2022 future of procurement · 6 pharma industry focus procurement v 1.0 drugs operational mandate v...
TRANSCRIPT
Lausanne February 2017
Beyond Procurement - 2022 Future of Procurement
Gi les Breaul t Sammy Rashed
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Personal Background More than two decades transforming and leading global organizat ions
5 6 12
1990 1995
7 8 3 8
Centralization & Re-engineering
Global Category Management
Demand Management
Offshoring & Outsourcing
Integrated Productivity &
Business Services
2000 2005 2010 2013 Beyond
Procurement
Next-level Productivity
Get the buy right
GILES BREAULT
SAMMY RASHED
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Research & Publications
Through our global Academic network with leading institutions, seek to understand, evaluate, publish, and present findings related to top options by industry & geography on how Procurement can help businesses drive greater company-wide productivity
Advisory
§ Work with few companies at Sr. Exec. Level to develop & deploy next-level productivity strategy
§ Transformation blueprint to grow organizational readiness and Procurement capabilities
§ Intense, pragmatic and output-f o c u s e d , d r a w i n g f r o m experience, practice & research
§ Centered around personal relationships, and guidance / coaching
Industry Think Tanks
§ Gathering small groups of Procurement executives (12-15) in a single industrial sector
§ Balanced group of peers, thought leaders, practitioners, academicians and advisors
§ Three 1-day sessions to Assess, Analyze, and Solve a key question facing industry
§ Aim to share innovative content, develop concrete solutions, and build a close community
Learning Conferences
§ Standard or tailored-content p r o g r a m s c o v e r i n g b o t h strategy and implementation
§ Open enrolment (100–150 pers.) or in-house (~25 pers.) learning conferences
§ Topics include: Better-Selling to Pharma, Business Productivity, Global Business Services and LEAN for Procurement
§ Executive Coaching for high-caliber talent
Our unique offering Strategy & guidance for break-through results in cost optimization
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
Presentation Overview
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
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Pharma Industry Focus Procurement v 1.0 Drugs Opera t iona l mandate
v 2.0 Por t fo l io d ivers i f ica t ion Role expands to inc lude con t inuous sav ings requ i rement + leverag ing company-w ide spend
v 3.0 Measures outcomes + ent rants f rom other industr ies
Requ i res the search fo r co -c rea ted va lue tha t d i rec t l y impac ts the pa t ien t exper ience
§ R e - e s t a b l i s h r e g i o n a l / l o c a l P r o c u r e m e n t presence
§ More marke t fac ing – tap in to suppl ier innovat ion s t reams
§ Par t i cu la r focus on IT as techno logy moves f rom in f ras t ruc tu re to de l i ve ry compan ion
§ Swi tch focus f rom cos t -op t im iza t ion to innovat ion
§ More cons idera t ion fo r supply base sources of cr ises
§ Reach Comprehensive Risk Mgmt th rough the fu l l va lue cha in
§ Involve up-f ront i n dec is ion -mak ing
§ Maste r and manage outsourced vo lume
§ Leverage to dr ive innovat ion
§ Broader product iv i ty i n i t i a t i ves
§ Move f rom cos t e f f i c iency to less tangib le outcomes
§ Crea te new sources of va lue
The Role of Procurement is Changing in Important Ways
Manage reputat ion r isk
More outsourcing
Greater category expertise
New measurements
More customer focused
*Source:
2014
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§ Broad theme: Move f rom Category Management to Value co-creat ion
§ Not on ly one so lu t ion… need to pr ior i t ize opt ions a long two d imensions: performance and feasibi l i ty
Key changes in responsibility and positioning Procurement needs can no longer cont inue or grow
Historical process § Spend penetration § Process compliance § Tactical negotiation with suppliers § Short-term savings § Reactive stand-alone role § Concentrated on back-end
Current direction § Spend optimization § Process efficiency § Driving demand mgmt with users § Multi-year productivity plan § X-functional project leadership § Early decision involvement
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
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Evolution of Procurement and its drivers Procurement 's past success can l imi t future contr ibut ion
Goals
Key levers
Traditional purchasing Strategic procurement
Spend Optimization
What's Next?
