Procurement’s Digital Transformation Journey: What Does ... · Enterprise Performance Management...
Transcript of Procurement’s Digital Transformation Journey: What Does ... · Enterprise Performance Management...
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November 12-14, 2018 | Las Vegas
Procurement’s Digital Transformation Journey: What Does Success Look Like?
Kurt Albertson – PrincipalThe Hackett Group Procurement Advisory
Principal and NA Procurement Advisory Practice Leader
Kurt Albertson is a Principal with The Hackett Group with program responsibility for
North American Advisory programs focusing on client relationships and delivery,
business development and research. Mr. Albertson works with over one hundred Global
1000 companies leveraging research and thought leadership to provide strategic
direction and best practice business advice within Procurement and Finance.
Prior to joining the Hackett Group Mr. Albertson spent six years as a management
consultant in Sourcing and Procurement during which he worked with executives from
dozens of large corporations on sourcing, business and technical strategies,
organizational and business process design, and cultural change.
Mr. Albertson also has five years of automotive experience working in manufacturing,
quality, and operations. In this role he designed and implemented global manufacturing
processes and supervised production operations.
Mr. Albertson has been quoted in the Wall Street Journal and other major publications,
has been the key note speaker at many national events, and travels globally to support
client objectives.
Kurt Albertson
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Learning Objectives
▪What does digital transformation mean for Procurement?
▪What is the value associated with Procurement’s digital transformation?
▪What are some of the best practices for delivering on Procurement’s digital transformation
journey?
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About The Hackett Group A leader in organizational effectiveness and best practice insight
Profile
▪ The Hackett Group is an IP-based consultancy focusing on enabling world-class
performance improvement by leveraging our intellectual capital from over 13,000+
benchmarks and performance studies with over 2,700 clients
– More than 20,000 performance metrics
– More than 1,800 best practices across 95 business processes
– Best practice process flows, capability maturity models, and configuration guides
– Enterprise and Functional Service Delivery Model Frameworks
Approach
▪ We help clients measure performance compared to world-class performance
▪ We identify opportunities and an actionable roadmap
▪ We implement our recommendations which result in accelerated benefit realization
Results
▪ Sustainable performance improvement leading to an agile enterprise with lower costs
and improved service levels
Accelerating the time to
sustainable benefit realization
93%Dow Jones
Industrials
87%Fortune
100
88%Dow Jones
Global Titans
87% DAX
30
58% FTSE
100
Hackett Value Grid™
1
23
A
B
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▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett Certified Best
Practices through the Best Practice Intelligence Center
▪ Unlimited inquiry access for members to Hackett experts for transformation steering
▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events
▪ Enterprise, functional and process-based performance studies & value accelerators
▪ “Gold Standard” Benchmark – over 13,0000 conducted, the empirical backbone for your transformation
at the SG&A Enterprise, Functional, and Process level
▪ World-Class, Peer and Custom Peer comparative metrics and best practices
▪ Ability to provide multiyear world-class program view of performance over time
▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP)
▪ Finance
▪ Human Resources
▪ Information Technology
▪ Procurement
▪ Supply Chain and Operations
Membership Advisory &
Research (Provides Insights Into World Class
Performance)
Benchmarking(Defines World Class Performance)
▪ Enterprise Performance Management
▪ Shared Services, Global Business Services & Outsourcing
▪ Merger Integration
▪ Working Capital Management
▪ Oracle EPM (Platinum Partner)
▪ SAP ERP (Gold Partner)
▪ Hyperion
▪ Kronos
▪ Workforce Management
▪ Application Managed Services
▪ Source to Pay technology solution selection and implementation support
Business
Transformation(Transforms Performance Into World
Class)
Best Practice
Technology Enablement(Implements Technology To Enable
World Class)
The Hackett Group is a leader in driving transformation improvement, organizational effectiveness and providing best practice insights
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Agenda
▪ Procurement’s Key Priorities
▪ The Value of Procurement Digital Transformation
▪Hackett’s Procurement Digital Transformation Model
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3.1%
3.9%
In 2018, revenue growth will continue to outstrip FTE and budget plans in procurement: Doing more with the same level of investment continues to be important
