased
Cost
Reduction
Process
Design
Level of
rationalization of
supply base size
Large number of suppliers due to
short-term, “one-off” relationships.
Organization has identified the
need to rationalize the number of
suppliers in order to create
leverage.
Supply base rationalization is
complete. Few new suppliers are
needed and an added supplier
typically results in a removed
supplier (equilibrium). Strong
relationships developed with
current suppliers focusing on JPI
in critical or large dollar spend
areas.
Structured process is in place that
benchmarks the marketplace and
ensures continual supply base
assessment.
2 - Achieving 2 - Medium 2 - Achieving 0.50
Practice
Sourcing and
Supply Base
Strategy
Purchased
Cost
Reduction
Process
Design
Maturity of use of
supply market
intelligence
Supply market knowledge is ad
hoc and incomplete.
Process, tools, and sources
established to gather and
organize data on most categories.
Supply market intelligence /
knowledge captured to identify
when a supply strategy needs to
be re-visited.
Supply market intelligence /
knowledge captured, modeled,
and utilized for pro-forma
simulations done during strategic
planning, design, sales, etc.
2 - Achieving 2 - Medium 2 - Achieving 0.66
Business
Transformation(Transforms Performance into
World Class)
Service
Delivery
Components
Information
Service
Placement /
Scope
Process
Sourcing /
Location
Strategy
Process
Design
Enabling
Technology
Skills &
Talent
Governance
&Organization
▪ Enterprise Performance Management
▪ Shared Services, Global Business Services & Outsourcing
▪ Merger Integration
▪ Working Capital Management
▪ Oracle EPM (Platinum Partner)
▪ SAP ERP (Gold Partner)
▪ Hyperion
▪ Kronos
▪ Workforce Management
▪ Application Managed Services
▪ Source to Pay Solutions
– Assessment
– Selection
– Implementation
– Change Management
Best Practice
Technology
Enablement(Implements Technology to
enable World Class)
In
-h
ou
se
Co
mp
le
te
O
utso
urc
in
g
Colo
catio
n
CustomerResponsibility
ProviderResponsibility
Sa
aS
A
pp
lic
atio
ns
5© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Objectives
▪ Review trends for priorities of procurement leaders
▪ Review trends for procurement capabilities
▪ Discuss Hackett’s Digital Transformation framework
Priority Trends
7© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
In 2017, revenue growth will continue to outstrip FTE and budget plans in procurement
4.0%
3.2%
1.2%
4.1%
1.4%
0.7%
2015-2016 Actual 2016-2017 Projected
Efficiency
Gap
Productivity
Gap
Revenue growth Number of staff (FTEs) Operating budget
Source: 2017 Key Issues Study, The Hackett Group
The never ending drive to “do more with the same”
8© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Success starts with aligning procurement’s value with enterprise objectives and building out the right sets of capabilities to perform
Procurement
Value: Evolve the Service Value
“What do we aspire to be?” which
becomes “What to execute?”
Procurement
Performance:
Recalibrate the Service Execution
“What is the level of performance
for both efficiency and
effectiveness?”
Procurement
Capability:
Redevelop the Service Capability
“What capabilities do we have today
or need to acquire to change?”
ProcurementWhat does the business need
Procure-to-Pay to deliver and
what does it do?
SUPPLY ASSURANCE
PURCHASE
COST
REDUCTION
TCO
REDUCTION
DEMAND
MANAGE-
MENT
VALUE
MGT
How well is Procure-to-Pay
delivering relative to WC and
Peers? What capabilities are
needed to be built?
Service
Delivery
Components
Information
Service
Placement
Process
Sourcing
Process
Design
Enabling
Technology
Skills &
Talent
Governance
&
Organization
9© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
The top priorities defining procurement’s value proposition in 2017 and beyond
Critical High
39%
23%
26%
13%
11%
5%
19%
21%
16%
12%
48%
61%
55%
64%
58%
62%
45%
42%
45%
48%
Elevate the role of procurement to a trusted advisor
*Improve procurement’s business agility
Reduce and avoid purchase costs
Expand purchasing’s scope / influence
Deepen influence on complex indirect spend categories
Increase internal stakeholder satisfaction
Obtain more value from purchase-to-pay (P2P)
*Support enterprise digital transformation objectives
Reduce supply risk to avoid regulatory non-compliance
Reduce supply risk to ensure supply continuity
Risk
Influence
*Biggest movers 2016 to 2017
10© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Cost savings (priority #1): Most procurement organizations had a savings target for 2016 and most either met or exceeded their target
Did your company have a 2016 savings
target for indirect spend?
