Post on 22-Mar-2017
GJ Nagtegaal – May 2016 ©
Business alignment of Procurement
How to make it happen?
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Imagine….. Your daily desk is like …..
- Roles & definitons- Proces- Results
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Taking care of.. Being accountable for …Minimising the risks for the company Business contribution
- Stable suppliers (reliability & continuity)- Clear terms with suppliers (liability)- Alternatives for critical suppliers (availability)
Maximise the value for the company - Use knowledge & skills of suppliers (innovation)- Competition & Value Analyses / should cost (fair cost)- Low cost for administration & logistics (efficiency / TVoO)- Adequate (project) reporting (progress monitoring)- Adequate treasury reporting (cash flow & currency risks)
It is a dynamic world- Tomorrow the markets might have changed….- Everybody has access to everything…..- You never control your environment…..
The holistic view- LTC2
- Adequate contract models
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Define your procurement battery limits
Definition of procurement
All activities ending up with an invoice to be paid for by the company or an activity which might end up with an other “outgoing” liability.
[Basic data the creditors dbase]
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With the basic process & interfaces….
Internal risk or operational risks & opportunities: Everything has interaction
Sales / R&D Production After sales
Customers
Future purchasing
Historical purchasing
dbase
Purchasing
Policy & Strategy
Operational risk portfolio
External competition
portfolio/Kraljic
Supplier market
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Operational risk portfolio
Red: Execute a suitable supplier assessmentOrange: Consider an assessmentGreen: No assessment on beforehandNB: Always remain alert, tomorrow the world might have changed!
HH MH LH
HM MM LM
HL ML LL
High --- Value in EUR --- Low
Low
---
Risk
---
Hig
h
ANS = Assessment (New) Supplier, specified towards the type of works/services
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Business suitable H/M/L risk definitionsRisk Type of works / services - examples
High - Site construction works on behalf of company
[ANS] - Access to company critical/confidential products - Business relations & market imago
Medium[ANS]
- Construction works not on site/behalf company
- Supplies on critical path
Low - Supporting office works
- General business services - Supply of commodities
It is not all about the price
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Some B2B theory of Van Weele
Best suppliers Worst suppliersSubject score Subject score
Quality 4,47 Price 3,16Reliability 4,41 Personal relation 2,68Service 4,39 Quality 2,67Development 4,16 Service 2,36Personal relation 4,06 Development 2,21Price 3,94 Reliability 2,03
Bandwidth score 0,53 Bandwidth score 1,13Lowest score 3,94 Highest score 3,16
Standard monthly report / ISO9001 certified - in practise about 20% of the supplier dbase will be subject to an assessment
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Your monthly controlled supplier dbase….
2011 2012 2013 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
20
40
60
80
100
120
To be approvedWorking on approvalApprovedApproval target
With monthly deviation. Accountant approved input for the treasury & accruals
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Your 12 months ahead cash out forecast
IC jan-15 feb-15 mrt-15 apr-15 mei-15
jun-15 jul-15 aug-15 sep-15 okt-15 nov-15 dec-15 jan-16 feb-16 mrt-160
500
1000
1500
2000
2500DPO rolling forecast end of month / 12 months ahead in kEUR
Feb-15Mar-15
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Including exposure to currency risks
And without any doubt you have your standard monthly (or weekly!) purchase order delivery status by project, budget responsible, supplier, delivery site or whatever you prefer.
kEUR DPO month
Currency 2015-02 2015-03 2015-04 2015-05 2015-06 2015-07 2015-08Eindtotaal
EUR 2 1.058 668 1.040 2.056 525 461 5.809
GBP 0 0 0 0 0 4 0 4
INR 0 0 0 0 0 0 0 0
SGD 0 215 0 215 0 0 0 430
USD 0 92 42 168 0 0 424 725
BHD 0 0 53 19 0 66 0 139
Eindtotaal 2 1.364 762 1.442 2.056 594 885 7.106
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With straight product group overviews
Of course, many more views/queries are available
Aantal van 3rdPAProduct Group Approved Supplier Totaal01-PR-ACCESSOIRES 1501-PR-CONSOLES 201-PR-IT-HARDWARE 2701-PR-SENSORS-A 201-PR-SENSORS-B 701-PR-SENSORS-C 601-PR-TOWERS 202-CONSTRUCTION-WORKS 402-INSTALLATION-SERVICES 3602-LOGISTICS-HANDLING-HOR 802-RMO-PARTS 8302-SITE-CRANAGE-TRANSPORT 802-TRAVEL-LODGING 4503-HRM-SERVICES 2403-HRM-TEMP-STAFF 1703-HRM-TRAINING 3504-ADVISORY-CONSULTANCY 3004-FIN-INSUR-ACCT 1404-GOVERNMENT-IC 2405-IT-OPERATIONS 3406-OFFICES-FACILITIES 4606-PR-MKT-COMMUNI 8509-UNDEFINED 3Eindtotaal 557
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The truth and the sweat part of the job….
Yeah, it is the truth: It is an Excel report with the pivot table. But fabulous to play with and ready within just a few hours after each monthly closure.
The sweat part of the job was:- Cleaning up the ERP dbase- Structuring and understanding of the ERP systemWhen everybody noticed and experienced the benefits maintained and acted accordingly, it became easy.
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Pleased stakeholders as a result?Management Monitored (supplier) risks Finance Treasury forecast / DPO
Currency risks Project manager Who, what, when, where, .. QA manager A controlled process Customers A controlled process Suppliers Consolidated reviews
This will definitely lead to LTC2 :-Reduced Lead Time to Customers-Reduced Lead Time to Cash
Are you as a purchasing professional now pleased, too?
© Please, maintain “ProMenSys” as source when you (partly ) re-use this presentation Page 15
And you end up here….. As a busy professional
However, your manager might have a different opinion…