Efficiency
Gap
Productivity
Gap
Revenue growth Number of staff (FTEs) Operating budget
Source: 2018 Key Issues Study, The Hackett Group
3.40%
1.60%
-0.49%
3.6%
0.5%
-0.3%
2016-2017 Actual 2017-2018 Projected
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Top 10 important priorities for Procurement in the achievement of overall enterprise goals
46%
58%
54%
43%
57%
55%
51%
45%
50%
52%
28%
41%
25%
29%
35%
20%
21%
25%
23%
17%
15%
38%
87%
CriticalHigh
Elevate the role of procurement to a trusted advisor to the business
Reduce purchase costs
Source: Key Issues Study, The Hackett Group, 2018
Increase internal stakeholder satisfaction
Improve OPEX savings
Enhance operational process efficiency
Expand purchasing’s scope/influence
Deepen influence on complex spend categories to drive value beyond sourcing
Improve procurement’s business agility
Support enterprise innovation strategy, objectives and initiatives
Increase level of supplier collaboration
Support enterprise digital transformation strategy, objectives and initiatives
83%
83%
78%
77%
76%
76%
68%
67%
67%
66%
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Importance of the procurement agenda from 2017 to 2018 looking at “Critical” procurement priorities only
0%
5%
14%
9%
7%
23%
8%
23%
23%
25%
38%
38%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Strengthen/protect the company’s brand
Increase internal stakeholder satisfaction
Expand purchasing’s scope/influence
Deepen influence on complex indirect spend categories todrive value beyond sourcing
Support enterprise innovation objectives
Support enterprise digital transformation objectives
Biggest Change (Critical)
2018 2017
+15%
+31%
+16%
+9%
+8%
+18%
YoYδ
Source: 2018 Key Issues Study, The Hackett Group
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Improving agility, enabling digital transformation and elevating the role of procurement to a trusted advisor are key development areas in 2018
Reduce purchase costs
Expand purchasing’s scope/influence
Improve procurement’s business agility (i.e., the ability to adapt quickly to meet changing stakeholder demands)
Increase internal stakeholder satisfaction
Elevate the role of procurement to a trusted advisor to the business
Deepen influence on complex spend categories to drive value beyond sourcing
Improve CAPEX savings
Improve OPEX savings
Improve cost avoidance efforts
Enhance operational process efficiency
Improve purchasing compliance
Support enterprise digital transformation strategy, objectives and initiatives
Support enterprise digital transformation
Low Importance
Lo
wM
od
era
te/H
igh
Ab
ilit
y t
o A
dd
res
s
Source: 2018 Key Issues Study, The Hackett Group
Critical development area
Well supported
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Some common definitions or misconceptions around digital transformation
▪ It is a market facing transformation and less relevant to internal support functions like procurement
▪ It is something that only the most technically advanced organizations need to think about
▪ It is about getting rid of the remaining paper within the source-to-settle process
▪ It is about implementing an end-to-end suite of source-to-settle technology
▪ It is about taking advantage of emerging technologies such as RPA and blockchain
▪ It is an IT driven strategy
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Agenda
▪ Procurement’s Key Priorities
▪ The Value of Procurement Digital Transformation
▪Hackett’s Procurement Digital Transformation Model
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The main objectives of enterprise digital transformation is revenue generation and improving competitiveness…it isn’t considered optional
PRIORITY
Remaining competitive in a rapidly changing business environment is ranked as the highest-
priority objective of the enterprise-level digital transformation strategy, followed by maintaining
or accelerating revenue growth. These are the primary objectives of digital transformation.
Enterprise organizations ranked their most important objectives for digital transformation
Remain competitive in rapidly changing industry
Reinvent the company
Maintain or accelerate revenue
growth
Maintain or reduce operating
cost
Improve agility
Improve customer focus/customer-centricity
Accelerate rate of
innovation
1 2 3 4 5 6 7
Most
important
Least
important
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How do we define Digital transformation?
Enterprise digital transformation:
The creation of business value by improving
customer experiences, operational efficiency
and agility by fundamentally changing the
way organizations innovate, operate, deliver
products and services, engage with
stakeholders and execute work, using digital
technologies as the enabler of holistic
transformation.
Procurement digital transformation:
Improving customer experiences, operational
efficiency, agility and business value
contribution by fundamentally changing the
way procurement services are delivered using
digital technologies as the enabler of holistic
transformation.