Yes, 74%
No, 9%
No but the company had one savings
target that encompasses both Direct and Indirect
spending, 15%
Do not know, 1%
How well did you meet your 2016 savings
target on indirect spend?
Did not meet, 3%
Met, 28%
Exceeded, 55%
Do not know, 7%
Did not have a target, 8%
11© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
But as procurement organizations mature their goals begin to evolve beyond savings to also include broader strategic value objectives
As your procurement organization matures and many savings opportunities are exhausted, do you see savings goals being reduced and
procurement’s scorecard shifting to more strategic areas?
N/A – there’s no shortage of savings opportunities for us
to take advantage of
Savings goals are not going down despite being harder to find. We are expected to continue to unearth the
same of greater levels of purchase cost reduction.
As the organization matures, we see the goals evovling to other
areas like strategic value and non-price related cost reductions (ex. process re-engineering, reduced
cost of quality). 49%
16%
35%
12© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
2.5
4.1
4.7
2.9
3.9 4.14.4
4.6 4.6
8.0
11.4
12.7 12.5
10.7
9.09.4 9.5
10.4
The history of Procurement’s ROI
Source: The Hackett Group, 2017
Digital
ExcellerationExcel in a
Volatile
Recovery
Enable
Success in
Any Economy
Accelerate
Global Growth
Optimize
Global
Performance
Integrate the
Enterprise
for Sustainable
Success
Accelerate
Growth from
Innovation
Creating a
World-Class
Internal
Customer
Experience
Creating
Agility in a
Digital Age
2011 2012 2013 2014 2015 201620102009 2017
World
Class
Non-WC
Peer
ROI = Savings/Procurement Cost
*Non-WC has 35% more investment in operations activities
13© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Digital Service Delivery Model
Intensifying competition
Disruptive innovation
Customer as King
The Insight Imperative
The Digital Imperative
The five forces of change
▪ Make and implement decisions
quickly
▪ Respond rapidly to changes in
business demands and priorities
▪ Flexible process and frameworks
that align with stakeholder
objectives
▪ Forecast and plan continuously
to identify future risks and
opportunities
What’s required for agility?
In 2017 a key objective continues to focus on a more agile procurement organization (priority #2)
Agile enterprises are those that are capable of changing internally at the rate of external change
Hackett Procurement Agility Model rolled out in 2016
14© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Hackett’s Procurement Agility Model
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
Bureaucratic decision-making, lacks
empowerment, fosters inappropriate risk
taking
Delegated decision-making authority,
change-oriented leadership, calculated risk
taking
Talent tied to specific roles, common talent
management strategies for all roles, limited
learning and development, life-long
procurement
Flexible talent placement, talent
management tailored to needs of roles,
continuous learning and development,
rotation
Talent
Leadership
Culture
Low HighAgility enablement index
Excerpt from Hackett Procurement Agility Model
15© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
We continue to see a drive to elevating procurement’s role to that of a “trusted advisor” (#3 priority)
81%
Ranked elevating the
role of procurement
to a trusted advisor
as a critical or major
objective in 2017
Source: Key Issues Study, The Hackett Group, 2015
77%
64%
61%
57%
53%
47%
36%
35%
35%
5%
4%
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
Which capabilities will help the most to achieve trusted advisor status?
16© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Hackett 2016 Procurement Forum
17© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
In 2017 the conversation continues to shift towards improving the “quality” of influence as opposed to simply “quantity” (#4 and #5)
Savings for stage when
procurement is involved (Quality)
4.57%
2.85%1.92%
0.61%
0.60%
0.56%
Design /Specification
(Demand Mgmt.)
