4 Key Procurement Objectives for 2014

During the recent Webinar ‘Real-time Procurement Benchmarking: Insights into Key Issues &

KPIs for 2014 & beyond’, held on Dec 12, 2013, in association with ISM, The Hackett Group &

Zycus, a small survey was conducted among the 861 procurement professionals who

attended the webinar. This survey was aimed at understanding the business/procurement

objectives and challenges anticipated by the webinar attendees in the year 2014. The survey

results can be seen in this info-graphic: Driving Down The Procurement 2014 Lane.

Procurement Objectives for 2014

Improving Profits

The top two enterprise objectives for 2014 among procurement professionals are to achieve

better Revenue Growth and to Improve Profit Margins . (40.9%) (44.2%)

With an objective to improve profit margins, it

is important that procurement focus on

identifying savings opportunities by

developing visibility into the direct and

indirect spend of the organization. One of the

prevalent cost factors in most businesses is purchased

goods and services. Reducing the costs of purchased

goods and services has a direct impact on a company's

profit margin. of the procurement professionals 60%

revealed that reduction and avoidance of purchasing

costs are the top two procurement-related issues that need to be addressed in 2014.

4 Key Procurement Objectives for 2014

RevenueGrowth

40.9%

Improve Margins

44.2%

1

The survey results also revealed that at

present of organizations have 46%

less than 40% of their indirect spend

influenced formally. World-Class

Companies have of their indirect 97%

spend formally influenced, as per the

2013 Hackett Group study.

The other critical procurement issue,

which needs to be addressed in 2014 according to 45% of the procurement professionals is,

expanding awareness of the importance of procurement and its influence on the bottom

line.

These issues may be addressed by adopting the following : process

i. Investing in Skilled Professionals: Investing in skilled professionals with strong negotiation

skills and overall knowledge of the industry, the raw materials cost and suppliers' capabilities

can enable procurement to master the negotiations and get best deals for the organization

from suppliers.

ii. Leveraging Procurement Automation: Technology can enable higher visibility and control

over different facets of the procurement process, such as: sourcing activity, supplier evaluation

and selection, contract terms compliance, overall spend etc., thus enabling timely

identification of bottlenecks and savings opportunities.

by World class

Companies in 2013

Indirect Spend formally influenced

Invest in

a. Qualified People

b. Efficient Processes

c. Effective Technology

The top 2 enterprise objectives for 2014 area. Revenue Growth (40.9%) and

b. Improved Profits (44.2%)

For achieving high visibility and identifying greater savings opportunities, best-in-class

procurement organizations are leveraging procurement automation by implementing a spend

analysis solution. A spend analysis solution facilitates sourcing performance, reduces maverick

spend, increases compliance and generates savings. Spend Analysis features expand the

performance-improvement horizon by:

Embedding spend data classification into real-time buying processes

Automating and accelerating the identification of savings opportunities

Synthesizing spend data with global market intelligence to inform competitive sourcing and

supply management strategies

To learn about the Zycus' Spend Analysis Solution, Click Here

Adopt the following Practices

a. Invest in Skilled Professionals

b. Leverage Procurement

Automation

A critical issue to be addressed in 2014a. Formally influencing the

indirect spend

OBSERVATIONfrom the survey

ACTIONto implement

OBSERVATIONfrom the survey

ACTIONto implement

2 Improving Visibility

According to the survey only of procurement professionals revealed that they have 40%

significant ability to view spends data by supplier on an enterprise-wide basis. As per the

Hackett Group study, of World Class Companies had significant ability to view spends 89%

data by supplier on an enterprise-wide basis in 2013.

Lack of a holistic view is a major impediment to identifying savings opportunities, spend

patterns across suppliers, utilization of contract terms and, more importantly, tracking the

performance of key suppliers.

Best-in-class organizations are leveraging technology to provide seamless information across

the various dimensions of the procurement function, and not just getting visibility into supplier

spend data. An integrated Source-to-Pay solution assists procurement professionals with a

single view across the various stages of the procurement processes.

Some of the key benefits of integrating procurement processes are:

I. Better Visibility: An integrated view of spend analysis with supplier management will provide

better visibility, not only in terms of spend per supplier, but also segmented per categories and

savings realized per supplier. Information like this can better enable procurement professionals

to sharpen their category sourcing strategies, and reap better results from their sourcing

initiatives, leading to savings more quickly.

for World Class

Companies

as per current study

Significant ability to view spend by supplier

ii. Monitor Maverick Spend and Realize better Savings Opportunities: With the integration of

spend analysis, supplier management and contract management, organizations will be able to

view on-contract and off-contract spends made in each category with each supplier. This not

only helps with tracking of maverick spending, but also helps monitor suppliers on key contract

terms. Also, if certain spend is off-contract with a certain supplier, the organization or the

procurement professional raising the Purchase Order will be alerted regarding the contract

(and the discount agreed upon in the contract), enabling realization of saving opportunities

with the ability to view enterprise-wide-data in a few clicks.

Integrate Procurement processes toa. Gain Better Visibility

b. Monitor Maverick Spend and

Realize better Savings

Opportunities

Over 60% of respondents lack significant information visibility into spend data by supplier on an enterprise-wide basis

OBSERVATIONfrom the survey

ACTIONto implement

3 Addressing Strategic Sourcing as a key capability related issue

According to the survey results, 45% of respondents

cited strategic sourcing as the top procurement

capability-related issue in 2014. Strategic Sourcing is

an approach to procurement whereby the business

needs of the organization are matched with the

supplier market.

