A Procurement Leaders Guide to Enabling Agility

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A Procurement Leader’s Guide to Enabling Business Agility

Presented By:

October 26, 2016

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Agenda• Introduction: 2015 in Review • 2016 Key Issues: Agility in procurement

• Developing procurement’s culture and talent • Building an agile information and technology architecture• Enabling an agile service delivery model

• Closing Thoughts• About Tradeshift

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Introductions

Vishal PatelDirector, Solutions MarketingTradeshift

Christopher SawchuckPrincipal, Global Procurement Advisory Practice LeaderThe Hackett Group

Christopher SawchukPrincipal, Global Procurement Advisory Practice Leader

The Hackett Group

A PROCUREMENT LEADER’S GUIDE TO ENABLING BUSINESS AGILITY

5© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

In 2015, procurement’s #1 priority was to elevate its role to a trusted advisor

72%Ranked elevating the role of procurement to a trusted advisor as a critical or major objective in 2015

Source: Key Issues Study, The Hackett Group, 2015

Consistently deliver on the basics

Hire and retain high-caliber staff

Increase agility

Develop category management strategies

Deliver high-quality market insights and research

Build better awareness of procurement’s services

Discover and recommend innovative suppliers

Prove value through small projects

Improve the overall buying experience

Other

N/A

77%

64%

61%

57%

53%

47%

36%

35%

35%

5%

4%

Stakeholders are not always seeking innovation

CostQualityPerformance

In past Key Issues studies, respondents have indicated that becoming a trusted advisor to the business is a critical objective. Which capabilities will help the most to achieve this

status?


In 2016, the priorities are similar; agility is top of mind… but procurement is struggling to address it


74%74% ranked improving agility as a critical or major objective in 2016

36%Only 36% said they have a high ability to improve agility today


To adapt, procurement must weave agility into every aspect of its service delivery model

Service Delivery Model 2.0

Intensify-ing

competi-tionDisruptive innovation

Extreme Volatility

The In-sight

Impera-tive

The Digi-tal Impera-

tive

The five forces of change

Make and implement decisions quickly

Respond rapidly to changes in business demands and priorities

Forecast and plan continuously to identify future risks and opportunities

What’s required for agility?

Developing procurement’s culture and talent is critical to

fostering agility


The characteristics of an agile procurement culture

Agile procurement organization

Low agility Agility enabler High agility

Change averse culture, preserve status quo, focus on resource utilization

Embrace change, view change as an opportunity, focus on business outcomes

Talent tied to specific roles, common talent management strategies for all roles, limited learning and development

Flexible talent placement, talent management tailored to needs of roles, continuous learning and development

Bureaucratic decision-making, lacks empowerment, fosters inappropriate risk taking

Delegated decision-making authority, change-oriented leadership, calculated risk taking

Leadership

Culture

Talent


Culture: At the US BPC, Pfizer’s presentation highlighted the importance of driving positive change through its culture champion network

If interested, the highlights from this presentation are available in a Hackett research paper.


What makes it agile?

“Our most important asset is our people. We’re trying to approach recruitment differently than in the past. I’m not convinced we necessarily need to hire only people who have done sourcing before. Rather than hiring for experience, we look for candidates with the right skills to succeed. Sometimes you need a combination of skills and experience, but ultimately, I want people with an entrepreneurial spirit, who want to build something new, are quick learners and logical thinkers, but who can also build relationships. We can train them in our sourcing process, but softer skills are more difficult to teach.”

Frederic Khalil VP, Head of Source-to-Pay and Corporate Services Guardian Life Insurance Company of America

Leadership: Guardian recruits and develops future leaders by fostering an entrepreneurial spirit, focusing on relationship skills (versus sourcing expertise)

"Outside the box" recruiting(offshore and onshore)

Cross-training and lunchbox training Career track program

Recruit,train and develop careers

Single mission Shared cascading objectives Team events (incl. Community

volunteering) Physical seating

Build “One Team”

Department meetings Intellectual capital building Process improvement Corporate projects volunteering

Foster ownershipand initiatives

Newsletters Recognition and rewards program Department trophy ceremony

Reward andrecognize performance

Source: Guardian


Talent: Mead Johnson’s four-phased approach to building procurement’s credibility includes continuously developing the ‘softer side’ of procurement

Phase

1

Phase

2

Phase

3

Phase

4

Set up a diverse team to support innovative thinking External experience brings new ideas and best practices to the team Diverse backgrounds (finance, engineering, IT) provide additional tools

Global oversight through Global Collaboration Councils Long-term strategies, productivity assessments, risk

management strategies Best practice, regional support, cross regional leverage, global RFPs,

category SME

Continue developing soft skills Harvard Business School Online training Culture Crossing seminar, global effectiveness, influencing, negotiation

global leadership, team building

Business advisors supporting regional initiatives Thought leadership Viewed as strategic partners who add value

What makes it agile?

