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Does the Perfect IT Tool Exist? Evert Karsen – Cimpress N.V.

CIPS Switzerland Event – Zürich, , January 27th 2016

Cimpress N.V. (Nasdaq: CMPR) is the world leader in mass customization.

We are a technology and manufacturing-driven company that aggregates, via

the Internet, large volumes of individually small, customized orders for a broad

spectrum of print, signage, apparel and similar products.

The company produces more than 46 million uniquely designed items a year.

We bring our products to market via a portfolio of 20+ brands, serving multiple

customer segments across many applications for mass customization.

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• What a Procurement IT tool has to Manage

• SMI & Data

• Procurement IT Tools

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• Investment & Payback 4

I. Spend

II. TCO

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IT to Manage Procurement’s Business Impact

III. Quality

IV. Performance

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Spend 1/4

1. Planning (Annual Budget)

a) Planning phase

b) Execution tracking

2. Projects (Investments)

a) Planning phase

b) Execution tracking

3. Data Warehouse

a) Spend (by category, supplier, plant, …)

b) Contract database

c) Pricing information (suppliers, logistics, …)

d) Other

Tactic Strategic

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TCO 2/4

1. Cost Structure

a) Price

b) Logistics

c) Quality

d) Etc…

2. Market & Evolution

a) Historical data

b) Market Intelligence

c) Sectorial Benchmarking

d) Etc…

Tactic Strategic

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Quality 3/4

1. Specifications

2. Approved Suppliers

a) Approved PN’s

b) Test Reports

c) Compliance

d) Contractual Warranties

3. Supplier Performance

a) Delivery performance

b) Quality Incidents – Corrective Actions

c) Supplier Ratings

Tactic Strategic

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Performance 4/4

1. Real Time Data

a) Operations’ Requirements

b) Inventories (Local, Remote & in Transit)

c) Supplier Lead Times

2. eSourcing Portal

a) Requisitions – Approvals – PO’s – Invoices –

Payments – Claims

b) eBids / aAuctions

c) Supplier Portal

3. Catalogs (“Zero Paperwork”)

a) P/N Catalog

b) Error tracking, etc. Tactic Strategic

• What a Procurement IT tool has to Manage

• SMI & Data

• Procurement IT Tools

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2

3

• Investment & Payback 4

IT Needs are Linked to the SMI

Complexity

SMI (*)

#1 “Infancy” Tactical & Reactive

Price Negotiations

Costs > Average

#2 “Awakening” Aware of potential, no experience “how”

Doing market leverage only

Slow improvement, some frustration

#3 “Developed” Challenging “Status Quo” of everything

Managing & Negotiating TCO

Costs improving fast, high motivation

#4 “Competitive” Procurement is Established

ST & LT Planning = Innovation

Company costs 5-10% below average

(*) Sourcing Maturity Index

Savings Potential

Measure: #Transactions, Prices & Spend

“easy” automation

Measure: TCO & Innovation

Limited automation = Trust based

IT Possibilities & Reporting Needs

Fully Automated:

FINANCIAL RESULTS

1. Price Variations

2. Cash Flow

3. Logistics, duties, taxes, etc.

4. Project Execution

a) Timing

b) Budget variance

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Semi-Automated:

FUNCTIONAL PERFORMANCE

1. Intangibles

a) Cost avoidance

b) Innovation

c) Multiple sources

d) Contractual spend coverage

e) Cost of quality, …

2. Program Implementation

a) Supplier adoption (ePO’s, eBilling, ...)

b) Internal users adoption (eReqs, approvals, …)

c) eTools usage (eAuctions, eTenders, …)

• What a Procurement IT tool has to Manage

• SMI & Data

• Procurement IT Tools

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1

2

3

• Investment & Payback 4

Currently… 150+ IT Procurement Platforms

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Source: Capterra http://www.capterra.com/procurement-software

Panacea Coupa BidSync SciQuest SAP

GateKeeper SourceIt BuyerQuest Bravo Zycus

Bupros Periscope Compleat Oracle Ariba

Procurement Software: Generic Pro’s

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a) Large choice of suppliers (150+)

b) Many pricing options: “buy”, “rent”, % of spend managed, …

c) Very customizable:

• Flexible features (can be activated anytime)

• Customizable design (web interface, forms, language, …)

• Many reporting possibilities

d) Intuitive: Easy-to-learn & roll out (for suppliers and internal staff)

e) Cloud data management has become the norm – Share across sites

Procurement Software: Generic Con’s

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a) Difficult to choose required vs. “nice to have” features

b) Expensive to operate & keep up to date

c) Centered on tactical work (PO’s, Inventories, Contracts, …)

d) Often designed for medium-small companies

• Limited operating internationally: currencies, units of measure, …

• Difficult to connect with legacy accounting systems

• Multiple locations / BU’s

e) Performance reporting remains the “eternal challenge”

f) Data integrity requires strong discipline, training & time investment

• What a Procurement IT tool has to Manage

• SMI & Data

• Procurement IT Tools

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1

2

3

• Investment & Payback 4

Key Success Factors

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1. Strong investment in Technology

a) Radical change of processes (eliminate manual)

b) All functions commitment

c) Interfaces with legacy systems

2. Strong investment in People

a) Invest in Training (HR support)

b) Different caliber and people skills

3. Strong investment in Processes

a) Executive Sponsorship

b) Agreed Metrics (Besides $$)

c) Adaptable to SMI level evolution

Some Precautions to be taken

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a) “The Best” is not the most efficient (Buy only what you need)

• Too complicated / Too expensive / Too many resources needed

• Too long to implement (newer versions available by then)

• Procurement IT ≠ Accounting IT (don’t try to automate everything)

b) Keep it flexible

• Never implement custom made (technology changes too fast)

• Make sure all future needs can be covered by the chosen tool

Investment & Payback

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“To make money… You need to invest money”

a) Approximate investment required

• Initial investment: ± 1% to 3% of the purchasing spend (depending on complexity)

• Running costs (incl. training): ± 0,25% - 0,50% of purchasing spend – The IT being 1/3 only

b) Running costs

• 30% is the tool (maintenance & upgrades)

• 70% is the operation

c) Payback of the tool is easy, but… only if managed properly:

• Initial & regular staff training

• Consistency in use (no manual shortcuts)

• Savings potential: Overall 10% lower sourcing costs compared to manual systems

Procurement IT Payback

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COSTS

1. Fixed

• Hardware

• Software

2. Variable

• Telecommunications

• Services (maintenance) & Updates

• Personnel (higher skills)

TANGIBLE BENEFITS (“Hard Savings”)

1. Information

• Improved negotiations (market data / new suppliers)

• Better project management

• Improved planning / Inventory reduction

2. Operations

• Lower operational costs (paperwork, errors, …)

• Reduced workforce / Increased productivity

INTANGIBLE BENEFITS (“Soft Savings”)

1. Team Performance

• Workforce flexibility (location, holidays)

• Improved decision making

• Retention of know how

• Increased job satisfaction

2. Organizational Performance

• Legal requirements attained

• Improved resource control

• Organizational learning

• Less (zero?) mistakes

• Higher client satisfaction

• Better corporate image

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Questions ?

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Evert Karsen

ekarsen@cimpress.com