procurement models for the future
DESCRIPTION
Presentation made at the SMART supply chain conference, Rajat DhawanTRANSCRIPT
Did You Know!
That now is the time to take
the lead – only a handful of
pioneers have started
investing in 4 areas of
procurement excellence!
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Procurement and Supply Chain Strategy
Procurement Models for the Future
Raj DhawanConsultant, SCMAccenture
David WaltersProfessor, SCMUniversity of Sydney
Jyoti Bhattacharjya & Yujie CaiUniversity of Sydney
What to Expect Today• Learn about future trends in procurement
– Learn what high performers in procurement do– Self-assess the maturity level of your procurement
organisation– Discuss and reflect what needs to be done to
transform your procurement organisation– Learn about immediate next steps
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Agenda
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Contextsetting
Self Assessment Future Trends Discussion &Analysis
• Technology• Process• Organisation
• Current state • Target state
• Group discussion• Live analysis• Results and debrief
Copyright © 2011 Accenture All Rights Reserved.
• What lies ahead• Technology• Process• Organisation
Discussion Framework
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Process
Technology
Organisation
Advanced Analytics
Risk Management
Closed-loop Spend Management
Capability Gaps
1
2
3
4
Basic
Average
Above Average
AdvancedNext Level of Excellence
Procurement Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Current Maturity Levels Future
leaders
laggards
Procurement
Process
Technology
Organisation
Agenda
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Maturity• Self Assessment• Future Trends
TECHNOLOGY
PROCESS
ORGANISATION
TECHNOLOGY
Technology: Introduction
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Use of technology in procurement• What really matters• How to get where you need to be• Includes
– Use of technology – Requisition to Pay
Technology: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Basic Average Above Average Advanced
Upstream technologies
No e-tools available Manual
communication with vendors
Simple RFxs emailed, some piloting of reverse auctions for a few categories
No procurement decision-support capability
Limited awareness of eCommerce benefits
RFx, reverse auction, spend management and reporting are used for all categories as appropriate
Procurement actively involved in driving technology enablement (e.g. eSourcing)
Moderate use of Internet based RFQ/RFP solutions
Extensive use of technology enablers, including e-Procurement, eSourcing, and e-Auctions
Self service / corporate procurement portal
eSourcing is integrated with Contract Management and the R2P process
Spend Visibility
No Management Information reports available
Reporting is available but there is limited granularity and coverage across total corporate spend
Manual management Information reports
No consistent reporting framework
MIS reporting functionality linked to procurement strategy and targets
Data and Management Information drives procurement and sourcing
Strategic decisions enabled by real time management information reporting
Management reporting fully aligned to business strategy
Market Intelligence
No market data/ external information outside the public domain is collected and used
Subscriptions are taken out with providers of indexes and market data on an ad hoc basis
There are subscriptions to all required information sources to support effective sourcing
Dedicated resources are available to pull together market information
Automated systems deliver rich external information to buyers through a customised portal
A pool of dedicated sourcing analysts provide customised information to buyers on an as needs basis
Copyright © 2011 Accenture All Rights Reserved.
Technology Use
Technology: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Basic Average Above Average Advanced
Ordering Isolated transaction processing systems with multiple manual hand-offs
No single integrated system or R2P process exists
Transaction systems exist but are dispersed and disaggregated
No single R2P process or system exists across the business
E-Catalogue only available for “easier” categories
Systems and processes are integrated to accelerate transaction processing
Buyer portal is available and utilised
E-catalogues available for key categories
ERP leveraged on organisation-wide basis allowing full data capture, common measurements, and decision support capability
End to End integration channels optimised by category & user environment
Receipt to Payment
Accounts Payable processes are managed by local teams
The majority of processes are manual and paper based
Limited usage of 3 way match
Accounts Payable activities are managed by a centralised team
A single instance of a dedicated system is used for processing transactions
3 way matches are commonly used
Some payment and mismatch issues occur
Accounts Payable is managed by a centralised team
3 way matches are used for the majority of spend
Processes are generally automated
Payment and mismatch issues are limited
Accounts Payable activity is consolidated in a shared services center
3 way match process exists for all transactions except defined and documented exceptions
There is a high degree of process automation and leading practice technologies are adopted e.g. OCR
High levels of on-time payment and few mismatches
Master Data Mgmnt
No common master data or standards
Master data processes are not defined and documented
Some master data harmonisation has taken place but discrepancies still exist
A relatively high proportion of items have been coded
Dedicated master data resources may exist but processes are informal
Common vendor master Common item master Most products have been
coded Master data processes
with approvals and controls exist but some are manual
Dedicated coding team
Common vendor master Common item master Virtually all appropriate items have been coded Automated master data processes with
approvals and controls Dedicated coding team
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Requisition to Pay
Basic Average Above Average Advanced
Ordering Isolated transaction processing systems with multiple manual hand-offs
No single integrated system or R2P process exists
Transaction systems exist but are dispersed and disaggregated
No single R2P process or system exists across the business
E-Catalogue only available for “easier” categories
Systems and processes are integrated to accelerate transaction processing
Buyer portal is available and utilised
E-catalogues available for key categories
ERP leveraged on organisation-wide basis allowing full data capture, common measurements, and decision support capability
End to End integration channels optimised by category & user environment
Receipt to Payment
Accounts Payable processes are managed by local teams
The majority of processes are manual and paper based
Limited usage of 3 way match
Accounts Payable activities are managed by a centralised team
A single instance of a dedicated system is used for processing transactions
3 way matches are commonly used
Some payment and mismatch issues occur
Accounts Payable is managed by a centralised team
3 way matches are used for the majority of spend
Processes are generally automated
Payment and mismatch issues are limited
Accounts Payable activity is consolidated in a shared services center
3 way match process exists for all transactions except defined and documented exceptions
There is a high degree of process automation and leading practice technologies are adopted e.g. OCR
High levels of on-time payment and few mismatches
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Technology: Self Assessment
Copyright © 2011 Accenture All Rights Reserved.
