The Future of Procurement (and other musings)...market intelligence –of all kinds (spend,...

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The Future of Procurement (and

other musings)

Dubai, UAE

March 2016

Jason Busch, Founder and Head of Strategy, Spend Matters


Some quick background on us …

• TheSpendMattersNetwork™helpsorganizationsspendandmanagecashmoreeffectively.

WecombineoneofthefastestgrowingB2Bdigitalmediaplatformswithasetofexpert

analyst,researchandadvisoryproducts.TheSpendMattersNetworkincludes:

– Expertandinfluentialprocurement,supplychainandfinancecontentthatconnects withindividuals

– Innovativesubscriptionproductsthatimprovehowbusinesses interactwithmarkets

– Customresearchandadvisorysolutionsforclients


Spend Matters Network – by the numbers

SpendMattersNetwork

• 12 differentsites/brands/researchservices

• 1,500-2,000+unique companies visitdaily

• 1,000+subscribers(paidmembers)

• 95%+ofFortune500visitmonthly

• 150+ freeandsubscriptionarticlespublished

weeklyacrossthenetwork

• Theonly globalprocurement,supplychainand

tradefinancingmediaandresearchplatform

• Amixofexpertcontributinganalystsand

supportingeditorsandjournalists

Parentcompany:AzulPartners,Inc.

• Privately-heldbythefoundersandmanagement

team;noexternalshareholders

• 30+teammembers


Behind Spend Matters Network are expert voices and faces that

connect with our audience including …

JasonBusch

Founder,ManagingDirectorAZULPARTNERS,INC.

EditorialCoverage:

TradeFinancing,Procurement, P2P,Risk

LisaReisman

ManagingDirector,Co-Founder, CEO

AZULPARTNERS,INC.

EditorialCoverage:DirectProcurementandCommodityManagement

(US)

PierreMitchell

Chief ResearchOfficer,ManagingPartner

AZULPARTNERS,INC.EditorialCoverage:

Chief ProcurementOfficer(CPO), ServicesProcurement,SaaS,PaaS,Procurement

Architecture

PeterSmith

Chief ResearchOfficer,ManagingDirectorSPENDMATTERSUK/EUROPE,PUBLIC SPENDMATTERSEUROPEEditorialCoverage:

UK/Europe, ServicesProcurement

XavierOlivera

EditorSPENDMATTERSMEXICOY

AMÉRICALATINA

EditorialCoverage:E-Procurement, E-Invoicing,P2P,andMexico/LATAM

DavidGustin

Editor,Co-FounderTRADEFINANCINGMATTERS

EditorialCoverage:

WorkingCapitalManagement,Receivables

Financing,PayablesFinancing

StuartBurns

Editor-at-large,Co-FounderMETALMINER

EditorialCoverage:

DirectProcurementandCommodityManagement

(Europe/Asia)

RauldeFrutos

LeadForecastAnalystMETALMINER

EditorialCoverage:

Commodity PriceForecastingandHedging

JohnConolly

ManagingDirector,ChiefMarketingOfficer

SPENDMATTERSNETWORK

EditorialCoverage:CommodityManagement

andTrading

KatieBenchinaOlsen

VPStrategicAccountsMETALMINER

EditorialCoverage:

DirectProcurement,StainlessSteelMarkets


Exploring Spend Matters: our coverage

Analytics Centric

Master Data / Information Management

Core Procurement Workflow (“Foundational Process Architecture”)

Software App Services

Advisory Services

Spend Matters Procurement Taxonomy

Contingent Labor-Based

Source-to-Pay

Procurement/Supply Performance Management

Item / Catalog Management

Supplier Information Management

Product Lifecycle

Management

Supply Chain

Cost / Price Management

Supply Risk & Compliance Management

Logistics

Supply Network Analytics

Environment, Health

& Safety

Talent Management

Systems & Architecture

Metals

Benchmarking

Global Trade

Outsourcing

Commodity Risk

Discrete Manufacturing

Metals

Raw Materials

Healthcare

All – At High Level

Supplier Networks

Working Capital

SOW & Project-Based

Process (Other)

