ardent partners - the state of strategic sourcing 2015

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The State of Strategic Sourcing in 2015:

Connecting the Dots

Andrew Bartolini

Chief Research Officer

Ardent Partners

November 10, 2014

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AGENDA

Introduction

The State of Strategic Sourcing in 2015

Best-in-Class Sourcing

Strategies for Success

Copyright © 2014 - Ardent Partners Ltd.

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Ardent Partners is a research and advisory firm

focused on defining and advancing the supply

management strategies, processes, and

technologies that drive business value and

accelerate organizational transformation within the

enterprise.

ARDENT PARTNERS


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Chief Research Officer, Ardent Partners

Publisher, CPO Rising – www.cporising.com

Summary Recognized expert in sourcing, procurement, AP, and supply management Named a “Pro to Know” by Supply and Demand Chain Executive three times Former VP of Global Supply Mgmt. research at Aberdeen Group; Benchmarked thousands of

enterprises across all facets of their supply management operations

Experience

Leadership roles in sales, marketing, and services at Ariba and Commerce One. Rich experience in strategic sourcing, business process transformation, and software implementation. Background also includes consulting and investment banking.

Education MBA – Indiana University BA – College of the Holy Cross

ANDREW BARTOLINI


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CPO Rising: The site for

CPOs and other supply

management executives

www.cporising.com

ARDENT’S NETWORK OF SITES


Payables Place: Global

source for ePayables news,

research, & analysis

www.payablesplace.com

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Research Report

Goal (I): Capture the strategies, performance, and intentions of Chief

Procurement Officers in 2014 (and beyond)

Goal (II): Present a clear and unfiltered “State of Procurement” annual report

Goal (III): Identify the strategies and levers that define Best-in-Class

performance

Approach

Utilize a web-based survey to capture responses from 249 CPOs and other

procurement executives

Interview leading CPOs and procurement executives to add context and

understand critical and emerging trends

Leverage experience and orientation of a leading analyst team

RESEARCH PROCESS


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Today’s Presentation

Report Demographics

249 Respondents

o 77% Director-level or above

o 82% work in procurement

o 68% from large enterprises

o 64% NA; 27% EMEA

o Interviewed 12CPOs

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THE STATE OF STRATEGIC SOURCING IN 2015

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WHY STRATEGIC SOURCING MATTERS?


22%

4%

2006 2011

Motorola Market Share: Mobile Phones

Key Takeaways:

Joy’s Law: “Innovation will happen,

and it will happen elsewhere.”

Innovation extends to all supply

markets

A ‘static “supply base is now a red

flag

No company can risk going it alone

Increasing reliance on suppliers

Suppliers are vendors assets

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THE CPO ROLE IN 2014

Purchasing

Sourcing

Cash Risk

Innovation

Sales M&A New

Products

New Markets

Joint

Ventures

Travel

Outsourcing

Contingent

Workers

Trusted Advisor / Influencer / Special Projects

Accounts

Payable


Convergence & Expansion

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CPO’S AGENDA: THEN AND NOW

CPO View 2009

"There has been a

change in context,

speed, and risk. It's

time for procurement

to be the hero.“

Christina DeLuca

CPO - BP

CPO View 2014

"The minute you get

complacent, people

will begin to offer

other opinions. You

must stay sharp.“

Chris Shanahan

CPO - BD


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TOP PRESSURES FACING SOURCING TEAMS IN 2014


18%

23%

39%

52%

Increase % of spend under management

Improve supplier performance

Increase overall effectiveness and influence

Find more savings

© Ardent Partners - 2014

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TOP STRATEGIES FOR SOURCING TEAMS IN 2014


41%

46%

53%

Improve use of technology (invest in new systems / improve current systems)

Improve collaboration with suppliers

Improve collaboration with line-of-business leaders


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“We’ve been working with our suppliers….. How do

[they] help us get better at our business? How do we

run our plants better? How do we manage our

inventory better? How do we use less chemicals

because we aren’t doing the application the right

way? They’re the experts in those fields, so we look

for them to help us.”