√
√
Self Assessment is anonymous
ILLUSTRATIVE
1.Identify current state using2.Identify target state (2-yr horizon) using
√
Future: Advanced Analytics
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
The process of using quantitative methods to derive actionable insights and outcomes from data.
• Involves the capture and use of data to support fact-based decision making and gaining competitive advantage
• Typically reporting on what has happened in the past
• Using predictive analytics based on historical data to ascertain what will happen in the future
Overview
Future: Advanced Analytics
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
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Source: Competing on Analytics: The New Science of Winning (Davenport / Harris)
What?
Com
petit
ive
Adv
anta
ge
Sophistication of Intelligence
Optimization
Predictive Modeling
Forecasting/extrapolation
Statistical analysis
Alerts
Query/drill down
Ad hoc reports
Standard Reports
“What’s the best that can happen?”
“What will happen next?”
“What if these trends continue?”
“Why is this happening?”
“What actions are needed?”
“What exactly is the problem?”
“How many, how often, where?”
“What happened?”
Predictive Analytics
Descriptive Analytics
Source: Competing on Analytics: The New Science of Winning, Davenport / Harris
Sophistication Levels
Future: Advanced Analytics
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• When to order and how many• Accurate information on volume
leading to better negotiating power
• Lesser chances of going out of stock or having excess
• Improved communication with business units and vendors
Improved understanding of stocks and flows
Source: When to Map and When to Model, PhD thesis, Univ of Sydney, Rajat Dhawan
Evidence
• Native ability – to comprehend complex procurement
issues is limited – too many variables to process
• Fact-based decision making – leads to better results – accurate,
measurable, resulting in lower costs and greater savings.
Future: Advanced Analytics
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Analytical tools – improve our ability to capture right
information, process it and help in informed decision making.
Conclusion
Future: Advanced Analytics
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Organisation– Top leadership awareness and support– Partnership with business units– Skill-set not available
• Processes – One-off versus operationalised
• Systems– Right technology not available; antiquated– Technology not usable
• Data– Data in multiple systems– Data not captured; existing data not analysed
Source: Analytics Coming of Age, Procurement Professional (CIPSA), Apr 2011, Rajat Dhawan & Olaf Schatteman
Implementation Challenges
Agenda
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Maturity• Self Assessment• Future Trends
TECHNOLOGY
PROCESS
ORGANISATION
Process: Introduction
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Key processes in procurement• What really matters• How to get where you need to be• Includes
– Sourcing and Category Management– Contract Management– Supplier Relationship Management
Process: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Basic Average Above Average Advanced
Methodology & Process
No documented strategic sourcing methodology exists
Significant expenditure is managed outside procurement
Procurement use "Three quotes" approach, mainly with incumbents
A documented sourcing methodology exists and is used to support most sourcing activities
Procurement managers/ budget holders provide sign-off for sourcing decisions
The sourcing process incorporates customer requirements analysis and some market analysis
Basic category planning takes place, mainly locally or on the Business Unit level
Limited expenditure is managed outside procurement and the standard process
A documented sourcing methodology exists, procurement staff have been trained in it, and it is robustly applied to all appropriate spend
The sourcing process incorporates defined approval stage gate meetings attended by cross-functional teams
All stages of the sourcing process are template driven
Detailed and robust customer requirements and market analysis is undertaken
Detailed annual category planning takes place, aggregating demand across sites, business units and CAPEX/ OPEX
Standard supplier selection criteria are available at the company level and incorporate TCO measures
All spend is managed and controlled by procurement
Cross-functional teams use a standardised and documented sourcing methodology in which all members have been trained
Sourcing governance is monitored by cross-functional executive teams
Standard sourcing methodology templates that have been customised at the category level are available. Cross-functional teams challenge specifications and requirements using fact-based market and demand information provided by dedicated analyst teams
Category planning incorporates global and low cost sourcing analysis and has a long term focus
Standard supplier selection criteria are available at the category level and incorporate TCO measures
Copyright © 2011 Accenture All Rights Reserved.
Sourcing and Category Management
Process: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Basic Average Above Average Advanced
Contract Management
Contracts are often managed outside the function by non-commercial staff
No or limited contract management processes and no contract database
Simple boilerplate contracts usually for spot purchases
Procurement is involved in the management of contracts for the majority of spend areas
Multiple basic informal contract databases
Ad hoc contract compliance management
Contract horizon based on immediate requirements
Procurement owns commercial relationships
Contracts based on supplier alliance agreements
Tools to centrally manage contracts and contract compliance are in place
Procurement owns commercial relationships and is supported by appropriate technical resources
There is a defined contract implementation methodology
Contracts manage risk, and focus on continuous improvement & value add
Centrally logged contracts and pro-active management of contract compliance
Product & Supplier Portfolio Management
There is a long tail of suppliers with a low amount of spend and a high number of one-time vendors
There are no or few documented product standards
There have been no or few attempts to rationalise the number of different products used
Product standards have been implemented in some areas of spend
A number of product rationalisation products have been run
There are common agreed technical standards for the majority of products
A process is in place between technical and procurement teams to agree product standards and specifications
There has been a high degree of product and service rationalisation
Common agreed technical standards exist for all commonly used products
Procurement and technical staff work collaboratively as part of cross-functional teams to select products that meet technical requirements and standards, as well commercial priorities
Copyright © 2011 Accenture All Rights Reserved.
Contract Management
Process: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Basic Average Above Average Advanced
Supplier Performance Management
No formal supplier performance metrics
Procurement organisation and suppliers have no clear understanding of key success factors
Key success factors known but not directly tied to performance measures.