Public Sector

Supply Market / Category Intelligence

Finance

Asset Management

Analytics Infrastructure

Knowledge Management

Shared Services / GBS

Enterprise Governance,

Risk and Compliance Transformation & Change

Retainer / Subscription Professional Services

Procurement Value

Contribution

Innovation

Customer Relationship

Management

Supplier Diversity

Sustainability

Quality

Globalization

& Localization

Customer / Demand

Management

Category Management

Procurement

Provider

Market

Time & Expense

Info

rmat

ion

/ Te

chn

olo

gy

Are

as

Kn

ow

led

ge

Are

as

Topic Areas Adjacency Areas Commodities / Categories

Direct Procurement

Industry

(Core Market

Coverage)

Master Data Management Infrastructure

Supplier

Management /

SRM

Indirect Goods

Indirect Services

Contract

Management

Sourcing Req-to-Pay

(P2P)


Agenda

• AGlobalProcurementUpdate

• SpendMattersCrystalBall

• ClosingThoughts


Considering the big economic picture in early 2016

• NegativeinterestratesinEurope(ECB)

• Aflightto(perceived) safetyinthedollar

• LacklustergrowthinChina

• Commoditiesvariationandvolatility

continuesunabated

• USGDPgrewat1%inQ4

– Becauseof inventorylevels!

– Businesscapital/infrastructure

spending waning

– Exportsadrag

• Europe:Ireland,PolandandLithuaniaarethe

onlybrightGDPspots,despiteaweakeuro

drivingexports;Germanygrowthsubdued

• Decliningmanufacturingpurchasingmanager

index(PMI)inUS– negativeterritory PMISource:InstituteforSupplyManagementPMISource:InstituteforSupplyManagement


GDP trending and the Eurozone only tell part of the overall

picture: into the global procurement/finance maelstrom!

FinanceandTrade

§ Smallandmiddle-marketcredit crunchisstillrealandworseinemergingmarkets— mitigated inmanycasesonlythroughexpensive financingcosts

§ Moralsuasiontoaccelerate cashinthesupplychainremainsmorepolitics thanpolicy

GlobalManufacturingandSupplyChain

§ Demandandsupplyvariability,artificialmarketsandgeneralvolatility

§ Currencyimpactofstrongdollar,weakeuro

PoliticalandEconomic

§ GDPforecastuncertaintyandslowingPMI

§ Elephant(Panda?)intheroom:China

§ Energy,environmentalstandards

§ Thefuture(orlack)ofintervention


Despite a weak currency driving exports, European GDP

growth is still in the doldrums…

Source:TradingEconomics,Bloomberg


… And downward trends and volatility in commodities is

continuing in 2016

Source:MetalMiner/SpendMatters


Agenda



• ClosingThoughts


We admit, this crystal ball thing is a bit of an inexact science

practiced by snake oil salesmen … but we’ll try!


Pulling out the Spend Matters Crystal Ball for 2016

1. Thepowerfulworldandintersection

offinancialandphysicalsupply

chainstakesoff– andcomeswith

newdangersaswell.

2. Gamification,socialandmobile–

exploring thefutureofprocurement

3. Spendgoesthreedimensional– the

riseofmultitiereverything(spend

analysis, sourcing, riskmanagement,

etc.)

4. Straighteningoutthedirectspend

fiasco – willsomeonepleasestepup

andtakeownership oftheintersection

ofdirectpurchasing, supply chain,

R&Dandmanufacturing?…

5. …Andtrulyseizingcontrolofindirect

procurement(andspend)inthe

meantime– beyondjust“P2P”and

strategicsourcingefforts

6. Appreciatingthespeed(andrise)of

commoditymanagement – notjust

infood,agricultural,CPGandretail

anymore!

7. Gettingthedivisionlaborright

alongwithservicesprocurement–

exploringtheemergingimportance

ofservicesprovision tothebusiness

andhowthischangesthestructure

andcharterofprocurement(and

howthefunction isperceived)

8. Becomingtrulyintelligentabout

marketintelligence– ofallkinds

(spend, supplier, supplymarket,

geography,geopolitical, risk, etc.)