~ Alicia Ralston, Director, Global Sourcing and

Procurement, Archer Daniels Midland

Supplier Collaboration Case Study

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TOP CPO PRIORITIES (NEXT THREE YEARS)


©Ardent Partners - 2014

Innovation

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HURDLES TO SUCCESS


27%

30%

31%

32%

52%

Challenges in aligning processes and systems

Budget constraints

Lack of technology (i.e. technology gaps)

Lack of engagement with the business

Staff/Talent constraints


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STRATEGIC SOURCING DEFINED (TRADITIONAL)

The process of identifying, evaluating,

negotiating, and implementing the

optimal mix of goods and services

that best support the objectives of the

enterprise.


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A 2015 STRATEGIC SOURCING DEFINITION

Leveraging business process

automation to quickly identify,

evaluate, negotiate, implement, and

adjust the optimal mix of goods and

services that best support the

evolving objectives of the

enterprise.


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Strategic Sourcing Sub-Processes

Spend Analysis Sourcing

Contract Managemen

t

Supplier Performance Management

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Spend Analysis

39.7%

31.6%

Automated Spend Analysis

Currently Use Plan to Use


Contract Managemen

t


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eSourcing


Contract Managemen

t


46.3%

30.1%

eSourcing


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Contract Management


Contract Managemen

t


25.6%

47.4%

Automated Contract Management


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BEST-IN-CLASS SOURCING

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STRATEGIC SOURCING PERFORMANCE (BEST-IN-CLASS V. ALL OTHERS)

Sourcing Performance Best-in-

Class

All

Others

Spend Under Management 77.0% 57.1%

Savings 2013 (Actual) 9.2% 6.7%

Savings 2014 (Planned) 9.6% 6.4%

% Spend Sourced 84.4% 39.1%

Percentage of on-contract spend 74.2% 54.9%

Percentage of transactions compliant with

contracts 76.6% 66.6%

Percentage of contracts stored in a central,

searchable repository 69.7% 63.2%



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CHARACTERISTICS OF BEST-IN-CLASS

STRATEGIC SOURCING

Greater adoption of integrated strategic sourcing

suites

Process standardization

• Sourcing

• SPM

• Contracts

Superior Collaboration


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BEST-IN-CLASS TECHNOLOGY ADOPTION


55.9% 57.6% 53.1%

50.0%

42.2% 46.8%

29.5% 27.9%

Automated Spend Analysis

eSourcing (and/or Reverse Auctions)

Automated Contract Management


Best-in-Class All Others © Ardent Partners - 2014

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WHY IT’S IMPORTANT TO CONNECT THE DOTS

Spend

Analysis Sourcing

Contract

Mgmt. Procurement Accounts

Payables


• Enterprises that leverage spend analysis into their sourcing

projects save, on average, between than 24% - 41% more per

project

• Eliminating any sourcing/contract process gap can reduce

savings leakage by up to 38%

• Best-in-Class enterprises report compliance rates that are

20%+ superior

• Linking and automating the P2P process can reduce invoice

cost by 40% to 70%

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STRATEGIES FOR SUCCESS

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THE NEW SOURCING DYNAMIC

Speed and complexity continue to accelerate

Compliance, control, efficiency are table stakes

This is the “Age of Innovation and Collaboration“

Winners will be the agile organizations that can tap into

expertise and find value wherever it exists in the

market

Selecting the right partners and platforms has never

been more important

Copyright © 2014- Ardent Partners Ltd.

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STRATEGIES FOR SUCCESS

Connect your strategic sourcing dots (“processes and

systems”)

eSourcing = Strategic sourcing

Utilize spend analysis as the basis for critical sourcing

decisions

Hire the right people and invest in them

View suppliers as a source of value and advantage

Expand the definition of strategic sourcing and manage

all sourcing efforts under one umbrella


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For more information please visit: www.ardentpartners.com

Q&A

Andrew Bartolini

Managing Partner &

Chief Research Officer

617.752.1620

[email protected]

@andrewbartolini

Contact Info: Ardent’s Media Sites:

Copyright© 2014 - Ardent Partners Ltd.

http://www.ardentpartners.com/

mailto:[email protected]

http://www.payablesplace.com/

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