Possible to track supplier delivery/ quality performance with manual effort.
Quality, delivery, lead-time measures available and used in negotiations with suppliers and linked to total cost model analysis.
Periodic reviews of performance with suppliers.
Key supplier metrics collected passively and available to decision makers on demand.
Measures linked to total cost model. Suppliers track their own status, take
corrective action as necessary.
Supplier Relationship Management
No supply base segmentation
Relationships are managed at a relatively junior level in the buying organisation for most suppliers
SRM is reactive with interactions - primarily when problems occur
The supply base is segmented but implementation of strategies is sporadic
Little proactive feedback to suppliers
Vendors providing limited value added services
Supplier interactions limited to technical support rather than value add
Some long term planning has taken place with a few key suppliers
Some proactive feedback to suppliers
Collaborative arrangements with some key suppliers
Suppliers provide basic value add activities
Suppliers are empowered to innovate in delivering services; innovative deal structures are put in place with key suppliers to share risk and reward
Strategic planning conducted with suppliers using TCO analysis
Multiple levels of interaction with suppliers
Joint Process/Product improvements, including e-Supply Chain integration.
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Supplier Relationship Management
Process: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Business Performance and Productivity Drivers:Supplier
Responses
Performance Management: Revenue Growth and Market Response
Maximise the performance of key management ratios (ROI, working capital productivity, marketing, etc) by creating value adding processes that reduce risk.
Fixed Capital EffectivenessUse service to improve the return on investment or to the lower investment in facilities
Risk ReductionCollaborative activities such as R&D and industry procurement activities not only reduces costs but increases quality and reliability through component standardisation and therefore customer confidence
Cost ManagementReduce value-in-use (acquisition) -costs; installation, operating costs, staff training, and maintenance costs etc.
Working Capital EfficiencyUse service (frequency, reliability and accuracy) to accelerate transfer payments and lower inventory holding costs and cash flow generation.
Optimising the Use of Time The effective (strategic) use of time is reflected in time-to-market and competitive advantage gained. The efficient (operational) use of time is the time response to customer requests (quotations, orders, deliveries, returns, etc) and its competitive impactCustomer Satisfaction
Create order winning product-service criteria based on customer facing processes (value drivers) – rather than order qualifying criteria
Supplier Added Value Activities that Increase Customer Productivity Performance
Source: Walters (2011)
Process: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
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Operational Efficiency: SRM
Financial Operating Response ManagementInventory productivity
Receivables Payables Cash2Cash CycleOperating cash Working capital cycle efficiency
Synchronised Operating and Cash Cycles
Procurement and Manufacturing Operations Response ManagementPer cent throughput Relative manufacturing cycle time
Relative manufacturing costs/revenues Per cent on time delivery Lead time flexibility response Order flexibility response
Order cycle time (P/A) Resources utilisation (P/A) WastageResources productivity (P/A)
Inter-organisational “Operations” Network Facilities
Source: Walters (2011)
Supplier Relationship Management
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
DemandChainProfile
TargetCustomer/Market
Customer Value Drivers
Value Proposition
Value Delivery Considerations & Implications
Demand Chain Analysis
Managing Value Chain Network Planning & Performance
Product-service specification and
design
Procurement, Manufacturing and Inventory Management and “Production”,
Marketingand Sales Operations
ValueDelivery:
Distribution
Customer Services
Management
Response Management: Integrating and Coordinating ResourcesSupplier Relationship Management Customer Relationship Management
Competitor Relationship Management
Process: Maturity Continuum
Source: Walters (2011)
Identifying and Targeting the Customer(s) - Managing the Response
Basic Average Above Average Advanced
Contract Management
Contracts are often managed outside the function by non-commercial staff
Procurement is involved in the management of contracts for the majority of spend areas
Multiple basic informal
Procurement owns commercial relationships
Contracts based on supplier alliance agreements
Tools to centrally manage contracts and contract compliance are in place
Procurement owns commercial relationships and is supported by appropriate technical resources
There is a defined contract implementation methodology
Product & Supplier Portfolio Management
There is a long tail of suppliers with a low amount of spend and a high number of one-time vendors
There are no or few documented
Product standards have been implemented in some areas of spend
A number of product rationalisation products have been run
There are common agreed technical standards for the majority of products
A process is in place between technical and procurement teams to agree product standards and specifications
Common agreed technical standards exist for all commonly used products
Procurement and technical staff work collaboratively as part of cross-functional teams to select products that meet technical requirements and standards, as well commercial priorities
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Process: Self Assessment
Copyright © 2011 Accenture All Rights Reserved.
1. Identify current state using2. Identify target state (2-yr horizon) using
√
√
√
Self Assessment is anonymous
ILLUSTRATIVE
Future: Risk Management
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
More needs to be done to manage risk • the political, environmental, and economic instability of late will stay, and
leaders recognise that risk must be proactively managed.
Future leaders will need to:
• Realise risk issues have a greater cost impact, and take up far more time, than most buyers’ efforts to capture savings through negotiation.
• Address supplier and price volatility risks when developing procurement strategies.
• Apply a comprehensive, end-to-end approach to anticipating, monitoring and mitigating risk.
• Use of a “risk management framework”—a comprehensive, end-to-end approach to anticipating, monitoring and mitigating risk.
Risk
Source: Procurement Mastery Research, Accenture, 2011
Future: Risk Management
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Organisation & Governance• Design a well-defined organisation structure with explicit roles and responsibilities and accountabilities to
decisions and identify risk ownership.
• Risk Management Processes • That identify critical supply categories and vendors. The processes should capture risks and include monitoring
activities to identify potential problems. They must be consistent throughout the organisation.