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0.104% 0.067%
0.364%
0.274%
0.059%
0.062%
0.050%
0.045%
0.577%
0.447%
Last year, Hackett released a research note highlighting the expected impact of digital transformation on future efficiency due to digital transformation
Baseline
22% reduction
Digital transformation: World-Class
World-Class
Procurement cost as percentage of spend
Knowledge based Technology Other
0.197%0.099%
0.379%
0.303%
0.078%
0.054%
0.079%
0.056%
0.733%
0.512%
30% reduction
Digital transformation: Peer
Baseline
Peer
Digital
Digital
Transactional
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Core process automation is foundational to digital transformation. If processes are still manual the ability to increase value delivery will be limited
Even without digital transformation, core process automation has and continues to have a significant impact on our organizations
66% 26% 84% 56%HIGHER SAVINGS
OVERALLFEWER CLERICAL
STAFF
MORE LIKELY TO CONSIDER THEIR DATA ACCURATE
AND RELIABLE
MORE LIKELY TO BE VIEWED AS A
VALUED BUSINESS PARTNER
Organizations with high levels of process automation adoptions demonstrate:
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Procurement digital transformation top performers have achieved significant improvement against peers when it comes to many operational value drivers
Few organizations exceed expectations, but the good news is: more than 50% of organizations are meeting expectations in all five areas.
Current performance – Operational value drivers
29%
13%
29%
38%
9%
13%
41%
75%
67%
88%
63%
100%
52%
100%
83%
88%
55%
25%
4%
8%
10%
9%
5%
TP
Peer
TP
Peer
TP
Peer
TP
Peer
TP
Peer
Falls Short Meets Exceed
Customer
satisfaction
Compliance with
applicable laws
and regulation
Service delivery
cycle time
Quality of
Services
Procurement cost,
efficiency and
productivity
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Procurement digital transformation top performers have achieved significant improvement against peers when it comes to many strategic value drivers
Business strategy
enablement
Enterprise innovation
objective realization
Procurement business
value contribution
Procurement
agility
Current performance – Strategic value drivers
13%
46%
13%
21%
38%
67%
13%
26%
88%
42%
38%
67%
50%
29%
75%
74%
13%
50%
13%
5%
4%
13%
TP
Peer
TP
Peer
TP
Peer
TP
Peer
Falls Short Meets Exceed
2018 Key issues Study | 19© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Agenda
▪ Procurement’s Key Priorities
▪ The Value of Procurement Digital Transformation
▪Hackett’s Procurement Digital Transformation Model
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Report that digital transformation will fundamentally change the way procurement
services are delivered over the next 3-5 years
95%
66%… but
only
have actually developed a strategy for getting there.
… and
only 46%
report having resources and competencies in
place to execute the strategy today
Source: Key Issues Study, The Hackett Group, 2018
While procurement believes digital transformation will fundamentally change the way it delivers services…strategy and resources are lacking
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Digital transformation is certainly about emerging technologies and we have seen organizations aggressively building out core procure-to-pay infrastructure
E-Procurement
Spend Analysis
MDM (Master Data Management)
Contract / Compliance Management
E-Sourcing
E-Invoicing ExpenseManagement
Supplier Relationship/Performance/Risk Management(Life-Cycle Management)
Supplier Portal/Network
Core Support
Supplier Item Contract Order
Market Intelligence/Research
Reporting & Analytical
Core Procure-to-Pay Infrastructure Support Tools
Partner Systems
Product Lifecycle Mgmt
Supply Chain
E-Catalogs
E-Payables/ SCF
P-card
Self Service
Purchase Order System
Services Procurement
Supplier Discovery/Spot Buy Marketplaces
Cognitive/AI/Chat Bots/ Block Chain
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…but it isn’t just about technology
• Move beyond just automating existing processes
• Define completely new ways of doing things
• Enable with new technologies (e.g., cloud, big data, RPA, social
media)
• Move beyond internally focused transformation
• Design from the “outside in”, starting with customer needs
• Design new ways to engage the customer (internal and external)
• Embrace a fail fast philosophy
• Execute pilots in targeted areas and scale up rapidly
• Shift focus from discrete projects to continuous transformation
New Ways of
Doing Things
A Customer-
Centric
Approach
Velocity of
Change
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Four pillars support
procurement’s digital
business strategy
Data and analytics
form the foundation
Hackett introduced a digital transformation framework for Procurement to help clients think through their strategy
Digital Capability pillars to support the digital strategy
Omni-channel,
personalized
stakeholder
experience
Digitally
enabled
procurement
workforce
“Smart”
orchestration
of source-to-
pay services
Ecosystem of
networked
solutions
Analytics-driven insights
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CUSTOMER-CENTRIC
DIGITAL INSIGHTDIGITAL OPERATIONS
Social technologies
Cloud RPA Block-chain
Mobility Analytics Data integration
Artificial Intelligence
Big data Predictive modeling
Data visualization
Design thinking Digital customer engagement
Customer journey mapping
Segmentation Individualization Omnichannel
Internet of things
▪ Internet of things opens up new ways to request goods and services in a more natural way (e.g. travel)
▪ Omnichannel design and individualization give users intuitive and adaptive tools to meet their highly specific
needs (e.g. mobile, saved preferences, history)
▪ Journey mapping and segmentation allows us to tailor relationships based on internal and external customer
needs (e.g. map out from the stakeholders perspective how they interact with Procurement)
▪ Design thinking enables category managers to build strategies that align with stakeholder objectives (e.g.