▪ Pay right price & ensure compliance
▪ Optimize costs/value generation across businesses
▪ Generate savings
▪ Generate higher returns per dollar spend
▪ Centralized process ▪ Local / tactical buying
▪ Process
I
II
III IV
• SRM as Value Creation
• Innovation Sourcing
• Total Cost-Base Management
• Global Business Services
• Comprehensive Risk management
• Take over operational activities
• Next Level ”Collaborative Buying”
• Internal Consultant/ Project Managers
• Embed function into business
• Top Line Contributor 10
▪ Demand Mgmt ▪ Process Mgmt
▪ Internal
▪ Category Mgmt ▪ Aggregate volume
▪ External
Process & Systems
Skills
Acceptance
1 2
3
4
5
6
7
8
9
Top options identified
Path to master the productivity /cost challenge
© 2012 The Beyond Group AG
IN
NO
VATI
ON
P
RO
DU
CTI
VIT
Y G
RO
WTH
Focus
Hurdle
2013
2014
2015
10
0
8
Take over opera t ions 15
Comp. R isk Mgmt
G loba l Bus . Serv ices 58
To ta l Cos t -Base Mgmt 57
Sourc ing innova t ion 87
Top-L ine Con t r ibu to r 50
Embed Func t ion in to bus 19
Ex tended SRM 13
In t . consu l tan t /PM 44
Nex t -Leve l Co l lab . Buy ing
0
0
18
38
48
88
40
27
58
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1 Based on implementation priority and return performance 2 Total Cost Base Management
Evaluating growth options Survey resul ts – Performance scale
The newcomer
Extended SRM shows the highest increase in importance. An average return of ~5% ist expected from this option
The veteran
Continuing to deliver high returns of ~5%, participants still highly value GBS, but do not expect further implementation efforts
The champions
Both options Sourcing Innovation and TCBM2 rank amongst the highest in terms of implementation priority as well as actual / expected return (ranging from 4 – 5 %); today as well as in the future1
Today Future
Four main productivity options to pursue Survey outcome: Importance rating Survey
▪ >100 participants from various industries and functions (procurement, finance, and other business stakeholders)
▪ Across Europe, North America, and Asia
Options with highest return expectation in Pharma Industry
11
2
3
4
2 3 4
Top-Line contributor
Collaborative Buying
Total Cost-Based Mgmt
Embed function
Ext. SRM
Internal Consulting
Sourcing Innovation
Take over operations
Risk Management
GBS
1
2
3
4
5
6
7
8
9
10
Org. readiness
Capabil i ty proficiency
2
4
5
1
6
7
8
9
10 3
Evaluating growth options Changes in 2013 Pharma resul ts vs . 2012 Global Survey resu l ts – Feasib i l i ty
7 8
4 4
6 1
9
5
2 3
X X
10
Deemed more feasible: • Sourcing Innovation • Total Cost-Base Mgmt • SRM as value-creation
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1
2
3
4
5
1 2 3 4 5 1 2 3 4 5Capabil i ty proficiency
2 x 2 by function
Procurement COO/CEO
Finance Business stakeholder
Undecided?
We need more
Needs convincing
Stay focused!