• Risk Analytics • To identify, measure and monitor operational risks. They should comprise metrics that allow a company to see
when and where an operational risk exists and focus it with related management initiatives. Analytical tools should also quantify the impacts of risk items.
• Risk Reporting • That delivers focused, relevant and timely information that enables management to make informed decisions
Ideally analytics should help management predict an event or risk.
• Information Management and Data Governance• Should help maximise performance by integrating and coordinating processes across organisational boundaries,
and regions. It requires managing and making internal and external information transparent to management to achieve an enterprise-wide perspective of risk that contributes to better decision making.
Five ‘Essentials’ of Risk Management
Future: Closed Loop Spend Management
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Sales
Fees
Travel
Labor & Benefits
Transport
…
HR Marketing Supply Finance IT/IS …
Appoint Senior Category Owners, aligned with Procurement Category Mgt
Define consumption policies, optimized specifications and optimal sourcing strategies
Category Ownership2 Zero-based Budget
Create bottom-up budget starting from a zero base, adhering to strict policies
Control & MonitoringMonthly Variance Report by Sub Category and Entity Level - Example figures -
Apr-08in USD
Entity xyzCost Category Budget Mon Actuals Mon Var Mon Var Mon %
01 Fees 12,984,168 11,454,191 1,529,977 12%0102 Insurance 7,543,567 6,209,382 1,334,185 18%0104 Audit Fees 2,599,883 2,389,493 210,390 8%0105 Recruitment 1,508,845 1,392,830 116,015 8%0106 Legal Fees 677,786 809,392 -131,606 -19%0107 Consultant Fees 197,196 190,002 7,194 4%0108 Medical fees 456,890 463,092 -6,202 -1%
02 Travel & Meetings 16,280,335 17,079,003 -798,668 -5%0201 Flights 3,320,554 3,492,099 -171,545 -5%0202 Lodging 6,065,169 6,209,392 -144,223 -2%0203 Meetings & Events 2,659,867 2,589,383 70,484 3%0204 Meals 2,426,755 2,393,299 33,456 1%0205 Ground Transportation 1,807,990 2,394,830 -586,840 -32%
06 Telecom 2,795,000 2,167,667 627,333 22%0601 Mobile Services 2,089,000 1,628,739 460,261 22%0602 Telephone Services 706,000 538,928 167,072 24%
TOTAL TOTAL 47,769,282 46,253,864 1,515,419 3%
Track actual variances against the budget and document during monthly meetings to ensure budget achievement by year end
5
Visibility
Provide full transparency on ‘who-spends-how-much-on-what’
1
Procurement
Translate into Buying Channels and “I need” portal and transfer to Procurement Middle Office - BSC
Closed Loop
3
4
Model
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
The visibility is created by mapping the key financial transactional data into a matrix made of Cost Categories and Business Functions
GL
Accounts
Cost CentersCost Category
structure
Travel
Marketing
Transport
Fees
Services
…
Finance HR IT/IS …
DetailedTransactional
Data
Functions defined by Organisational structure
Future: Closed Loop Spend ManagementVisibility
ILLUSTRATIVE
Low Hanging Fruit
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Define maximum CRM spend by segment
• Enforce max. phone allowance
• Do not allow business class for flights < 6h
• Define POS maximum spend by segment / Only purchase in POS Catalogue
• Challenge Consultant spend not supported by strategic plan
Each Cost Category owner is responsible for identifying and prioritising significant opportunities in their area which are easy to implement
HighLow
High
Size of opportunity
Ease of implementation
Low
Medium
Medium
• Challenge Market Research expenses
• Centralize all office supplies procurement
• Optimize office space in sales centers
• Define mandatory agency fees list
• Reduce # travels to same destination
• Challenge sponsorship costs vs. brand equity building
• Enhance Employee Referral Program and E-recruitment
Priority for
Implementation• Implement new car
policy and review entitlement
Future: Closed Loop Spend ManagementCategory Ownership & Policies
ILLUSTRATIVE
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
At the end of the process, the Category Owner will present its conclusion to the Budget Holder and they negotiate on the Final budget. The scope will drive the effort
Negotiation Rounds
Category owner
Budget holder
Send New Proposal
Final agreement on the Budget
Quantified Opportunities To Optimize Budget
Budget
Reduce cost of dues & memberships by defining a policy limit on spend per FTE per year on dues & memberships
Check & challenge company cars costs
Align & benchmark the spare parts, maintenance and 3rd party labor consumption per brewery (cost / produced hl)
Reduce price by benchmarking consultancy/audit rates
Reduce consumption by evaluating necessity of consulting/audit projects
Reduce FTE driven office supplies consumption by defining a minimum allowance per employee (20 euro per emp. per month)
Reduce the cost of Secretaries, Administrative Assistants, Receptionists and Call Centers by benchmarking with other functions
Reduce lodging costs by reviewing the list of preferred hotels
Reduce frequency of travel by rationalizing trips of employees from the same function to same destinations
Opportunity
860Corporate Affairs
500Labor & Benefits
1.000Fees
1.000
450Maintenance
785Travel
1.000
700Services
30
Savings (k€)Cost Category
Reduce cost of dues & memberships by defining a policy limit on spend per FTE per year on dues & memberships
Check & challenge company cars costs
Align & benchmark the spare parts, maintenance and 3rd party labor consumption per brewery (cost / produced hl)
Reduce price by benchmarking consultancy/audit rates
Reduce consumption by evaluating necessity of consulting/audit projects
Reduce FTE driven office supplies consumption by defining a minimum allowance per employee (20 euro per emp. per month)
Reduce the cost of Secretaries, Administrative Assistants, Receptionists and Call Centers by benchmarking with other functions
Reduce lodging costs by reviewing the list of preferred hotels
Reduce frequency of travel by rationalizing trips of employees from the same function to same destinations
Opportunity
860Corporate Affairs
500Labor & Benefits
1.000Fees
1.000
450Maintenance
785Travel
1.000
700Services
30
Savings (k€)Cost Category
Send New Proposal
Future: Closed Loop Spend ManagementZero-based Budget
ILLUSTRATIVE
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Actual consumption is triggered by the “I need” portal in which policies and how to order/work with procurement is guided in the so-called buying channels
“I need” Portal
Procurement Middle Office
Policies and how to order/work with procurement is guided in the so-called buying channels
Preferred suppliers are presented
Prerequisites and other useful information can be consulted
Invoices are booked by the back-office in the right cost category