start with stakeholder objectives and think creatively)
How the digital transformation landscape will impact the “experience” of stakeholders
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Virtual service assistants and agents go beyond simple Bots
▪ Virtual Service Agents orchestrate building blocks of automation capabilities together such as desktop
automation, RPA, and chat bots to deliver an orchestrated service that goes beyond simple
conversational services, is able to trigger requests to execute process steps or even self-remediate.
▪ Current use case examples include:
– IT HELPDESK
▪ IPsoft’s Apollo. Apollo will cost 20% less than Amelia, providing automating basic technology
work and have some elements of cognitive technologies. Able to request everything from
being able to access a printer to provisioning IT resources for an application development
project
▪ Cantoche LivingActor: as used by Atos, Toshiba, EDF, Naxitis. Provides animated avatar,
engages customer though AI/natural language processing (NLP) including live translation and
chat capabilities, real-time knowledge management and data analytics.
▪ Other AI platforms include TCS Ignio and Wipro’s Holmes.
– CUSTOMER SERVICE: complaints and resolution including paying refunds or claims.
▪ IPsoft’s Amelia. Amelia is designed , to replace the work of a call-centre employee. Clients
include SEB, Enfield Council, Barclays and Vodafone
▪ Celaton inSTREAM: Virgin trains customer relations cognitive agent
Source: Hackett Research
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The travel industry has undergone its own digital transformation. How can we apply these practices to procurement’s stakeholder experience?
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Four pillars support
procurement’s digital
business strategy
Data and analytics
form the foundation
Hackett’s digital transformation framework for Procurement
Digital Capability pillars to support the digital strategy
Omni-channel,
personalized
stakeholder
experience
Digitally
enabled
procurement
workforce
“Smart”
orchestration
of source-to-
pay services
Ecosystem of
networked
solutions
Analytics-driven insights
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It’s not just about the elimination of work. It’s also about capability augmentation…an opportunity to blend technology with human capabilities
HUMAN
-
MACHINE
An opportunity to join forces, a way to succeed in
the new working environment
WORK
ELIMINATION
Understanding the tasks that will be eliminated vs.
those that will be augmented (repetitive vs.