9. Realizingthepowerofdigital

disruption

10. “Leap-frogging”emergesasacore

strategyforemergingprocurement

organizations


• DiscountingandSupplyChainFinance (SCF)havebecome

industrybuzzwords,andCFOs/treasurersofcorporationsare

increasinglybecoming responsibleforSupplyChainfinance

solutions(notA/Pandprocurementalone)

• There isageneral confusionastohowSCFworks&therole

ofdifferentplayers.Forexample,today'sbuzzwordsinclude

reversefactoring,vendorfinancing,payablesfinancing,

receivables purchasingandtradepayablesbackedfinancing,

whichalltendtobevariationsonthethemeoftheumbrella

termofSCF

• Therearemanybenefitsforprocurementbecomingmore

involvedindiscountingandpayablesbeyondjustleveraging

one’sbalancesheettoprovidefinancingandtoearnasolid

APR;onebenefit,forexample, isoverallcontrolandoversight

oftheend-to-endtransactionwithsuppliers toreduce risk

1) Exploring the powerful world & intersection of financial and

physical supply chains

*Partsofthissection,includingthedefinition,are

sourceddirectlytoSpendMatterspartner,David

Gustin (GlobalBusinessIntelligence).


2) Gamification, consumerization, social and mobile – the

future of work

• Whathappenswhenourkidsjoinusintheprocurementworkforcealready(hint:theyhave)?

– Social(imagineapplicationsandproceduresbuildaroundasocialconstructratherthantraditionalvisualworkflow)

– Internalcompetition

• Savings

• Games,point systems

• Nameandshame

– Predictionmarkets

– Mobile (nextgeneration interfaceswilllookandactthesameonnotebooks/desktops andlargertablets;smallermobiledevices/smartphoneswilloffercontextualnavigation)

– Consumerization – alreadyhereandgettingmoreimportantbytheday


3) Spend goes three dimensional – the rise of multitier

everything (spend analysis, sourcing, risk management, etc.)

Focusontwothings:

• Understandwhatlurksunder thetier-onesurface

• Appreciatethespacethatexistsinbetweenorganizations– e.g.,newinformationexhaust

Leadership,talentandsystemsarekey

• Requiresanewmindsetfocusedonunderstanding thebroader supplychainaswellastheabilitytomustertherightresourcestomakeithappen

• Therearemultiple internal(andexternal)customersforthisdata;whichalsoraisesthequestionofsecurityanddataownership (butmoreonthisinaminute)

• Newapplications,networksandplatformswillchangeeverything aroundtransactionalfacilitationandinsight (andarestartingtodosoalready)acrossmultiple tiers

Furtherreference:SpendMattersPRO– SupplyChainData:HowManyPuzzlePiecesareYouMissing(October2013)


4) Straightening out the direct spend fiasco…

Will someonepleasestepupandtakeownershipoftheintersectionofdirectpurchasing,

supplychain,R&Dandmanufacturing?

Source:SpendMatters/ISM


5) … And truly seizing control of indirect procurement (and spend) in

the meantime – beyond just “P2P” and strategic sourcing efforts

• “Justdoit– yesterday”

– Itemlevel spendanalysis(yes,itmatters)

– Strategicsourcing&spendportfoliostrategy(e.g.,

MRO)

– eProcurement

– E-invoicing(truee-invoicing)

– Supplieron-boarding,enablementandvisibility

– Contingentspend/VMS

– Supplierdiversity

• “Planandact”

– Market/categoryintelligence

– Supplierdevelopment/partnering

– Supplier riskmanagement

– Servicesprocurement(beyondtheVMS)

• “Getsmartandexplore”

– Advancedsourcing

– Financial supplychain

DataSource:SpendMattersPRO


6) Appreciating the speed (and rise) of commodity management –

not just in food, agricultural, CPG and retail anymore!

ValuePropositionof

Procurement

Right goods /servicesat right time & place

Right goods and services AND at the right price

Shift from lowest price to Total Cost of Ownership

Reduce demand activity, complexity and variability

Increase business value derived from spend

SupplyAssurance

Price

TotalCostofOwnership

DemandManagement

ValueMgmt.