Often requiring chart of account changes/ training of AP people to properly book invoices
The back-office also acts as supplier helpdesk
Future: Closed Loop Spend ManagementProcurement
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Each month a cascade of meetings takes place where analyses and actions are filtered up through to the Cost Category Owners for review and action
* Depending on the month closing cycle the monthly routine will start as of week 2 or week 3
1 2 3 4 5 ……
Regional Meeting
Category Meeting
Executive Team
Meeting
Reg
ion
Glo
bal
1-2h
1h
0,5-1h
Workday of Week 3 *
Analysis of variances at regional level per Category
Analysis of variances at
Sub-Category level
e.g. EMEA Meeting
e.g. Services Meeting
Site Meeting
Cou
ntry
1-2h
Analysis of variances at site
level per Category e.g. Country Meeting
Future: Closed Loop Spend ManagementControl & Monitoring
ILLUSTRATIVE
Agenda
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Maturity• Self Assessment• Future Trends
TECHNOLOGY
PROCESS
ORGANISATION
Organisation: Introduction
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• What is the role of procurement organisation in managing spend
• Centralised versus decentralised structures• How to get where you need to be• Includes
– Procurement Strategy– People & Workforce
Organisation: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Basic Average Above Average Advanced
Vision & Strategy
A basic procurement function exits but has no documented strategy
Procurement has a basic set of priorities and objectives have been created
There is a defined procurement strategy which has been derived based on organisational priorities and as a result of external benchmarking; strategy is executed through a series of coordinated projects
Procurement strategy is vertically integrated to corporate strategy
The strategy is cascaded through a departmental objective setting process and embedded in personal performance objectives
Organisational Alignment
Procurement viewed as an back office function
Executive sponsorship is limited
Procurement is perceived as having a tactical role
No Procurement representation in executive leadership team
Procurement viewed as important to enable corporate savings
CPO leads centrally with strong leadership and dedicated resources in place
Procurement viewed as a strategic function critical to the future of the business
CPO sits at Board Level /reports to CEO
Metrics and Measures
No clear performance metrics
Key measures focus on cost/price competitiveness
The scorecard incorporates other procurement focused metrics
A balanced scorecard for purchasing is used but is manually derived
There is a feedback loop into operations for performance data
Metrics are communicated to stakeholders on a periodic basis
Purchasing targets set at board level Metrics are tied to company strategic
objectives and aligned to drivers of shareholder return
The balanced scorecard is IT enabled
Copyright © 2011 Accenture All Rights Reserved.
Procurement Strategy
Organisation: Maturity Continuum
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Basic Average Above Average Advanced
Organisation Structure
Decentralised sourcing No cross-division
interaction
Some policies in place to guide centralised sourcing activities
Procurement excluded from strategic planning
Procurement treated as a central corporate function with strong leadership and dedicated resources
Centrally led procurement organisation optimised to manage organisation-wide spend portfolio
Training & Development
No formal requirements on competency building and no clear career path; no formal training program exist
Minimal focus on career development and minimal investment in training
In most cases individual competency linked to career progression and rewards
Training matrix outlines skills necessary by position and reviewed at individual level
Individual competency linked to career progression and rewards
Training linked to strategic priorities, includes Procurement and Business skills
Staff & Performance
People deployed to meet Procurement administration activities
Traditional transactional skill sets
Procurement attracts and develops personnel in management and category focused sourcing areas
Some strategic thinking skills in addition to transactional skills
Network of global people/skills including partners, suppliers and outsourced services
People developed, dynamically matched, and cross trained throughout the corporation
Copyright © 2011 Accenture All Rights Reserved.
People and Workforce
Basic Average Above Average Advanced
Vision & Strategy
A basic procurement function exits but has no documented strategy
Procurement has a basic set of priorities and objectives have been created
There is a defined procurement strategy which has been derived based on organisational priorities and as a result of external benchmarking; strategy is executed through a series of coordinated projects
Procurement strategy is vertically integrated to corporate strategy
The strategy is cascaded through a departmental objective setting process and embedded in personal performance objectives
Organisational Alignment
Procurement viewed as an back office function
Executive sponsorship is limited
Procurement is perceived as having a tactical role
No Procurement representation in executive leadership team
Procurement viewed as important to enable corporate savings
CPO leads centrally with strong leadership and dedicated resources in place
Procurement viewed as a strategic function critical to the future of the business
CPO sits at Board Level /reports to CEO
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Organisation: Self Assessment
Copyright © 2011 Accenture All Rights Reserved.
√
√
Self Assessment is anonymous
ILLUSTRATIVE
1. Identify current state using2. Identify target state (2-yr horizon) using
√
Future: Workforce Capabilities
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• Running powerful training programs that not only improve the skills of its employees but helps make the function – with procurement at its core – an attractive area to work and a breeding ground for talent for the company as a whole
• Capability development initiatives – continual improvement of on-the-job skills at every level
• Programs that focus on “learning how to learn”, as well as how to work competently with cross-functional counterparts in the safety, legal, finance, projects, engineering, and operational functions;
• Action learning programs – activities in which real business problems are solved in small groups
• Individuals targeted as high performers within procurement, finance, HR, operations, etc., are eligible for additional training, special projects, and networking opportunities
Research shows that not even the leaders are doing well with workforce and organisation.