“Culture Crossing” seminars help improve global collaboration, improve effectiveness

Global councils help break logjams to improve productivity


Four characteristics of agile talent management in procurement

1. Training is conducted in the field, not in a classroom. It is creative, engaging, challenging and specific/based on real-life scenarios.

2. Staff is rotated within and between business units and geographies, developing potential future leaders who have a broad understanding of the entire value chain.

3. Recruiting and hiring draws from outside the typical pool of procurement and sourcing specialists. Softer skills like relationship management, intellectual curiosity and business acumen are highly valued.

4. Procurement’s culture is defined by successfully challenging the status quo, influencing leadership to try something different. It is a “constructive disrupter,” displacing traditional, less efficient processes with new, creative solutions that are able to scale with the future strategy.


Ultimately, becoming more agile requires innovators, not optimizers

“A lot of procurement executives have been molded and developed in their careers to become optimizers, but we need innovators. In the past, managers often took

comfort in hiring like-minded people, which yielded a kind of group-think that is not sustainable. You may get a temporary lift for a few years when someone comes in

and optimizes something, but when you are challenged to change the model altogether, it is very difficult. Transformation requires people who bring individual

creativity and thinking to the table and are willing to raise controversial issues and consider alternative ideas.”

Ramsay ChuGlobal Head of Procurement

Rio Tinto Group

Building an agile information and

technology architecture


Information and technology enabled agility

Information and technologyLow agility Agility enabler High agility

Calendar-driven planning, singular set of planning assumptions

Adaptive, dynamic planning process, multiple scenarios and dimensions to planning models

Ad hoc response to variances, disjointed KPIs, manage reactively based on lagging indicators

KPIs aligned with business strategy, proactive performance management based on leading indicators

Fragmented systems and data models, poor data governance, limited analytical tools

Mature systems, data models and governance, broad adoption of analytics

Fragmented, disjointed, single purpose (i.e. only invoicing) networks in place

Business networks span from source-to-pay and include broader trading partner collaboration

Risk forecasting and planning

Performance management

Information governance

Business network collaboration


Risk forecasting and planning: A hallmark of procurement agility


Agile procurement orgs have a strategy in place to take advantage of technology developments

Technology components Questions procurement should be asking

Internet of everything How can sensors, location based services, RFID, etc. help to make our supply chains more agile?

Social media Can social media be used as a tool to detect supplier risk patterns? Can we use it to collaborate across procurement?

Mobility Can we conduct the business of procurement on the move?

Analytics What predictive modelling capabilities should we invest in?

Cloud What do we need to know about the risks of sourcing cloud technology?

Cognitive computing How will this revolutionize spend analysis? Risk forecasting?


Information

Talent

Develop

Plan

Source

Make

Enablingprocesses

Deliver

Performancemanagement

Service Customer Sell

Market

Customer-centric business networks: Agile procurement organizations are rethinking how supplier networks can be expanded to better connect the entire value chain

Information-driven decision making, customer-centricity, and operational responsiveness are all byproducts of having better end-to-end, real-time network visibility.

Source: The Hackett Group


Beyond supporting transactions, networks can also be a source of market intelligence, knowledge sharing and collaboration

Suppliers

Research centers

Industry groups & trade associations

Internal business partners

Government agencies & NGOs

Customers

Universities/schools

Procurement


Four characteristics of agile procurement technology and information architecture

Continuous risk forecasting and planning is a hallmark of agility. Procurement’s ability to react quickly to change hinges on how well its prepared.

Agility leaders have a plan in place for taking advantage of future developments in social, mobile, analytics, cloud and cognitive computing.

Agile supply chains are built on a network of real-time visibility. Supplier networks will evolve into more holistic business networks to enable faster, more educated insights.

An agile procurement technology footprint is characterized by an ecosystem of software solutions, including both mature P2P solutions and emerging vendors in areas like risk, mobile spend analysis and spot buying

Enabling agile service delivery


Automation, COE and Outsourcing enabled agility

Agile service delivery

Low agility Agility enabler High agility

Labor intensive, fragmented systems, ‘swivel chair’ processing

Technology intensive, integrated transactional systems, high levels of “touchless” orders (automation)

Limited adoption of COEs, the scope of work only includes the most transactional tasks

COEs are used for more advanced work like spend analysis, market intelligence, tactical sourcing and risk forecasting.

Large, all encompassing projects spanning multiple functions (Finance, Procurement, HR). Business case based solely on labor arbitrage.

“As-a-service” outsourcing of select areas in bite sized, consumable parts. The business case is tied closely to performance.

Outsourcing

Centers of Excellence

Automation


Automation: Agile P2P organizations are piloting robotic process automation (RPA) – especially in shared service centers Large outsourcing providers have begun to reap the

benefits of RPA as a way to lower their own operating costs. GBS and procurement shared service centers should explore the potential as well.