creative…the “so what”)
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Vodafone – Real Time, Smarter, Faster Decision Making With Cognitive
Source: Vodafone, Self-disruption: How Cognitive Computing Will
Recreate Procurement
Cognitive And Digital Sourcing, SCM Operations And
Enablers, Vodafone Procurement Co
✓ Business Insights
✓ Value add content
✓ Automated decision making
✓ Risk mitigation
✓ Management and control, policies and procedures
Case Study
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Thriving in the digitally enabled workforce will require these skills
Business Acumen
Understand key business drivers
Knowledge of factors, priorities and business demands
Identify problems and prioritize alternatives
Relationship Management and Collaboration
Advanced interpersonal skills
Positively influence decisions
Open and approachable
Supply Risk Management Expertise
Assess and prioritize business and category-specific risks
Measure, prioritize, and address risk
Develop risk mitigation plans for high-priority drivers
Data Analysis and Modeling
Process data and extract relevant information
Knowledge of analytical tools and methodologies
Translates analyses into actionable plans
Strategic Mindset
Develop strategic frameworks and visions
Anticipates market changes
Address challenges and outline future direction
Savings and Financial Analysis
Translate savings and value improvements to P&L impact
Develop tools to track, measure and forecast savings
Analyze supplier financial statements for detailed insights
Agility and Change Orientation
Welcomes change
Comfortable with shifting priorities
Able to deal with ambiguity
Creativity and Innovation
Create diverse and novel ideas, or novel combinations of ideas
Create and recognize new patterns/categories
Curiosity, broad interests, constructive criticism
Agile and
Trusted
Business
Advisor
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We will see the emergence of new procurement roles…many of which are already emerging in select organizations
Late Majority Early Majority Early Adopters Innovators
Purchase Ops
and content
specialist
Internal business
partner
Supply risk specialist
Supply analytics
specialist
Purchasing /
Supply controller
Technology success
manager, solution
architects
Communications and
social media lead
Innovation scouts
Senior innovator
Digital SME: robotics,
cognitive, blockchain
Advanced analytics SME:
Big data, python, R
(Bring data to life)
What’s different
and new?
Chemists,
physicists,
Market intelligence
specialist
Supply value
optimization
manager
Corporate social
responsibility activist
Smart contract coders
32© 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Four pillars support
procurement’s digital
business strategy
Data and analytics
form the foundation
Hackett’s digital transformation framework for Procurement
Digital Capability pillars to support the digital strategy
Omni-channel,
personalized
stakeholder
experience
Digitally
enabled
procurement
workforce
“Smart”
orchestration
of source-to-
pay services
Ecosystem of
networked
solutions
Analytics-driven insights
33© 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Mainstream Technologies
21%
40%
67%
63%
60%
79%
42%
35%
14%
21%
23%
9%
63%
74%
81%
84%
84%
88%
Socialmedia/collaboration
Mobile computing
Data visualization tools
Advanced analytics
Master datamanagementtechnologies
Cloud-basedapplications / SaaS
Mainstream adoption Limited adoption
Mainstream and emerging technologies provide an opportunity to redesign how procurement delivers services to its stakeholders
7%
17%
16%
33%
30%
28%
26%
35%
23%
33%
35%
43%
51%
56%
63%
Blockchain
Virtualassistants/chatbots
Cognitivecomputing/artificial
intelligence
Internet of things
Robotic processautomation
Mainstream adoption Limited adoption
Emerging Technologies
Source: Key Issues Study, The Hackett Group, 2018Projected adoption next 2 to 3 years
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Execution of the sourcing process for example is and will be significantly impacted by emerging technologies
Source: Keelvar Intelligent eSourcing presentation
Auto-configure complex bid sheets
Auto-execute early stages
of sourcing process
Reduced cycle time and award optimization
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Problem:
▪ Identifying risk exposure at a specific contract level to particular risk events can be a time consuming an manual process requiring the manual review of contracts for identification of specific language or clauses tied to a particular risk event. Auditing for these risk events can be triggered by regulators, market events, management requests, etc.
▪ Redlining of contracts on supplier paper or responding to redlines from suppliers on a buyer’s paper requires a significant level of time commitment from lawyers and procurement practitioners as they read through the contracts or redlines.
▪ Understanding the overall level of risk associated with a contract can be difficult to quantify leading to overly aggressive terms and conditions which often extend the contracting process. It also makes understanding overall risk across contract difficult to understand.
Solution:
▪ Company is piloting Smart Contracts using Seal Software in conjunction with their current SAP Ariba platform. The solution using AI and Machine Learning to make suggested redline edits to supplier paper, respond to redlines from suppliers and update clauses library as contract changes are made. The solution also can search the contract repository for patterns of terms which would indicate a particular risk exposure as well as summarize risk levels against the overall contract.