Here's what some companies are doing to move out in front...
Source: Procurement Mastery Research, Accenture, 2011
Agenda
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
• State of the Art• Roadmap to Target State• Future Trends
TECHNOLOGY
PROCESS
ORGANISATION
• Debrief & Next Steps
Recap: Future Focus Areas
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Advanced Analytics Closed-Loop Spend Management
Risk Management Workforce Capabilities
1
2
3
4
Immediate Next Steps
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Advanced Analytics Closed-Loop Spend Management
Risk Management Workforce Capabilities
• Analyse what could you do with information; then work backwards to ensure you’ve got the right data and tools to extract, process and present intelligence
• Invest in systems; ensure they are integrated• Create awareness; change culture from gut-feel to
fact-based decision making• Consider processes that can be supported by data
• Create visibility on the cost structure; review GL accounts and standardize across the company; key to enable consistent benchmarking and analysis
• Reviewing policy compliance is the first step in finding savings
• Increase number of "hands-free" transactions, improves contract / channel compliance and optimises the operational effort
• Effective strategies are those that identify areas of risk and work to minimise its effects - build risk analysis into strategic analysis and decision making.
• In the current environment market and financial risk are no longer constants or given they change rapidly - that's why the GFC caught many organisations unawares.
• Learn from experience
• Competition no longer matter of being Company vs Company it is value chain vs value chain
• Organisational boundaries overlap those of partners encouraging trust and a free exchange of information/knowledge.
• By adopting a collaborative approach with suppliers costly levels of inventory holding are lower and cycle times (operating and cash2cash) reduced.
1
2
3
4
Debrief
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
• Start focusing on the 4 future focus areas – this where the future lies!
• Get top-management support–Procurement/Finance/Board.
• Collaborate with business units – ensure they understand the change; share skills
and information where possible.
• Revisit processes; enforce them.
• Revisit procurement technology landscape; learn to walk before you run.
• Gauge where you currently are and where would you like to be – have a plan for
change.
• Get external support to kick-start changes/introduce rigour.
Copyright © 2011 Accenture All Rights Reserved.
Debrief: Technology
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Note: Results presented are aggregated by Technology maturity, and not by individual components within Technology. Detailed analysis available on request.
Debrief: Process
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Note: Results presented are aggregated by Process maturity, and not by individual components within Technology. Detailed analysis available on request.
Thank You
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
www.rajatdhawan.com Further Interest Summary of Results and Presentation
[email protected]@sydney.edu.au
www.rajatdhawan.com
• Context• Maturity• Self Assessment• Future Trends
• Debrief & Next Steps
Appendix
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Self Assessments• Are anonymous• Fill it to the best of abilities• Demographic info is optional
– Detailed analysis– Presentation summary– Future work
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Stage 5Analytical
Competitors
Stage 4Analytical
Companies
Stage 3Analytical Aspirations
Stage 2Localised Analytics
Stage 1Analytical Novice
Routinely uses analytics as a distinctive capability, takes an enterprise-wide approach, has committed and involved leadership, and has achieved large-scale results.
Has established analytical capabilities, and has a few significant initiatives under way – but progress is slow and missing critical elements.
Organisation lacks one or several of the pre-requisites for serious analytical work.
Applies analytics regularly, and realizes benefits across the organisation.
Pockets of analytical activity, but they are uncoordinated and not focused on strategic targets.
WHICH STAGE OF PROCUREMENT ANALYTICS IS YOUR ORGANISATION IN?
Future: Advanced AnalyticsContinuum
Future: Risk Management
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Risk Anticipation Risk Monitoring Risk Mitigation
Develop strategies to avoid/minimise exposure to risk
Track potential risk set indicators
Take quick and appropriate actions to minimise effects
Procurement StrategySourcing and Category
Management
Supplier Relationship Management Requisition to Pay
Process and Technology
Workforce and Organisation
ProcurementPerformance
Risk Management Framework
Risk Management Framework
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Key Performance Indicators (KPIs) are defined to measure price and consumption, then benchmarked both internally and externally
Cost Category KPI Benchmark
Travel # Trips to the same destination 2 trips / employee / month
Price per night per destination Brussels = 100 €, London = 120 €
Agency Fees Agency Fees vs Deployment Cost 10-20%
Transport Cost / km 0,7 € / km
Services Office supplies / employee 250 € / employee / year
Telecom Mobile expense / employee 40 € / employee / month
