Leading Procurement Transformations...2020/04/20 · incl. “smart” categorization Automated...
Transcript of Leading Procurement Transformations...2020/04/20 · incl. “smart” categorization Automated...
WITH DATA VS TECHNOLOGY
Leading Procurement Transformations
Tim Herrod www.linkedin.com/in/tim-herrodApril 22, 2020
Reality check: business alignment
Foundations and capabilities
A digital transformation approach
Supplier data
Leveraging the foundations: COVID shapes the 2020’s
A G E N D A
First, Business Alignment…
Step one:
GET REAL!
Source: Ozark Episode Cards
WHAT IS VALUE?
Business Alignment, Value: Strategic, and essential to figure out
Perceived Value
Price/Revenue
Cost/COGS
Procurement must be seen as a value-driver for the business, or it goes nowhere
Create and sustain competitive advantages:
• Lifecycle TCO reduction: perceived procurement wheelhouse, basics, ticket to play. Least strategic.
• Price/revenue growth: innovation, quality, safety, OTIF (when competitors cannot). More strategic.
• Perceived value growth: brand, reputation, corporate social responsibility, diversity and inclusion, rapid acquisition integration + synergy delivery. Most strategic.
Margin
Growth
Source: Section 4
Business Alignment: Diagnose and baseline everything
Data-driven starting point is essential to selling value:• End-to-end understanding of business and goals: sales, operations, value chains, enabling functions
(how money is made and spent, through cycles)
• Owners’ expectations, culture, governance, decision rights, decision quality
• Org design, stakeholder mapping, talent pool
• Data quality, structures, governance
• Spend
• Suppliers
• Products/items
• Materials
• Services
• Capability and capacity of interdependencies
• Detailed assessment of digital philosophy and maturity
Business Alignment, Transformation Goals: Procurement objectives should resonate with the business
Be, and be perceived as, a talent hub. Design, develop and invest in a goal-oriented procurement organization that grows leaders for the enterprise, empowers people and provides rewarding career paths
Develop and digitally enable standardized, best practice procurement governance, processes, procedures, tools, and master data for spend, suppliers, products and materials
Be an excellent partner to the business and suppliers to improve quality, performance, safety and reliability of suppliers and supply for retail and manufacturing
Deliver and sustain cost savings: EBITDA improvements and capital cost reductions for the enterprise
Provide outstanding service to our key stakeholders, and be an excellent example of leadership and customer-centricity for the enterprise
Source: FCL
Business Alignment: Focus transformation on value model and drivers
$$$
Business, Function and
Transformation Goals
Tools, technology, data & advanced analytics/ science
Best-in-class governance,
practices and training
Buying channel strategy
Spend, sourcing and category management
strategies
Communication and change
management
Performance and compliance measurement,
reporting
Business Alignment, Leadership: Procurement’s Strategic Posture in the organization
*The Leadership Challenge - Wiley, Five Practices of Exemplary Leadership Model
MICEE*• Model the way• Inspire a shared vision• Challenge the process• Enable others to act• Encourage the heart
Reality check: business alignment
Foundations and capabilities
A digital transformation approach
Supplier data
Leveraging the foundations: COVID shapes the 2020’s
A G E N D A
Reality, Savings: Plan, execute, realize and communicate value, early and often
Virtuous cycle:
- Engage authentically, deliver savings, establish credibility, earn investment, wisely re-invest (service/experience, sustaining capabilities, savings generation), sell and storytell… repeat
• Detailed spend analytics, value roadmap, agile workplans
• Spend, savings, what matters, to whom, where in the business
• What gets dollars and capabilities concurrently
• Quick wins (contract switching, supplier consol. and negot., etc.)
• Identify and attack sole-sourcing
• Targeted larger projects, underperforming/complacent suppliers
• Higher value, lower complexity end-to-end categories
• Power-up with team cycles, org and infrastructure development
Mindset: At cause, results oriented, creating and leveraging healthy tension
Foundation, Agile: Leverage data and insights to learn, relearn, continually improve
Think BIG Act now Start small Scale fast
Foundation, Org Design: What design provides excellent service and delivers expected value? Example.
