Sales Institute

David Coffey – The Clearview GroupDavid Coffey  The Clearview Group

Stephen Pitcher – Provide Consultants

19TH 201119TH January 2011

AgendaAgenda Introduction – Who we are

1. What is Purchasing /Procurement1. What is Purchasing /Procurement

1. When does it start?

2. What are the different levels of procurement maturity within clients organisations

3 What challenges does procurement face3. What challenges does procurement face

4. Outline ways to identify the procurement behaviours of clients

2. Procurement Practices

1 What do they do1. What do they do 

2. How do they plan, identify strategies

3. What tools do procurement use

4 What does this mean for you4. What does this mean for you

5. Identify ways to engage with different levels of procurement

3. How do suppliers respond

1 How to categorise procurement functions1. How to categorise procurement functions

2. Category and Supplier Management

3. Tools for suppliers

4 T Ti4. Top Tips 

Introduction

David Coffey – The Clearview Group – david.coffey@clearviewgroup.ie / 087.137.0798

David has extensive experience building, managing, and transforming strategic procurement functions across David has extensive experience building, managing, and transforming strategic procurement functions across both the public and private sectors.

• The Clearview Group : Co-founder (2005 to date), a procurement services company

• Supplierforce: Chief Services Officer, with responsibility for professional services delivery.

• Takeda Pharmaceuticals North America, Inc (Chicago): US Head of Procurement ($1.2B in supplier spend)

• ABN AMRO North America, Inc (Chicago): VP of Corporate Planning and Strategic Sourcing ($1.7B in supplier spend)spend)

• PricewaterhouseCoopers US (Chicago): Senior Strategy Consultant

Stephen Pitcher – Provide Consulting Ltd – stephen@provide.ie – 086 6235551Stephen Pitcher Provide Consulting Ltd stephen@provide.ie 086 6235551

Stephen has worked in senior Procurement roles in the UK and Ireland for PLCs such as Allied Domecq, First Leisure and Hibernian/Aviva . He was a founder member of the Aviva International Procurement council. He founded Provide Consulting after leaving Hibernian and provides procurement services to a variety of SME and Corporate clientsvariety of SME and Corporate clients

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Traditional Purchasing gCharacteristics

Focus on short‐term savings

Tactically oriented vs. strategically focused

Focused on Tangible Goods FocusShort-Term

Pre‐ Defined Specifications

Deal Driven (Adversarial) RelationshipsCommunication

No consistent measures to assess performance

Communications not consistent

Performance

Relationship

Suppliers lack knowledge of Group OPNs.

Procurement Characteristics Today

Focus on total cost of ownership

Increased Focus on Service

Strategically vs. Tactically oriented

FocusShort-Term

Long-Term

Consistent assessment of performance

Clear direction in relationship developmentCommunication

p p

Improved communication

E h d k l d f b i

RelationshipPerformance

Enhanced knowledge of company business practices

Procurement  Defined

Procurement is the process of creating d t i i l d i and sustaining value and managing

external spend and activities through:• 40-60% of a company’s cost

base

• the acquisition of goods and/or services • at the best possible total cost of

ownership

• significant impact on margins

• Complex - thousands of ownership, • in the right quality and quantity, • at the right time, • in the right place

Complex thousands of suppliers with many more relationships

C l h i g p

• and from the right source • for the direct benefit or use of the

procuring organisationgenerally via a contract

• Constantly changing environments (business, markets, people, regulation, compliance etc.)• generally via a contract. compliance etc.)

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The  capability of your clients and target companies will vary

PROCUREMENT CAPABILITY – WHERE ARE YOUR CLIENTS & PROSPECTS?

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Behaviours of Procurement Function along the Capability Curve – a look at levels 1 to 3

TRANSACTIONAL1. Tactical2. No/Limited sphere of influence3. Weak relationships with business4 Focus is on execution process

COMMERCIAL1. Follow process ‐ tenders2. Not independent thinkers – follow process3. Limited sphere of influence4 Suspicious

PROACTIVE1. Strategic – think in a business context2. Ear of CFO/CEO3. Commercially, analytically strong4 Subject matter experts4. Focus is on execution, process

5. Not commercially savvy6. Limited decision making7. Distracted with day to day

4. Suspicious5. Blinkered, somewhat narrow vision –

process and price6. Traditional negotiation and supplier 

management methods – challenge, 

4. Subject matter experts5. Independent, self directed6. Influence, may in fact control7. Open‐minded, progressive8. Broader, more holistic view

aggressive7. Short term approach

9. Receptive to ideas10. Relationship builders, leaders11. Change managers12. Thinkers ‐ innovation

Traditional Challenges

Managing Procurement is challenging......and it has only become more so

Traditional Challenges

• Purchasing vs. Procurement –perceptions

• Lack of executive awareness

• Deliver savings

• Budgets reside outside of purchasing / Shift from competitive advantage to

titi i l• Budgets reside outside of purchasing / procurement

• Lack of procurement expertise in the business unit

competitive survival

• Massive pressure building on the purchasing function

business unitNew Challenges

• Massive upheaval in global markets

• Look to cost base and procurement for sustained profitability

• Contracting revenues

• Market share is under threat

R d d fit bilit d

• “Doing more with less”

• Same quality / service for less

Manage and drive value• Reduced profitability and competitiveness

• Supply chain risk – company f il

• Manage and drive value

failures

Procurement What do they do?