VALU

E

+CommodityManagement

Context

Availability drives Price(need to manage both)

Price is only one TCO element

Price/Cost Forecasting needs good demand forecasting process

Price/Cost Forecasts must feed the business planning process

Strategic Commodity Management is intrinsically linked to business strategy

Furtherreference:Manufacturing’s ProcurementBlackHole:SourcingandCommodityManagement (October2013)


7) Linking services procurement initiatives in the human supply

chain to broader procurement and supply chain programs

• Servicesprocurement(especiallyoutsideofcontingentlabor)

hasmanytouch-pointswithexistingprocurementandsupplier

managementprocesses

• Sourcing– integratingservicesprocurementintoa

standardstrategicsourcingprocess(e.g.,reverseauction,

multi-roundsealedbid)

• Suppliermanagement– measuringsupplier

performance,developingkeysuppliersand ensuring

contractcompliance

• Compliance/risk– beyondjustworkerclassification!

• Cyber/security

• “Inventory”forservices/virtualgoods

• …Butitisalsocriticaltorememberthatwithservices

procurement,managingtheentirelifecycleisessentialto

managefortotalvalue(notjustcost)andimproveoutcomes

forstakeholders


8) Becoming truly intelligent about market intelligence

• Starthere:understandingthecompletemarketspectrumanddefinition

– Macroeconomicenvironment

– Exploringdifferentoptions(e.g.,outsoruced, in-house,bundled supplier services,singleservice,etc.)

– Understandingstandardpricingmodels

– Understandingadvancedapproaches

– Understandleversbasedonindustry (e.g.,M&A)

– Supplymarketsegmentation

Source:TheSmartCube


9) Truly predicting the future with forecasting

• Interestrates

• ChinaPMI

• BDI

• Scrapprices

• Electricityrates

• OECDgrowth

• Capacityutil.

• RMB/USDForex

• Strikes

• Minesafety

• Chinainterestrates

• Stimulusprograms

• Exchangestocks

• VIX

• Housing starts

• Automotive sales

• GDP

• Iron ore costs

• Commercial const.

• Mortgage defaults

• Unemployment claims

• Coking coal costs

• ETF investments

• Water supplies

• Skill shortages

• Environmental

• Canceled warrants

• MW premiums

• Exchange rates

• US trade deficits

• Product substitution

• Demand

• China bank lending

• Consumer durables

• Inventory overhang

• Easy credit

• China GDP

• Inflation

• Import levels

• Commodity spot

markets

• SRB buying

Trackingallof

theinput

variablesand

knowinghow

mucheachof

theseimpacts

the

commodities

youbuy

remainsa

challenge!

Source:SpendMatersPRO/MetalMiner


9) Besides price, what else can I forecast?

• Budgets

• Demand(duh…)– buthaveyoudoneitforindirectorservicesspend?AnddoyouhaveaformalS&OPprocesstiedintodirectprocurement?

• Supplierperformance(moreonthisinaminute!)

• Supplierquality/SLAs

• Othersupplyriskfactors

• Internalperformance(vs.market)

• Peerperformance(vs.market)

• …andmuchmore

Source:SpendMatersPRO/MetalMiner


10) “Leap-frogging” emerges as a core strategy

Emergingorganizationswillbeableto‘leap-frog’others

iftheymaketherightsetofinvestmentsandlookto

thefuture,payingattentiontofivekeydisruptors

1. Digital

2. Big data / analytics

3. Social

4. Financing trade and the supply chain

5. Radical new technology / infrastructure


Agenda



• ClosingThoughts


Keep in mind the “three procurements”

• Thecost/goods/servicessupplychain

• Theinformationsupplychain

• Thefinancialsupplychain

© 2016. Azul Partners, Inc. and Spend Matters. Proprietary and Confidential.


The cost / goods / services supply chain


The information supply chain


The financial supply chain


For more on these topics, check out Spend Matters Plus/PRO


Contact details

JasonBuschFounderandHeadofStrategySpendMattersNetworkandAzulPartnersEmail:[email protected]:773-525-7406Mobile:773-934-0908Assistant:MeaganMena([email protected])

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