Category management & strategic sourcing Procurement Operations
Procurement Centre of Excellence (CoE)
Responsible for activities that support / enhance procurement work throughout the organization
Responsible for the planning, sourcing, and contract management of spend categories
Day-to-day advisory services to internal BU customers and suppliers, facilitating use of processes and tools (e.g. self service)
1 2 3
How should we structure our category management organization and how should
it be managed?
What roles and capabilities are required for our procurement operations support?
What are the capabilities we will need for our COE today and in the future and how
should these be prioritized?
Source: FCL
Foundation, Talent: Is the talent needed realistically in the market? “Build” and “borrow” to fill capability gaps
Buy
Key targeted new strategic leadership, COE,
Ops Category mgmt positions
Skills and capabilities do not exist in
organization, cannot be built or built quickly
enough
Local market reality: difficult to identify,
attract, land
BuildThis 80% is a large number of people. Local market reality: “replace” not practical
Key internal foundations present but variable: energy, enthusiasm, drive, attitudes, behaviors, etc.
Success via investment in hard and soft/ strategic skills
Borrow (shorter term)Draw on select, interested procurement, non-procurement talent to execute quick/early wins and infrastructure build
Talent DistributionWeaker Stronger
Lower
HigherP
op
ula
tio
n C
ou
nt
Source: FCL
Foundation, Change: Design for human adoption of processes, tech and tools
• Human-centered design thinking
• Dozens of new processes, tools and systems will be rolled out to employees and suppliers
• Will users resist?
• Will they embrace new systems?
• How can we craft a seamless process, and achieve buy-in from the ground up?
• Collaborative and bottom-up approach focused on end users
• People impacted by change have best and nuanced view of not only solutions, but actual problems themselves
• Designed with people, not for people
15Source: Zu
Reality check: business alignment
Foundations and capabilities
A digital transformation approach
Supplier data
Leveraging the foundations: COVID shapes the 2020’s
A G E N D A
Procurement Digital: Transformation approach has changed
An old way A new way
• Rigid business process design and long, painful alignment efforts trying to build in everyone’s legacy practices
• Complex development of workflows and workarounds
• Layers of over-designed decision rights
• Months or years of choosing and customizing a system
• Data? We’ll deal with that after. Hurry up and implement
• “Drive-by” training of thousands
• Hundreds of permanent “temp” employees added to deal with all the flaws
• Total focus on pain points, jobs to be done, use cases, UI/UX
• Flexible, targeted digital platforms, mobility prioritized
• Powerful cloud or edge e-Procurement, BI, AI, ML, DL and automation tools available to:
• Deliver seamless delightful experience, meeting needs at speed for users and BUs
• Create quality data
• Analyze, make meaning, make decisions
• Best-practice processes, workflows and decision rights
• Constant improvement based on agile methods, user feedback and evolving jobs to be done
Source: FCL
Digital Ambition: Collaborating, setting and prioritizing. Example
1. [50% of votes] Develop an effective and efficient digital approach to relevant master data management enabling necessary business and procurement outcomes/use-cases via advanced data and analytics practices and tooling
2. [25% of votes] Enriched spend insights platform to increase visibility, improve planning and drive data based decisions to optimize organizational value
3. [12.5% of votes] Deliver a digital self-service purchasing toolkit for end users to access required goods and services from contracted and approved suppliers
4. [12.5% of votes] Drive efficiency through automation and/or elimination of tactical transactional activities that are generated as a result of our P2P function
Source: FCL
Digital Ambition: Example Procurement digital roadmap
Integrated supplier
performance and risk
management platform
Easy, automated sourcing
toolkit for procurement and BU
teams
VISION AND AMBITION
Automated data cleaning
incl. “smart” categorization
Automated insights (e.g.,
internal benchmarking)
Real-time spend
analytics platform
in powerful BI tool
Integrated intake, routing,
and end-to-end procurement
workflow management tool
Supplier management hub, integrated
discovery and onboarding tool
Digital self-service and/or automated
purchasing, invoicing and reconciliation
tools, with supporting P2P and buying channel
optimization
P2P planning/phased
approach determination
P2P enabling majority of
functions and phases
Single intake w/ dynamic
ability to collect, info &
route to correct channel
Automatic workflow
updates based on
sourcing changesS1
Single “portal” to see
suppliers external data
(e.g., risk, etc.) S2
Contract meta-data
tagged & housed in
searchable repository
Enhanced tool w/
internal supplier
reviews, prior RFP
scores, KPIs, etc.