SupplierIdentification
Negotiation &Contracting
Cost Reduction Cost Avoidance
3.45%
2.48%
5.18%
Source: The Hackett Group, 2016
85%77%
68%
100%95% 93%
Direct Materials IndirectMaterials
IndirectServices
Procurement Spend
Influence (Quantity)
Peer Group World Class
18© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Category 1 Category 2 Category 3 Category 4 Category 5 Category 6 Category 7 Category 8 Category 9 Category10
Category11
Category12
Quality Quantity of Spend ($M)
Qu
alit
y o
f S
pen
d
Infl
uen
ce
Supply
Assurance
Price
TCO
SRM - Risk
SRM - Innovation
Demand
Management
SRM - Performance
Sp
end
($1
0M)
Opp
ortu
nity
Opp
ortu
nity
Opp
ortu
nity
Opp
ortu
nity
Opportunity
And we see organizations reflecting this shift with respect to their measurement models across various categories
19© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Increasing stakeholder satisfaction (priority #6) benefits significantly from a structured approach to customer relationship management
▪ Identify key stakeholder groups and individuals,
their interactions and general attitude
▪ Develop measurement approaches tailored to
key stakeholder groups
▪ Analyze customer feedback, plan for action by
leadership to own and deliver
▪ Provide feedback to key stakeholder groups on
customer satisfaction and action plans to address
identified improvement needs
Identify
Customers
Improving the
Customer
Experience
Measure
Success
Analyze
Results
Take
Action
20© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Some critical success factors for a customer-centric approach to procurement ranked by importance and capability
High ImportanceLow Importance
21© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
54% of organizations admit procurement brand is not recognizable despite the potential increase in spend influence that it would drive
7%13%
58%
13%7%
No impact Increase by 5-10%
Increase by 11-20%
Increase by 21-30%
Increase bymore than 30%
42%
54%
YesNo
Are procurement brands recognizable
with stakeholders today?How much do you estimate increased brand
awareness would change spend influenced?
22© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Risk rounds out the top ten priorities for Procurement executives
67%
58% 56%51%
33%
41%
35%32%
47%
41%
32% 31%
25% 25% 24%22%
20%
17%
24%20%
8%17%
11%10%
Cyber /information
security
Intensifiedcompetition
Disruptiveinnovation
Access tocritical talent
Regionaldemand
weakness
Regulatory risk IP theft /industrial
espionage
Exchange ratevolatility
Current (2016) Projected increase in 2017-2018
Percentage of companies ranking as “high risk”
Source: 2017 Key Issues Study, The Hackett Group
Capability Trends
24© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Hackett has recently updated its Service Delivery Model which supports the building of capabilities to deliver on value objectives
• Customer experience strategy
• Service catalog design
• Service based end-to-end process
design
• Continuous improvement capability
design
• Information mgmt strategy
• Performance mgmt framework
• Information deliver strategy
• Analytics strategy and design
• Integrated enterprise information architecture
• Org & Gov strategic alignment model
• Enterprise process ownership model
• Service placement design
• Organization design
• Governance model design
• Service partnering/sourcing
strategy
• Service partner selection
• Outsourcing partner relationship
model
• Technology SDM design decisions
• Business technology governance model
• Functional technology strategy
• Functional technology architecture
• Core values/mindset definition
• Talent strategy
• Skills and competency definition
• Continuous learning and development
• Employee Performance mgmt
• Culture development strategy
25© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Let’s look at how executives feel about the importance of current procurement capability gaps in driving their objectives
Improve procurement analytical, modeling and reporting capabilities
Align procurement skills and talent with changing business needs
Measure and manage procurement performance and business value
Modernize procurement application platform(s)
Improve procurement responsiveness to changes in business demands
Increase spend influence though strategic sourcing
Obtain more value from existing categories through category management
Obtain more value from existing suppliers through SRM
Expand procurement work executed in GBS / SSO
Invest in procurement CoE to enhance ability to provide value added services
Invest in supply market intelligence capabilities
Reduce procurement operating cost
Refine continuous improvement programs and techniques
Increase budget for procurement software tools
Invest in procurement technology other than software
78%
73%
72%
70%
70%
64%
62%
56%
45%
43%
42%
33%
33%
33%
22% High/Very High
26© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Four pillars support
procurement’s digital
business strategy
Data and analytics
form the foundation
Let’s talk about what digital transformation means to procurement by reviewing Hackett’s Procurement Digital Transformation framework
The Digital Business Strategy
2Omnichannel,
personalized
stakeholder
experience
3Digitally
enabled
procurement
workforce
4“Smart”
orchestration of
source-to-pay
services
5Ecosystem of
networked
solutions
1 Analytics-driven insights
42%
say that
collecting
new forms of
category
market
intelligence
is the top
use case for
big data in
procurement
1. Setting a foundation of
analytics-driven insights
28© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The five levels of business intelligence
Optimization
Predictive modeling
Forecasting
Simulation
Alerts
Query/drill down
Ad hoc reporting
Standard reporting
Co
mp
etitive
adva
nta
ge
Complexity
AnalysisWhy did it happen?
MonitoringWhat’s happening now?
ForecastWhat might happen?
PredictThe probability of it
happening?
ReportingWhat happened?
29© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Defining ‘Big Data’Big data is high-volume, high-velocity and/or high-variety information assets that demand cost-effective, innovative forms of information processing that enable enhanced insight, decision making, and process automation
VALUEPatterns, trends,
associationsVERACITY
Uncertainty of data
VOLUME
Scale of data
VELOCITY
Analysis of streaming data
VARIETY
Different forms of data
Top three Big Data use case that have the
greatest potential in procurement:
42%
Collect and analyze new
forms of category market
intelligence
39%
Conduct spend analysis
leveraging unstructured
sources (e.g., maverick and
tail spend buying)
34%
Track real-time supplier risk
and performance metrics
Source: Big Data Case Studies in Procurement,
March 8th Webcast, The Hackett Group
Only 2%
of
organizations
have an
explicit
customer
management
organization,
formal service
delivery
model, and set
of
engagement
processes
2. Building an
omnichannel,
personalized
stakeholder
experience
31© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group – Key Issues Study 2017
Creating an omnichannel and personalized stakeholder experience for engaging procurement services
▪ Omni-channel access to procurement process
allowing ability to buy/pay for goods/services from
all locations (corporate, satellite offices/locations,
home, on-the-go/mobile)
▪ Real-time information and status on all
procurement requests/transactions
▪ Intelligent purchasing process that know who you
are, where you sit, and what role you play in the
organization
Chat support
Self-service
Newsletter
Email and messaging
Intranet portals
Phone support
Voice
Mobile
Social
Web
3. Creating a digitally
enabled workforce
31%
of
organizations
consider
access to
critical talent
an area of
high risk and
they expect
that risk to
grow 20% in
the next year.
34© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
There are a broad array of procurement’s skills and talent concerns keeping CPOs up at night…where to focus?
Most serious concerns Serious concerns Moderate concerns Least serious concerns
Ability to attract
and retain
Developing
leadership capability
within procurementAlignment of procurement
staff skills with changing
requirements
Procurement managers’
people mgmt. &
development capabilities
Training and developing the skills
of procurement staff
Ability to offer learning &
career progression opps.
Communication vehicles
and styles appropriate
for/preferred by younger
workers
Impact of increasing use of
and dependence on
technology by procurement
Productively integrating
new generation of workers
into the company
Impact of growing use of outsourcing on
staff development and career paths
Maintain adequate skill levels
as older workers retire
Dealing with varying talent
mgmt. requirements of staff
in different regions
Impact of increasing
globalization/ offshoring
of procurement
resources
Source: Skills and Talent Outlook, The Hackett Group, 2014
Most pressing…. Leadership
Attract and retain talent
Learning and career
progression opportunities
Staff skills
development
People mgmt
skills
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Creating a digitally enabled workforce relies on many of the “transferable” skills that are needed as we evolve procurement’s value proposition
Business Acumen
Understand key business drivers
Knowledge of factors, priorities and business demands
Identify problems and prioritize alternatives
Relationship Management
Advanced interpersonal skills
Positively influence decisions
Open and approachable
Supply Risk Management Expertise
Assess and prioritize business and category-specific risks
Measure, prioritize, and address risk
Develop risk mitigation plans for high-priority drivers
Data Analysis and Modeling
Process data and extract relevant information
Knowledge of analytical tools and methodologies
Translates analyses into actionable plans
Strategic Mindset
Develop strategic frameworks and visions
Anticipates market changes
Address challenges and outline future direction
Savings and Financial Analysis
Translate savings and value improvements to P&L impact
Develop tools to track, measure and forecast savings
Analyze supplier financial statements for detailed insights
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The question of our time: Will Procurement exist in 25 years?
Yes – but it will look very different from today
▪ Transactional tasks may be entirely automated
▪ Sourcing activities may be executed electronically with little need for human intervention
▪ Data analysis will be embedded into our information systems
However…..
There will always be a need for interpersonal relationships, values based
decision making, creativity, and judgement to harness the value of the supply
network.