Maintenance % labor cost for unplanned maintenance 10 %
Billing rate / 3rd party supplier / hour 21 € / hour
Corporate Affairs Price of gifts / employee 50 € / gift
Free products / employee 40 € / employee / year
Labor & Benefits Training budget / employee 400 € / employee / year
Utilities Cost / employee 15 € / employee / month ILLUSTRATIVE
Future: Closed Loop Spend ManagementVisibility
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Budget holders build their budget zero-base with great amount of detail, adhering to top down targets and strict global policies
Budget Templates
Are built for all (Sub-)Categories
Contain enough details to allow full understanding on the budget construction
Might have a different level of detail, depending on the Category
Contain enough attributes to enable powerful analysis and benchmarking
Travel Budget Template
Future: Closed Loop Spend ManagementZero-based Budget
ILLUSTRATIVE
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Challenging cost is no longer a Finance-only activity; Category ownership creates a shared responsibility driving sustainable savings opportunities
Cost Category ExecutiveOwner
Labor & Benefits
Sales & Marketing
Transport
Maintenance
Rent
Taxes
Services
Fees
Travel
Telecom
…
Have deep understanding of cost drivers
Challenge budgets, across all departments
Enforce disciplined execution
Drive fact-based cost savings
Monitor costs
Lead by example
Sustain savings
…who has a set of responsibilities but is also empowered to make tough decisions
For each category, an owner is appointed at the top level…
Future: Closed Loop Spend ManagementCategory Ownership & Policies
ILLUSTRATIVE
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
TO-BE Situation: An innovative operating model is at the heart of maximum procurement value at a low operating cost
Procurement (Operational ) ProcessesSourcing & Category Management
Internal Business users
Suppliers
Local User interface: Local Purchasing RepresentationPerform Requisitions & Fulfillment
Perform CustomerServices (Helpdesk)
Provide Sourcing Support
Execute local Contract Implementation
Execute Spot Buys(<2.5k)
Corporate Procurement – Zone(s)
Roles: Cat. Leader and Manager
Front Office: Corporate/ BU/ Local Sourcing Roles: Cat. Leader and Manager
Finance shared service center (Back-Office)
InvoiceProcessing
SupplierHelpdesk
Optimize User Compliance –Satisfaction
Optimize Contracts
eSourcingServices
Value Tracking/BudgetingServices
PO & FulfillmentServices
Execute Spot Buys (>2,5K)
SourcingSupport
LPR Helpdesk (future- > User)
Item- Master DataMgmt
Procurement Center (Middle Office)
Future: Closed Loop Spend ManagementPurchasing
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
The variances against the budget are tracked and documented during monthly meetings to ensure budget achievement and actions trigger continuous improvement
L1 North West RegionL2 TOTAL
Cost Category Rev. Act08 Mon Actuals Mon Var Mon Var Mon % Rev. Act08 Mon Actuals Mon Var Mon Var Mon %Fees … … … … 37.708.197 35.972.801 1.735.396 5%
Real Property Taxes … … … … 16.110.035 15.309.223 800.812 5%Insurance … … … … 7.543.567 6.209.382 1.334.185 18%
General Taxes and Licenses … … … … 8.613.994 9.209.387 -595.393 -7%Audit Fees … … … … 2.599.883 2.389.493 210.390 8%
Recruitment … … … … 1.508.845 1.392.830 116.015 8%Legal Fees … … … … 677.786 809.392 -131.606 -19%
Consultant Fees … … … … 197.196 190.002 7.194 4%Medical fees … … … … 456.890 463.092 -6.202 -1%
Travel & Meetings … … … … 16.280.335 17.079.003 -798.668 -5%Flights … … … … 3.320.554 3.492.099 -171.545 -5%
Lodging … … … … 6.065.169 6.209.392 -144.223 -2%Meetings & Events (Non Customer Entertainment) … … … … 2.659.867 2.589.383 70.484 3%
Meals … … … … 2.426.755 2.393.299 33.456 1%Ground Transportation … … … … 1.807.990 2.394.830 -586.840 -32%
Telecom … … … … 2.795.000 2.167.667 627.333 22%Mobile Services … … … … 2.089.000 1.628.739 460.261 22%
Telephone Services … … … … 706.000 538.928 167.072 24%TOTAL … … … … 47.769.282 46.253.864 1.515.419 3%
Franchise St PeteApr-09in RUR
Apr-09in RUR
L1 Moscow RegionL2 TOTAL
Cost Category Rev. Act08 Mon Actuals Mon Var Mon Var Mon % Rev. Act08 Mon Actuals Mon Var Mon Var Mon %Fees … … … … 37.708.197 35.972.801 1.735.396 5%
Real Property Taxes … … … … 16.110.035 15.309.223 800.812 5%Insurance … … … … 7.543.567 6.209.382 1.334.185 18%
General Taxes and Licenses … … … … 8.613.994 9.209.387 -595.393 -7%Audit Fees … … … … 2.599.883 2.389.493 210.390 8%
Recruitment … … … … 1.508.845 1.392.830 116.015 8%Legal Fees … … … … 677.786 809.392 -131.606 -19%
Consultant Fees … … … … 197.196 190.002 7.194 4%Medical fees … … … … 456.890 463.092 -6.202 -1%
Travel & Meetings … … … … 16.280.335 17.079.003 -798.668 -5%Flights … … … … 3.320.554 3.492.099 -171.545 -5%
Lodging … … … … 6.065.169 6.209.392 -144.223 -2%Meetings & Events (Non Customer Entertainment) … … … … 2.659.867 2.589.383 70.484 3%
Meals … … … … 2.426.755 2.393.299 33.456 1%Ground Transportation … … … … 1.807.990 2.394.830 -586.840 -32%
Telecom … … … … 2.795.000 2.167.667 627.333 22%Mobile Services … … … … 2.089.000 1.628.739 460.261 22%
Telephone Services … … … … 706.000 538.928 167.072 24%TOTAL … … … … 47.769.282 46.253.864 1.515.419 3%
Franchise MoscowApr-09in RUR
Apr-09in RUR
L1 Other RegionL2 TOTAL
Cost Category Rev. Act08 Mon Actuals Mon Var Mon Var Mon % Rev. Act08 Mon Actuals Mon Var Mon Var Mon %Fees 235.676.231 206.217.130 29.459.101 12% 37.708.197 35.972.801 1.735.396 5%