Automated contract
compl. linked to P2P
systems
Tool allows
direct access to
contractsS3
Supplier discovery internally and
externally (relevant universe)
Supplier onboarding
functional
Simple workflow mgmt.
tool to track and prioritize
projects
Streamlined generation of
no-bid data requirements
(e.g., pre-config. templates)
Simplified RFX (incl.
templates by category, multi-
round down selection)
Integration of intake data
into sourcing (e.g., pre-
populate RFPs)S1
Pre-population of internal
data, including preferred
suppliers
Wave 1 Wave 2 Wave 3
Improved functionality
(real-time, mobile, self-
service, etc.)
Spend analysis w/ other
data sources (e.g.,
pricing, benchmarks)
SOW / PO line item detail
available (w/ automated data
extraction)
Today
Source: Bain, FCL
Digital workshops: Focused on personas, jobs to be done, key journeys: S2C, P2P, Analytics and Reporting, and Category Strategy
Procurement journey Key activities and jobs to be done Example scenarios / personas
Source-to-Contract
Capture business customer requirements
Identify suppliers / supplier discovery (existing / new)
E-RFX including e-auctions
Contract authoring, monitoring, compliance
Sourcing and contracting involving new supplier (business/ops + procurement category manager)
Contract renewal and negotiation / renewal (business/ops + procurement category manager)
Procure-to-Pay
Creation of requisition
Purchase order creation and submission
Order confirmation
Invoice match / approval / payment
Free text order ( business buyer or procurement user)
Catalog order (business buyer or procurement user)
Blocked invoice / matching (finance)
Early payment discount (finance)
Analytics & Reporting
Combine data sources – multiple ERPs, T&E data
Normalize / classify data – apply taxonomy and rules to classify transactional data by category
Visualize data – produce reports and data visualizations in support of analysis
Category dashboard (procurement category manager)
Supplier risk / performance data (business / ops, procurement category manager)
Savings tracking (procurement category manager, business/ops, finance)
Category Strategy
Internal analysis – spend, demand plan, corporate strategy
External analysis – market intelligence, risk management, vendor landscape, vendor performance/quality management
TCO analysis
Category segmentation (Strategic / Commodity etc..)
Direct materials commodity strategy (business / ops + procurement category manager)
Indirect procurement commodity strategy (procurement category manager)
Services category strategy – insource/outsource (procurement category manager, business/ops, Finance/HR)
Accounts payablePre-purchaseContracting/contract implementDiscovery Sourcing
Supplier relationship management
Ongoing opportunity identification
Procure-to-pay (P2P)Source-to-contract (S2C)Defining business needs
and routingOverall
business
strategy
Source: Bain, FCL
Digital Workshops: Identified 30+ use cases based on the user-driven journeys identified
Source to contract Procure to Pay Data and Analytics Category Management
Supplier registration portal
ERFX, Specialty ERFX
Supplier discovery
Contract repository
RFX templates
Contract authoring platform with standard clause library
Contract templates
Cognitive sourcing capability
Buying channel definition
Supplier self service portal
P2P / R2P platform
T&E management
VMS / MSP for labor
Contract compliance (DSD)
Dynamic discounting
Standardized terms
Contract compliance (P2P)
Basic spend cube
Automated item-level spend cube
GSFOU specific category dashboards
Predictive and Predictive analytics
Contract analytics
Sourcing analytics and KPIs
Procurement effectiveness / savings tracking
ARB toolkit
GSFOU category-specific dashboard
Capital project execution
Supplier performance management (incl. scorecards)
Supplier risk management assessment and monitoring
Supplier collaboration and innovation platform
TMS