Top-Line contributor
Embed function
Ext. SRM
Internal Consulting
Collaborative Buying
Take over operations
Risk Management
GBS
Total Cost-Based Mgmt
Sourcing Innovation
1
2
3
4
5Org. readiness
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
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Session 1 - May
PiP Think Tank overview Three 1-day sessions, each with dist inct purpose and outcome
Focus: ASSESS • Understand the role and
impact of Innovation Sourcing through case-studies (int & ext to Pharma)
• Build on Trading Relationship Mgmt methodology to generate innovation output
• Identify Procurement challenges to better broker vendor innovation
Session 2 - Jul Focus: EXPLORE
• Explore existing Innovation models and identify best for Procurement in Pharma
• Get practical examples of successful application from Vendor and Customer perspective
• Map internal mechanism within Buying organizations for driving Innovation Sourcing
Session 3 - Oct
Focus: SOLVE • Develop effective
approach to drive Innovation Sourcing,
• Identify, build & obtain unique capabilities Procurement will require to successfully lead
• Elaborate required governance model to ensure promising ideas are visible, supported, and implemented
Host: Host: Host:
2013
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2013 “Productivity in Pharma” think tank Aiming to move Procurement f rom “Contro l ler to Orchestrator”
Participants
Academia & Partners
¡ Smal l group of inv i ted senior business leaders f rom Procurement ¡ Part ic ipants f rom large / medium / smal l s ize Pharma companies ¡ Ser ies of three 1-day workshops focusing on lead quest ion:
“What are the key challenges & opportunities in the healthcare sector and pharmaceutical industry, and how to address by better
leveraging the unique capabilit ies within our supply base”
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“We just can’t seem to escape this without recognising that what we want to achieve is a route to lower costs, not only a route to lower prices” “Of course we need to measure the performance of our most important suppliers, but this “crowds out” a much more important dialogue” “Our processes do not encourage suppliers to evaluate us as customers of choice who actively are seeking innovation and co-created value” “Our own buyers often have neither the time nor the knowledge to manage a deeper discussion with our most important suppliers”
Why are value based relationships so difficult for large organizations?
Focus on Cost Savings - Metrics management –
Control vs. Collaboration – No Priority / No time –
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1. SRM is broken § Measurement / KPIs are limited (focus on Perf. Mgmt, Risk Mgmt, and Cost
savings) § Systems aren’t adequate to move further § Intelligence needed to access higher-level needs, and visibility into Supply-Base
capability § Limited acceptance from business to move beyond savings & compliance § Insufficient capabilities within Procurement to step-up
Ø SRM needs to help manage complexity and drive it out of the value chain Ø SRM is a cross-functional commercial activity, balancing risk, innovation, and
market opportunities
2. Healthcare trends wil l have signif icant impact on Pharma industry
3. This threat can be an opportunity for Procurement to differently leverage it ’s supply base § Procurement needs to move from "controller” to “orchestrator” by building coalition
across value-chain § SRM has potential to influence EVA, not only reduce COGS, through value co-
creation across entire supply chain § Can’t directly address identified issues
2013 Summary of Conclusions
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Trading Relationship Management (TRM) Canvas© Opportuni ty to t r igger the spark of innovat ion and create tangible value vis ib le to customers
Supplier Buyer Customer
2 3
4 5
1
6
Understand Translate Seek & Share
Communicate Select & Implement Assess
Value generation © 2013 The Beyond Group AG
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
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“Productivity in Pharma” think tank 2014 ser ies: Helping Procurement dr ive Innovat ion Sourcing
Members
Partners
¡ Smal l g roup o f i nv i ted s r. bus iness leaders f rom Procurement ¡ Par t i c ipan ts f rom la rge /med ium/sma l l s i ze Pharma compan ies ¡ Ser ies o f th ree 1 -day workshops focus ing on lead ques t ion :
ENJOIN PARTNERS
Ser
ies
Day
C
ontri
buto
rs
Aca
dem
ia
“How can Procurement strike the spark of innovation from suppliers, nurture it, and help carry it from idea to realization”
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Why Innovation Sourcing isn’t working?
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Anecdotal survey among CPO’s reveal 5 basic t ruths about Innovat ion Sourcing
© 2013 The Beyond Group AG
The ability to interact with suppliers allowing for the collaborative discovery, development and use of novel ideas in processes or products that create an
enhanced value proposition for both parties
Sourcing Innovation – What is it?
- yet there are common truths we can extract. Some conclusions: There is a great deal of literature/experience available but no absolute way of defining an approach
• Buyer/Supplier strategies differ
• Know what type of innovation to look for: S-C-T-D
• Make sure you are solving a real need (PULL not PUSH)
• Share your strategy & expectations with right suppliers
• Focused Search • Use of appropriate
tools • Portals • Fairs • Crowd Sourcing
• Collaborative • Methodology e.g.