When does RPA make sense? – Stable, relatively static applications– Need to access multiple systems– Limited need for human intervention, exceptions

handling– Clear understanding of the current cost of manually

completing the work– High transaction volumes


Centers of Excellence: Looking beyond transactional work, agility leaders use onshore COEs to reap the greatest return on MI investments

55% are not implemented or in the first stage of maturity

343xOnshore COE

183xOutsource

190xOffshore

COE

326xCategory Managers

The ROI of MI

31%

24%

26%

17%

3%

How mature is your market intelligence program today?

Not Implemented

Stage 1Lagging

Stage 2Achieving

Stage 3Exceeding

Stage 4Leading


Outsourcing: Tactical sourcing desks free up valuable category manager’s time…

Knowledge Management

Category Mgmt & Strategic Sourcing of Direct Materials & Services

Supplier Performance Measurement

Supply Master Data Maintenance

Analytics

Internal Customer/Requisitioner support/help desk

Requisition and PO Processing Activities

Tactical Sourcing for Indirect Materials and Services

Supply Market Intelligence

Supplier support / help desk

Sourcing technology support

3%

4%

8%

14%

13%

14%

22%

23%

22%

24%

26%

3%

4%

1%

4%

6%

6%

3%

3%

4%

3%

7%

6%

8%

10%

18%

18%

20%

25%

25%

26%

27%

33%

Plan to Outsource All or Part Within 2-3 YearsColumn2

Which of the following activities are provided by procurement business process outsourcing (BPO) service providers?



… and can help reduce the tail, increase spend influence

Source: The Hackett Group

Savings

Suppliers

80% ofspend

20% 100%

0-2%3-4%5-7%

40% influenced by strategic sourcing 5% not

influenced 1

0% n

ot in

fluen

ced

10% influenced by buying desk 5%

e-catalogs

Tota

l spe

nd p

er s

uppl

ier

10% not influenced 15% not

influenced

10% maverick spendthat should have beenstrategically sourced

Candidatesfor spot buys

5% unknown

Example of tail spend at a company with only 55% spend influence

Good candidates for the tactical sourcing desk


Three characteristics of agile procurement service delivery

1. Agility leaders are piloting Robotics Process Automation in P2P.

2. Centers of excellence are hubs of more advanced analytics including spend analysis, market intelligence and risk forecasting.

3. Outsourcing is being used to help address tail spend and increase influence by staffing tactical sourcing desks and maintaining catalogs.

Getting started


Five recommended action items

1. Apply the agility test to your own service delivery model. Determine where the gaps are and how it needs to change to support procurement’s evolving role.

2. Take an honest inventory of procurement’s identity and culture. Is it an optimizer or an innovator? Is it operating seamlessly across cultural and geographical boundaries? Refresh recruiting, hiring and training with the idea that chaos is the new normal.

3. Even for non-regulated businesses, risk forecasting and planning is a hallmark of agility. Evaluate your current risk management program not only for depth but speed and agility. Benchmark cycle times to strike the right balance.

4. Invest in predictive capabilities, pilot emerging technology and work towards expanding single function supplier networks into interconnected business communities.

5. Consider outsourcing providers to help manage tail spend. Model the ROI on efficiency gains and compliance versus savings.


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The Business Commerce Platform

We provide our customers with solutions to buy and sell goods and services.

Our extensible platform allows you to tailor solutions to meet your company’s needs.

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Our SolutionsProcurementBuy everything you need from one place, where any online purchase can be within policy Accounts PayableTransact with all your suppliers for 100% of your invoice volumeSupplier ManagementAll your supplier master data, compliance, product information, risk and performance in one place

PlatformDirect & Indirect

Transactions Collaborative & Agile

Open & free for suppliers

App Ecosystem

Financial Solutions Dynamic Discounting, Supply Chain Finance, Virtual Cards

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End-to-End Business Commerce Platform

Supply Chain Collaboratio

nBuild your own apps

Financial Solutions

Third Party Apps

Procure-to-Pay (Direct & Indirect)

Supplier Management

Tradeshift Platform(Transactions, Collaboration, Compliance, Insights)

Customer

ERP and Legacy Apps

Suppliers

Tradeshift Platform

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Example of Extensibility / Agility

Forecast Collaboration

E-Logistics

Order Collaboration

Supply Chain Performance

Supply Chain Collaboratio

nBuild your own apps

Financial Solutions

Third Party Apps

Procure-to-Pay (Direct & Indirect)

Supplier Management

Tradeshift Platform(Transactions, Collaboration, Compliance, Insights)

Customer

ERP and Legacy Apps

Suppliers

Tradeshift Platform


Q&A

A Procurement Leaders Guide to Enabling Agility

Technology

Transcript of A Procurement Leaders Guide to Enabling Agility