Smart contracts will also change the way procurement approaches the contract management process
Case study: Large global software provider pilots smart contracts
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Case Study: RPA @ Bosch Services Solutions: Example Indirect Purchasing
Process
Manual Process
Processor - 2
Follow up & escalation
8
STEP
Processor - 1
i-cockpit / SAP Download
1
STEP
Processor - 1
Import data to Access Tracker &
Allocation
2
STEP
Processor - 2
Shopping Cart Validation
3
STEP
Processor - 2
PO Creation
4
STEP
Processor - 2
PO transmission to Supplier
5
STEP
Processor - 2
Update Access Tracker
6
STEP
Processor - 2
Discrepancy Resolution
7
STEP
BOT’ified Process
Processor - 2
Follow up & escalation
8
STEP
Robot
i-cockpit / SAP Download
1
STEP
Robot
Import data to Access Tracker &
Allocation
2
STEP
Processor - 2
Shopping Cart Validation
3
STEP
Robot
PO Creation
4
STEP
Robot
PO transmission to Supplier
5
STEP
Robot
Update Access Tracker
6
STEP
Processor - 2
Discrepancy Resolution
7
STEP
Scope Status
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Source: Robert Bosch, reproduced with permission
▪ Process: iBuy (PR-to-PO)▪ Countries: 7 (US, MX, BN, FR, PT, SP, UK)▪ # of SAP P-Systems: 45▪ Provided by Bosch in-house Center of Excellence in RPA
▪ PoC started 03.2016, LIVE since 08.2016
▪ Zero Defects reported by quality team
▪ 82% pass-through success; 44% efficiency realized
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Four pillars support
procurement’s digital
business strategy
Data and analytics
form the foundation
Hackett’s digital transformation framework for Procurement
Digital Capability pillars to support the digital strategy
Omni-channel,
personalized
stakeholder
experience
Digitally
enabled
procurement
workforce
“Smart”
orchestration
of source-to-
pay services
Ecosystem of
networked
solutions
Analytics-driven insights
38© 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Supplier Relationship Management has always been important, but objectives and practices need to evolve and extended across the ecosystem
Traditional SRM Goals/Model
▪ Establishing an enterprise wide and coordinated SRM
program
– SRM Center of Excellence (COE) for process
management
– Dedicated SRM staff versus part time
▪ Utilizing broad and holistic supplier measurement
systems
– Addressing the execution of key business outcomes and
capabilities
– Focus on strategic suppliers, not all suppliers
– Supplier metrics integrated with category management
metrics
▪ Focusing on being better customers
– A “Voice of the Supplier” feedback process is utilized
– Supplier development resources are provided to help
suppliers
Source: SRM Book of Numbers, The Hackett Group
Next Level SRM Objectives
▪ Facilitating supplier engagement
– Structured buyer-supplier senior executive relationships
- “supplier advisory boards”, best practice sharing
– Extracting new ideas and technologies before
competitors
▪ Creating an explicit gain sharing and mutual cost
reduction environment
– Suppliers as the key to growth
▪ Leveraging enabling technology
– “CRM for SRM” functionality for supplier account
management
– Collaborative workspaces and applications
– Supplier portals for supplier self-service information
management – with attention to ease of use
▪ Engage a broader ecosystem of connected partners
– Financing, research, data enrichment, etc.
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Ultimately: Driving innovation from the value chain is key to enterprise innovation
Hackett Findings:
▪ Procurement’s enablement of the innovation cycle are critical to the enterprise
▪ Value chain partners are deeply entwined in enterprise innovation and in some cases are the
main source of product innovation in globally integrated supply chains.
▪Managing value chain partners’ involvement is ranked as the most effective of all innovation-
enabling practices.
▪While fewer than 50% of procurement groups have adopted supplier innovation practices, close
to 80% of those groups consider it to be effective.
“We need to deepen Procurement
skills related to how our suppliers’
products and services get
embedded in our solutions/
portfolio”
“The better the supplier understands the
stakeholders’ requirements, the better they are
able to provide Procurement with the most
useful information to communicate the
information of the value internally. Ask more
questions.”