As humans have in the past, we will adapt our personal value and our
surroundings for success
23%
of P2P
organizations
are piloting or
have partially
rolled out
robotic
process
automation
4. Orchestrating a
“smart” portfolio of
digital services
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While P2P process cost reduction is attractive, the real payback comes from enabling broader source-to-settle and business objectives
Value Drivers
Process Cost Reduction
• Transactional purchasing
process cost reductions
• Accounts payable process
cost reductions
Service Level Excellence
• Maverick spending reduction
• Supplier non-compliance to contract
• Demand management (consumption reduction)
• Demand management (spend influence)
• Sourcing savings via better spend visibility from
P2P
• Cost of capital from DPO improvement
• Early payment discounts
• Rebates from purchasing cards
• Reduced cost of P2P errors for direct materials
• Reduced supplier late payments penalties
Strategic Business
Enablement
• Improved/protected
customer service, revenue,
profit
• Brand protection:
compliance risk;
supply/supplier risk
• Opportunity cost of
management time
10X process cost reduction
Foundational to delivering on benefits is end-to-end alignment across source-to-settle
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40% 25% 10% 10% 15%
Global category strategy BU / region / large country Local / small country Tactical sourcing Non-procurement managedspend
This includes spend management orchestration through flexible spend management capabilities
Global category strategy
Tactical sourcingBU / region / large country sourcing
strategy
Local / country sourcing strategy
Non-procurement managed spend
?Source: Global Category Management Study, The Hackett Group, 2016
Percentage of company spend managed using each approach
Hackett’s perspective: Global by design, regional as
appropriate, local when required
Tail Spend Mgmt
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Defining tail spend: A common definition focuses on the suppliers that make up the bottom 20% of spend
23%
10%6%
24%
7%3%
Lower Quartile Median Upper Quartile
Percent of Suppliers Representing 80%
Invoice volume Invoice spend
“Shorter
Tail”“Longer
Tail”
Hackett P2P Study, 2015
To
tal s
pe
nd p
er s
up
plie
r
Suppliers1 n
80% of spend with
20% of suppliers
Tail spend: 20% of
spend with 80% ofsuppliers
Getting a handle on tail spend starts with an understanding of the supply base profile
Caveat: We normally
also look this by
transaction volume
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What are the top strategic activities in a COE or similar team?
39%
41%
40%
14%
14%
17%
Execute strategic sourcing & sourcing event management
Contract & commercial excellence
Analytics
Currently In Place Expanding Use
19%
22%
26%
31%
12%
10%
10%
10%
Cognitive procurement, AI, RPA
Supply innovation
Procurement brand, marketing and communications
Supply market intelligence
Planning/Evaluating Piloting
Top three activities currently in place or expanding use
Top four activities currently being evaluated or piloted
Source: 2017 Key Issues Study, The Hackett Group
5. Unlocking value
through an ecosystem
of networked
procurement solutions
32%
of
organization
s plan to
consolidate
to a single
source to
pay platform,
but only 8%
have
achieved that
goal today
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32% plan to consolidate to a single source to pay platform… but only 8% have achieved that goal today
8%
14%
15%
31%
32%
We use our ERP provider for all source-to-pay processes with only
limited exceptions
We use our ERP and a single source-to-pay solution for the majority of
processes
Our goal is to consolidate all source-to-pay applications on a single
platform provider but we still have disparate tools in place today
We have a “best of breed” strategy which allows us to pick and choose
individual solutions based on how well they meet our requirements
We use a single source-to-pay software provider with limited
exceptions
Which statement would you say best describes your source-to-pay technology strategy?
Source: 2017 Key Issues Study, The Hackett Group
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Many organizations are just getting started with Robotic Process Automation although it is ranked as transformational over the next decade
5%
18%
23%
27%
39%
43%
45%
57%
59%
75%
Enterprise social networking
Prompt payment regulation
Millennial workforce
Global economy
Mobility
Cloud computing
Robotic process automation
Process ownership and link to procurement
Predictive analytics and forecasting tools
Digitalization of B2B connections and transactions
77%
16%
7%
RPA Adoption in P2P
None
Piloting
Partially Rolled Out
Source: 2016 P2P Key Issues Study Results
Trends that will have the greatest transformation impact on P2P in the
next 10 years
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The ecosystem of available solutions are all at different levels of maturity
Source: 2016 P2P Key Issues Study Results
We feel procurement
will be focusing more
attention in next few
years
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Summary
▪ While cost savings are core to procurement’s value proposition it is evolving to include other
business value objective
▪ Procurement’s focus is shifting to more of an influencer in order to deliver overall business value
and becoming a trusted advisor is core to success
▪ Stakeholder relationship management is a critical capability that should be formally developed
▪ Procurement should be viewed as a single end-to-end global process with strong alignment and
collaboration
▪ Digital transformation objectives of the enterprise are being cascaded down to supporting
function like procurement and can drive step-change benefits
▪ Digital transformation is not simply about technology, talent transformation for example is a
critical component of the journey
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Contact information
KURT ALBERTSONPRINCIPAL, PROCUREMENT ADVISORY
1000 Abernathy Rd
Suite 1400
Atlanta, GA 30338
Tel.: 770.225.7570