The Sourcing Cycle

Value Creation Value Capture

PerformanceManage

Define UserRequirements

Profile theCategory

SourcingStrategy

Tender &Award

ImplementContract

3-5 months 3-5 years

• Best practices

• Order to chaos – categories, segmentation

• Prioritise – categories, suppliers, resources – to deliver value

• Cycle, not an eventy

• From tactical/short term to the strategic/long term

• Information rich – business solutions

• Plans solutions• Plans, solutions

• Process + Management

• Collaborate and engage – stakeholders and suppliers

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Cost Drivers ReviewCost Drivers Review  

Supplier C tSupplier Customer

Tariff(Unit Cost)

SpecificationCosts

UsageCosts

Costs

Infrastructure Costs/ Transaction Costs

Procurement StrategyProcurement Strategy

Poor Service

Information

r Mar

gin

Poor ServiceHigh Cost

of Is

sues

Specification

s. H

ighe

r

ntifi

catio

n o

Performance

d C

ost v

s

Poor ServiceLow Cost

Iden Performance

Measurement

Red

uce

Sustainable Cost Savings

Procurement Best Practice

How do Procurement Functions create  Procurement Strategy…

• Focus on Core Business

• Improve Quality of I f ti

Business Strategy• Correct

product/service

• Improve Quality of I f ti

Dept. Strategy• Assess current

supplier base

• Set Out Performance C it i

Identify Suppliers• Review Specifications

• Provide Management Information

Internal Tactics• Improve internally and

externally

• Better information flow

Communications

Information

• Reduce Cost Year on Year

• Streamline Decision Making

Information

•Reduce Number of Suppliers

•Reduce Processing Time

Criteria

• Allocate Resources• Identify Appropriate

Budget Allocation• Better access to global

information

Making Processing Time

•Identify Cost at Source

• Continuous quality improvement

The Light at the End of the Tunnel!The Light at the End of the Tunnel!

• Structure and Objectivity– Category Management– Category Management

– Supplier Management

• Global Requirements

• Non Core RequirementsNon Core Requirements– CSR Agendas

k d b l b l b l• Risk, Auditability, Stability, Sustainability

What can Suppliers do

1. Categorise procurement functions

2. Embrace Category and Supplier Management

3. Contribute to the process

4. Tools for suppliers

5. Dos and Don’ts

Categorise the procurement functions

• Review Procurement in light of maturity chart• Who’s at the meeting• Who reads the proposals• Are they looking at reducing invoices, CSR Reporty g g p• Who will manage the contract• What issues do they discuss ; cost, volume, y ; , ,specification

• How will value be measured • What language do they use about Risk, Contingency, Added Value 

OpportunitiesOpportunities

• Category Management– Visibility– Visibility 

– Structure

• Supplier Management– Platform for measurement

– Platform for stakeholder management

Contribute to the processContribute to the process 

• Identify ways to help move the procurement function across the maturity chartSh d t di f t h ll• Show an understanding of procurement challenges

• Need for short term savings – Deliver short term benefitsDeliver short term benefits

• Corporate unwillingness to partner with suppliers– Build trust with stakeholders

• Lack of understanding of procurement in client organisations– Demonstrate value of ongoing engagement in supplier management 

process Develop communicationsprocess. Develop communications

• Risk in Supply Chain– Demonstrate risk avoidance

Dos and Don’tsDos and Don ts 

Do Don’t

Li t t Cli t T ll hi h t hListen to Client Tell him what you have

Use an Executive Summary Abuse an Executive Summary

Provide Solutions Sell your productProvide Solutions Sell your product

Account Manager to attend Sales people attend

Show Trust Start Tender with Confidentiality Clause

Show relevant CSR evidence Engage in Corporate Boasting

Identify stakeholders Pigeon hole stakeholders

Know why you are there Just Tell them you value the business

Tips for Sales Professionals when Engaging with Procurement

Your goals are to win new clients, sell more to existing clients, be retained or increase ‘stickiness’, t t i Th bj ti t il fli t ith th b ’ bj ti

1. Gauge the capability of the procurement function

protect margin. These objectives may not necessarily conflict with the buyer’s objectives

2. Identify the key stakeholders, don’t circumvent procurement

3. Understand how the procurement function organises spend, categories

4 See your business through the client’s eyes - understand your category spend 4. See your business through the client s eyes - understand your category spend relative to other categories, complexity, importance to the business

5. Engage procurement – understand sourcing strategy for your category.

6 Heighten your profile by providing objective strategic guidance such as market 6. Heighten your profile by providing objective, strategic guidance such as market intelligence, product developments.

7. Help to shape the prospect’s category strategy. They often need your help!

8 Listen and understand the problem they are trying to address8. Listen and understand the problem they are trying to address

9. Provide value - understand the prospect’s total cost structure for the model. Make those improvements if necessary

10 In tenders engage and answer the questions be creative and do not provide 10. In tenders, engage and answer the questions, be creative and do not provide marketing fluff

11. Implementation is key – do not let the wheels fall off at the first hurdle

12 Management - do not forget the client after the contract is signed – expect

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12. Management do not forget the client after the contract is signed expect improvements, value, risk mitigation over the life of the contract.

Tool: Procurement Capability Framework

Client 1 Client 2 Prospect 1 Prospect 2

1. Procurement Strategy

2. Total Cost Focus

3. Category & Supplier Mgmt

4. Stakeholders

5. Organisation (Skills, Structure)

6. Policy & Governance

7. Processes & System

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QuestionsQuestions