W-F-G-M model • Do not over
regulate
1- Random is Not Acceptable
3- Champion the Process
• Systemic Facilitation • Have mandate! • Communicate with
internal stakeholders • Communicate with
suppliers – process & expectations
• Visible Program • Senior Level
Involvement
4- Manage Expectations
• Protection of Intellectual Property
• Profit Sharing approach
• Close the loop • Supplier • Customers • Internal
• Clear visible & objective process
2- Strategic Landscape 5- Talent
• Recognize new talent needs
• Develop new role profiles
• Recruit from leading organizations
• Talent and progression for highest qualified only
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
24
“Productivity in Pharma” think tank 2015 ser ies: Transforming Procurement into the Product iv i ty Engine
Members
Partners
¡ Smal l g roup o f i nv i ted s r. bus iness leaders f rom Procurement ¡ Par t i c ipan ts f rom la rge /med ium/sma l l s i ze Pharma compan ies ¡ Ser ies o f th ree 1 -day workshops focus ing on lead ques t ion :
“How can we equip Procurement to become the recognized Productivity engine of the organization”
Ser
ies
Day
C
ontri
buto
rs
Aca
dem
ia
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Productivity in Pharma Target output for 2015 ser ies
1. MEASUREMENT : How to frame Procurement’s value proposit ion, f i t in business planning, and demonstrate what we do has an impact?
2. SKILLS: What skills are needed that enable better partnering internally and externally, managing projects as a Trusted advisor?
3. STRUCTURE which includes Procurement “basics” as well as “beyond”, but which?
4. MANDATE : Define a clear mandate around expectations, our responsibil i ty, and logical l imits
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Four ways of reducing cost in organizations
External
Price
Internal
Structure
Third Party Spend
Activities & Footprint
Organization Fixed Costs
Buy Less
Price Traditional Category Management and negotiations, Supplier Consolidation & Selection etc.
Demand Management Business to identify “essen-tials” and reduce spend at the source
Structure Further consolidate and streamline back office functions (Transformation of Finance, HR, Communications, Legal, etc.)
Fixed Costs Structured global effort to reduce commercial and administrative offices, Manufacturing and Development site footprint
Demand
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
28
Supplier Organization Customer
Understand Translate Seek & Share
Communicate Select & Implement Assess
Where we began the 2016 series New Posi t ions and Ski l ls
Cross-functional Integrator
Business Partner
Al l iance Manager
• Big Picture • Risk Mgmt & Scenarios • Engagement and
Communication • Ambassador Skills &
Conflict management
• Project Management skills • Influencing skills • Business case development • Change Management • Credibility through
performance
• Alignment and Structure • Intrapreneurial skills • Game changer capability • Credible experience – earn
your right to be at the table • Consultation skills
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§ Corporat ions wi l l become more dependent on their external network § The role of procurement wi l l s ignif icant ly change into a much smaller
highly strategic organization § I t is focused on creating entrepreneurial value with suppliers and
increasingly with customers § Routine tasks wi l l most ly be transferred to Global Business Services
organizat ion (GBS)
Ø As a consequence business partnering wi l l become a key to success for procurement
Ø The ski l ls of procurement professionals wi l l have to change Ø The Business Partner wi l l master a broad span of competencies, be
passionately engaged beyond procurement… Ø …and require the necessary environment to succeed
Burning Platform for Business Partnership Excerpts f rom Givaudan CPO presentat ion on Day 1
Background
Impact
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¡ Combine customer / category ro les where natura l f i t
¡ Raise expectat ions, del iver and secure ro le
¡ Al ign wi th business st ructure ¡ No paral le l s t rategy, s ingle
a l igned approach
Becoming a recognized Business Partner Don’t manage processes to meet funct ional object ives, manage relat ionships to meet business strategy MANDATE & STRUCTURE KNOWLEDGE
SKILLS LANGUAGE & COMMUNICATION
¡ End-to-end knowledge (e.g. regulatory to commercia l )
¡ Credib le business exper t ise ¡ Business Strategy & Planning Cycle
¡ External Market t rends
¡ Engage wel l and manage re lat ionships
¡ Open, Agi le ¡ Analyt ics & ins ights ¡ Vis ionary, In t rapreneur,
and game changer
¡ Keep i t s imple ¡ Listen more than ta lk
¡ Learn and use business language ¡ Demonstrate real va lue and focus on
contr ibut ion, not per formance
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Becoming a “Connector” Growing need for Procurement to be a stronger network manager
Why so important?