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Past Hackett studies have shown that Top Performing Supplier Relationship Management organizations deliver greater value to the bottom line
5.00%4.13%
3.60% 3.37%
1.20%2.48%
1.93%2.90%
Peer Group Top Performer Peer Group Top Performer
Cost Savings/Avoidance FromSRM
Cost Savings/Avoidance fromSourcing
Total monetary value delivered from SRM processes as a percentage of total spend
Currently In Three Years
“As global sourcing finance head, I monitor the financial performance impact of global sourcing on top and bottom line. Of the overall
benefit pie, we are now starting to see shift toward higher cost avoidance contributions compared to P&L savings. We are just kicking off
a more centrally driven SRM program. I think that not only will a robust SRM program drive the next wave of savings…”
The Hackett Group SRM Study, 2011
Note: Hackett data shows that cost
reduction typically is 75% of overall
savings
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Four pillars support
procurement’s digital
business strategy
Data and analytics
form the foundation
Hackett introduced a digital transformation framework for Procurement to help clients think through their strategy
Digital Capability pillars to support the digital strategy
Omni-channel,
personalized
stakeholder
experience
Digitally
enabled
procurement
workforce
“Smart”
orchestration
of source-to-
pay services
Ecosystem of
networked
solutions
Analytics-driven insights
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Fundamentally, it is about harnessing big data from internal and external sourcing to evolve across the five levels of business intelligence
Optimization
Predictive modeling
Forecasting
Simulation
Alerts
Query/drill down
Ad hoc reporting
Standard reporting
Com
petitive a
dva
nta
ge
Complexity
AnalysisWhy did it happen?
MonitoringWhat’s happening
now?
ForecastWhat might
happen?
PredictThe probability of it
happening?
ReportingWhat happened?
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2017 Digital Transformation Performance Study | 44© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Case study #2
What is it?A combination of Statistics and Data Science enabling
computers to learn and identify patterns without being
explicitly programmed
Machine Learning
Program ComplianceDetect agreements that should
be part of a Procurement
sanctioned program
Supplier PO ConsolidationDetect similar supplier books
of work that can be
consolidated
Similar Deals SearchDetect similar deals during
negotiations
ForecastingWhat will it likely be?
PersonaHow is it clustered?
DetectionIs it one or the other(s)?
Is it an anomaly?
Is it one or the other(s)?
What will it likely be?
How is it clustered?
Is it an anomaly?
The 4Q’s ML Can Answer
Employee Hardware RefreshPredict & Forecast up and
coming asset refreshes and
which assets will be purchased
Sourcing PipelinePredict & forecast up and
coming sourcing events to
better allocate resources
Programmatic Spend & Volume Predict & Forecast Spend & Volumes
for a Procurement program allowing
for a proactive approach
Supplier PersonaIdentifying distinct
groups of supplier
segmentations Traveler PersonaIdentifying distinct
groups of MS Travelers
Case Study
Source: Microsoft, Hackett Best Practices Conference Atlanta, 2017
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An analysis of analytics related initiatives in procurement based on level of adoption show that master data management efforts are foundational and ongoing
Analytics Initiatives By Life-Cycle Stage
23%
23%
31%
15%
19%
19%
19%
19%
31%
58%
46%
35%
19%
31%
24%
31%
31%
46%
19%
19%
46%
73%
38%
43%
35%
27%
4%
4%
8%
12%
14%
15%
23%
Develop or improve capability to analyze different structured and unstructured data types
Develop AI/cognitive computing based predictive analytics capability
Acquire or develop new analytical talent and skills (e.g., data scientists, analysts, data management)
Upgrade or adopt advanced new analytical toolsets to support procurement analytics
Establish or improve data stewardship, data governance and Master Data Management (MDM)
Redesign and implement modern data architecture (e.g. data lakes, data warehousing)
Develop or improve data visualization capability level
Consolidate and/or rationalize existing analytical tools used in procurement function
Establish procurement analytics center of excellence
No imminent plans Exploring Ongoing initiative Completed initiative
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Key takeaways
▪ Procurement FTEs and budgets continue to grow at a much slower pace than most company’s
revenue and growth targets. This is creating an efficiency and productivity gap.
▪ In response to this growing disconnect, procurement continues to indicate a new sense of urgency
around digital transformation initiatives. How can procurement transform its operations to do more
with less -- at a higher level of quality and responsiveness?
▪ The first order of business is to create a digital transformation strategy… and from there a
framework.
▪Hackett’s recommends organizing the framework around these key themes: accelerating digital
transformation, building stakeholder value, establishing a supplier ecosystem, and delivering
business intelligence as a core competency.
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Atlanta | Chicago | Frankfurt | Hyderabad | London | Miami
Montevideo | New York | Paris | Philadelphia | San Francisco | Sydney | Vancouver
Kurt AlbertsonPrincipal and NA Procurement Advisory
Practice Leader
+1 770.225.7570 | o
Associates NameJob Title
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