Real Property Taxes 100.687.718 76.546.115 24.141.603 24% 16.110.035 15.309.223 800.812 5%Insurance 47.147.296 47.621.905 -474.609 -1% 7.543.567 6.209.382 1.334.185 18%
General Taxes and Licenses 53.837.462 49.005.553 4.831.910 9% 8.613.994 9.209.387 -595.393 -7%Audit Fees 16.249.266 15.294.728 954.538 6% 2.599.883 2.389.493 210.390 8%
Recruitment 9.430.283 9.576.433 -146.149 -2% 1.508.845 1.392.830 116.015 8%Legal Fees 4.236.165 4.533.288 -297.123 -7% 677.786 809.392 -131.606 -19%
Consultant Fees 1.232.477 1.159.555 72.922 6% 197.196 190.002 7.194 4%Medical fees 2.855.564 2.479.555 376.009 13% 456.890 463.092 -6.202 -1%
Travel & Meetings 101.752.094 93.934.517 7.817.578 8% 16.280.335 17.079.003 -798.668 -5%Flights 20.753.465 19.206.545 1.546.920 7% 3.320.554 3.492.099 -171.545 -5%
Lodging 37.907.303 34.151.656 3.755.647 10% 6.065.169 6.209.392 -144.223 -2%Meetings & Events (Non Customer Entertainment) 16.624.166 14.241.607 2.382.559 14% 2.659.867 2.589.383 70.484 3%
Meals 15.167.221 13.163.145 2.004.076 13% 2.426.755 2.393.299 33.456 1%Ground Transportation 11.299.940 13.171.565 -1.871.625 -17% 1.807.990 2.394.830 -586.840 -32%
Telecom 17.468.750 11.922.169 5.546.582 32% 2.795.000 2.167.667 627.333 22%Mobile Services 13.056.250 8.958.065 4.098.186 31% 2.089.000 1.628.739 460.261 22%
Telephone Services 4.412.500 2.964.104 1.448.396 33% 706.000 538.928 167.072 24%TOTAL 238.846.412 231.269.318 7.577.094 3% 47.769.282 46.253.864 1.515.419 3%
Franchise UralsApr-09in RUR
2009 Variance to Revised Actuals 08 Analysis (in RUR) - APRIL YTD
Region: Moscow Region
Apr-09in RUR
L1 Moscow RegionCost Category Rev. Act08 Mon Actuals Mon Var Mon Var Mon %
01 Fees 235.676.231 206.217.130 29.459.101 12%0101 Real Property Taxes 100.687.718 76.546.115 24.141.603 24%0102 Insurance 47.147.296 47.621.905 -474.609 -1% Phasing0103 General Taxes and Licenses 53.837.462 49.005.553 4.831.910 9%0104 Audit Fees 16.249.266 15.294.728 954.538 6%
0105 Recruitment 9.430.283 9.576.433 -146.149 -2% Error in budgetingTo be cross-checked with HR, check estimation on # hired people
0106 Legal Fees 4.236.165 4.533.288 -297.123 -7% Phasing0107 Consultant Fees 1.232.477 1.159.555 72.922 6%0108 Medical fees 2.855.564 2.479.555 376.009 13%
02 Travel & Meetings 101.752.094 93.934.517 7.817.578 8%0201 Flights 20.753.465 19.206.545 1.546.920 7%0202 Lodging 37.907.303 34.151.656 3.755.647 10%0203 Meetings & Events 16.624.166 14.241.607 2.382.559 14%0204 Meals 15.167.221 13.163.145 2.004.076 13%
0205 Ground Transportation 11.299.940 13.171.565 -1.871.625 -17% Error meeting needs to be recharged to correct cost centers
Finance will check and correct. Estimated correction is 1,7m RUR
06 Telecom 17.468.750 11.922.169 5.546.582 32%0601 Mobile Services 13.056.250 8.958.065 4.098.186 31%0602 Telephone Services 4.412.500 2.964.104 1.448.396 33%
TOTAL TOTAL 238.846.412 231.269.318 7.577.094 3%
Variance Explanations Corrective Actions
Input from Finance Output from Category Team
Updated and consolidated Variance Report
Agreement on Action Plan, Responsible and Due date
Variance Reports for the Category by Region
INPUT REPORT DURING THE MEETING OUTPUT REPORT
Future: Closed Loop Spend ManagementControl & Monitoring
ILLUSTRATIVE
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
What is the Customers’ Expectation of Value?
What is the customer value to be delivered-: customer/market “value driver” characteristics?Market/segment volume?Who are the end- users? Is the product-service a candidate for imitation and commoditization?What are the preferred product-service format alternatives?What are the product-service production format alternatives?How active are competitors? Who are they? Do they have a presence in all of the market or specific segments?What are the market constraints (if any)?
One
Design and Development
What is the required R&D expertise? What resources (assets, processes, capabilities and capacities are required for success? What are the investment implications (capital, capacity, forecast utilisation?)Are they already available? Who owns them? Where are they?Which of them are “core” to the customer/market opportunity?What are the competitive issues?Are there enablers that can create a CA What is the likely number of tasks the product will be expected to undertake?
Two
Procurement and Manufacturing
Product complexity The role of differentiationMarket/production volumes Range & varietyProduction process options;
Project? Job? Flow Line? Continuous Process?
Procurement profile;Standard components (product, industry)Modular build?Exclusive/specific components?Industry purchasing group?
Three
Future: Workforce Capabilities
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
Future: Workforce Capabilities
Future: Risk Management
Dhawan, Walters, Bhattacharjya Procurement Models for the Future
Copyright © 2011 Accenture All Rights Reserved.
High
Medium
Low
ChemicalsFood
(Impact of wheat & milk prices)
Mining & Metals
Manufacturing
Pharmaceutical and Medical Products
Low
Construction
Industrial EquipmentConsumer Goods
Retail
Media and Entertainment
Communication
Medium
Transportation(Impact of Oil Prices)
Oil, Gas and other Natural Resources
Automotive30% of component
suppliers in bankruptcy situation
Aerospace and Defence
(Single source supply)
Electronics and High Technology
High
Perceived Exposure to Supplier Risks
Perceived Exposure to
Price Fluctuations
Source: High Performance in Procurement Risk Management (Accenture, 2010)
Risk Exposure by Industry