Procurement is uniquely positioned within the organization. Some clear opportunities:
§ Increasingly tasked with “bringing the outside in” § Communications between and even within
departments not always solid § Need for standardization and harmonization across
all functions § No natural owner for cross-functional Project
Management
Connectors § People with special gift for bringing the world
together. § Know lots and different kinds of people § They are curious, self-confident, sociable
and have high energy
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Procurement as Alliance Manager How to to become accepted and recognized
1. OBJECTIVES & INCENTIVES
2. MINDSET
Go beyond financial objectives 1. Mutual object ives for both sides (e.g. savings
and prof i tabi l i ty), c loser to corporate goals 2. Progress milestones against 3-5 year journey
(evaluate 1-5 level, incl . relat ionship) 3. Impact on P&L (overal l , not incremental)
Ø ACTION : ident i fy a pain-point (not too large) and f ix i t through the al l iance (which can' t be solved by ourselves) as f i rst proof of concept (answer f rom mgmt must be: where else can this be appl ied)
Not just from Procurement but also the entire organization 1. Be seen as having good commercial awareness
( incl . what real dr ivers are) 2. Connector mental i ty, stop managing the your
personal interest and manage to the mutual outcome
3. Leadership, courage to think di fference
Ø ACTION: select a p i lo t to demonstrate, and put a l l resources at i t to be successfu l
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3. SKILLS
4. PROCESS & SYSTEMS
Alliance Management is team effort, and Procurement can take a leadership role 1. Communicat ion 2. Emotional Intel l igence (bui lds on connector
mental i ty) 3. Project Management 4. + Strategic Planning
Ø ACTION: assess your peers
1. Quali ty Management Something l ike SRM abi l i ty to evaluate qual i ty AM
2. Lifecycle Management 3. System that acts as repository to manage
al l iances
Ø ACTION: star t conversat ion so process at buying and sel l ing is a l igned
Procurement as Alliance Manager How to to become accepted and recognized
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The CPO of the future: a complete business person ”You must lead with your head, heart hands… and guts” J F B a r i l , C o n n e c t i n g P a r t n e r s
Heart § Wants value for all partners § Perceived as principled and
trustworthy
Hands § Credible Experience § Finance and Legal
Knowledge § Industry 4.0 Cognizant
Guts! § Strong Advocate § Unafraid of manageable risks § Manages Conflicts § Don’t ask for permission
Head § Understands the totality of the
business § CEO of own business
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Procurement at a Crossroad
The Beyond Procurement Global Study
2013 The Productivity Think Tank is Introduced
2014 Think Tank - Innovation Sourcing
2015 Think Tank - Procurement as Productivity Engine
2016 Think Tank - The New Skills/Capabilities of Procurement
Closing Thoughts / Q&A / Staying in Touch
36
Staying engaged with the Beyond Group A few ways of contr ibut ing to and benef i t ing f rom our work
§ Monthly series building on topic of Entrepreneurship
§ Applying current research and work to the function, helping Procurement become “the Corporate Intrapreneur”
§ https://www.procurementleaders.com/blog/my-blog--guest-blog/beyond-procurement-the-corporate-intrapreneur--595433
Blog series
§ Three 1-day sessions starting November 2016 New Jersey, USA
§ Topic “Procurement as the Orchestrator of Value-Creation and Sourcing Innovation”
§ Three 1 ½ -day sessions starting May 2017 in Basel, CH
§ Theme: “Growing the Digital and Agility capabilities to drive efficiency in Procurement”
Will include Technology showdown