The important Steps of Strategic Sourcing are:

1. Analyze the requirement for sourcing – identify spend

2. Search for Suppliers

3. Request Information

4. Request proposal or quotation

5. Event Roll-out

6. Analyze Supplier Information

7. Award the contract and begin to track suppliers

To get a detailed understanding of the above-mentioned steps of Strategic Sourcing, refer to

the e-book ‘7 Step Guide to Strategic Sourcing’.

The survey results also show that only of 29%

respondents, have 80% - 100% of annual

RFX's done electronically. This low figure

indicates that many organizations still need to

make better use of technology and adopt an e-

Sourcing solution for sourcing automation. As

per The Hackett Group, World-Class

Companies handled of their RFXs 85%

electronically last year.

Cited Strategic Sourcing as top capability related issue

in 2014

45%

for World Class

Companies in 2013

eRFXs

Benefits of e-Sourcing:

I. Reduces cycle time: A well-defined and automated sourcing process is easy to manage and

provides output in a shorter time frame. According to a recent study by the Aberdeen Group, a

structured process reduces the sourcing cycle time by 25% - 40%.

ii. Avoid bottlenecks: With higher visibility and control over the sourcing projects, the

organization can easily identify the bottlenecks and take prompt measures to resolve them.

This helps in cutting costs and realizing savings opportunities.

To learn about the Zycus' e-Sourcing Solution, Click Here

The important Steps of Strategic Sourcing are:

a. Analyze the requirement for sourcing – identify spend

b. Search Suppliers

c. Request Information

d. Request proposal or quotation

e. Event Roll-out

f. Analyze Supplier Information

g. Award the contract and begin to track suppliers

Top Procurement capability-related issue for 2014 is Strategic Sourcing, as mentioned by 45% of respondents during the current study

Adopt an e-Sourcing solution for sourcing automation and reap the following benefits:

a. Reduce cycle time

b. Avoid bottlenecks

Over 70% of respondents handle less than 80% of their annual RFX's electronically at their organization

OBSERVATIONfrom the survey

ACTIONto implement

OBSERVATIONfrom the survey

ACTIONto implement

4 Value realization through non-sourcing activities

43% of respondents cited that 10% - 50% of procurement value arises from non-sourcing

activities. These activities largely consist of Supplier Relationship Management, Contract

Management and Spend Analysis.

Supplier Management can help companies have better visibility into supplier deliverables and

offers the following benefits: removal of hidden cost drivers, increase in competitive advantage

by reducing cycle times, inducing charge-backs for non-conforming material, gaining insight

into how to best leverage the supply base, and

streamline processes.

The survey results also revealed that of 60.2 %

procurement professionals either totally lack a

formal scoring methodology or have it only for a

select few strategic suppliers.

A formal scoring methodology for suppliers helps the organization understand the strengths

and weaknesses of their suppliers. Supplier performance management can help companies

have better visibility into supplier deliverables. Scorecards can also help companies develop

their suppliers and help them overcome their weaknesses which is beneficial to both the

companies and the suppliers. Organizations can leverage supplier management programs

which help in setting up key performance indicators, capture data inputs, set stakeholder

surveys and manage supplier scorecards.

Benefit of using a Scoring Methodology for Supplier Performance Management:

Develops Strategic Relationships: Based on the scorecards, organizations may choose to

benchmark suppliers with their peers in the industry, execute supplier development programs

which can help the organization improve supplier performance, product/service quality, reduce

cost and attain higher value from the suppliers. Procurement can thus leverage and enhance

strategic supplier relationships and also help reduce business risks.

126 0 %

Lack Formal Scoring Methodology

To learn more about Supplier Management, read 'What, Why and How of Supplier Management’

To learn about Zycus' Supplier Management Solution, please Click Here

Conclusion

The increasingly complex business environment, coupled with evolving procurement needs and

objectives, requires procurement to focus on the right people, processes and technology. The

procurement technology landscape has evolved to provide cutting-edge technology for meeting

the requirements at different point in the procurement cycle. The year 2014 requires the

procurement function to move towards process standardization, automation and integration for

enterprise-wide information availability and to overcome various capability-related issues.

Read AMD’s case study to understand how AMD leveraged the Zycus Suite

Know More

To know more about Procurement Automation Solutions and the value that the Procurement

Automation Suite can deliver to your organization, or for any other advice on procurement-

related issues…

Feel free to for help and clarifications.Contact Zycus

A formal scoring methodology for suppliers helps the organization to

a. Understand the strengths and

weaknesses of their suppliers &

b. Develop Strategic Relationships

Over 60 % of procurement professionals have disclosed that a formal scoring methodology either does not exist or is extended and maintained only for a select few strategic suppliers.

OBSERVATIONfrom the survey

ACTIONto implement

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Zycus is dedicated to positioning procurement at the heart of business performance. With our spirit of

innovation and a passion to help procurement create even greater business advantages, we have

evolved our portfolio to a complete Source-to-Pay suite of procurement performance solutions which

includes - Spend Analysis, eSourcing, Contract Management, Supplier Management, Financial Savings

Management, and Procure-to-Pay.

Behind every Zycus solution stands an organization that possesses

deep, detailed procurement expertise and a sharp focus on

being responsive to customers. We are a large — 600+

and growing — company with a physical presence

in virtually every major region of the globe. We

see each customer as a partner in innovation

and no client is too small to deserve our

attention.

With more than 200 solution

deployments among Global 1000 clients,

we search the world continually for

procurement practices proven to drive

competitive business performance. We

incorporate these practices into easy-to-

use solutions that give procurement teams

the power to get moving quickly — from any

point of departure — and to continue innovating

and pushing business and procurement

performance to new heights.

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