1a
1b
1c
2a 3a 4a
4b
4c
1d
1e
1f
1g
1h
2b
2c
2d
2e
2f
2g
2h
2i
3b
3c
3d
3e
3f
3g
4d
4e
4f
4g
Source: Bain, FCL
Digital Workshops: Prioritization of use cases based on value attractiveness and ease of implementation
Evaluation of initiatives along two dimensions for prioritization:
Value / attractiveness
• Cost savings potential full year
• Categories/suppliers/projects targeted
• Sustainability
Ease of implementation:
• Time to market
• Complexity of initiative
• Business beneficiaries outside of Procurement
• Interdependency effort and clustering
Val
ue
HighDifficulty
Low
High
Low
2b
4b
4a
3c
3a
1c
1a
3f
3e 4c
2g
2e
2d
2f
2c3b
4d
4f4e
4g
3d
1h
1b1e
3g
1d
1g
1f
2i2h
2a
High value – Low difficulty
Source: Bain, FCL
Digital Ambition: Building foundations first (e.g. data) enables choice. Better solutions for bus. requirements, substantially lower lifecycle TCO and risk, and future optionality
Coupa
iValua
Jaggaer
Oracle
SAP/Ariba
Zycus
Amazon
Globality
Icertis
Scout
Seal Software
Sievo
SirionLabs
Tealbook
Tamr
Tealbook
Tradeshift
Source: Kearney Solution does not cover capability Low capability High capability 23
Supplier Management
Perform./ Risk Management
Master Data Management
Payment Systems
Spend Analytics
Requisition Management
SourcingContract Management
/ Illustrative
Startups/disruptors
Established“Big 6”
Source: Kearney, Elouise Epstein
Reality check: business alignment
Foundations and capabilities
A digital transformation approach
Supplier data
Leveraging the foundations: COVID shapes the 2020’s
A G E N D A
Supplier Data: Essential foundation for Procurement having any strategic capability. And delivering expected value, quickly
• Everything we do connects to a supplier.
• The more supplier/potential supplier data we have the more value we can create.
• The vendor master is NOT the supplier universe.
• Enriched supplier master data, inside out and outside in, is critical to unlock the potential.
• Faster, better, cheaper to buy versus build critical strategic AI/ML capabilities and platform
• How many supplier data points, channels, and ways of interacting internally and externally do we need?
• Do others look at this value the same way we do?
Supplier Data: Rethinking expectations for ONE source of Truth. Example.
Business users Procurement teamBusiness support
team user
ERPs
P2P
SLP
Supplier Experience (e.g. onboarding)
Risk
Sourcing CLM
Spend ISNet
Sourcing Supplier ManagementRegistration
Source: FCL
Reality check: business alignment
Foundations and capabilities
A digital transformation approach
Supplier data specifically
Leveraging the foundations: COVID shapes the 2020’s
A G E N D A
COVID: Applying this discussion
- Never waste a crisis
- Even greater expectation and opportunity for Procurement to preserve, create and sustain value
- Proactive, agile and resilient mindset required. Especially resilient. Massive upheaval coming.
- Expect broad, rapid acceleration of digital; laggards have nowhere to hide.
- The outgoing tide will reveal much nakedness. Unprecedented leadership turnover ahead.
- Immediate crisis/emergency response
- Then strong shift to longer-term
COVID: We’re in for an exceptionally bumpy ride.
Source: Abraham Maslow
COVID, Procurement Posture: Carve your space. Future-focused, you can add value to the business in ways nobody else can
Source: Bain, Bond Cap, Marc Andreessen, Capital Growth Advisors, Bloomberg, Gavekal Research, Accenture Source: https://a16z.com/2020/04/18/its-time-to-build/ Marc Andreessen
Making meaning of macro demand/supply drivers:
- Digital and tech acceleration
- Medicine, health care and science broadly
- Energy industry transformation
- Food systems
- Human behavior:
- Education
- Work and work platforms
- Entertainment: concerts, bars and clubs, theme parks, sports, movies, TV, videogames
- Grocery
- Dining
Making meaning of macro demand/supply drivers:
- Govt’s abilities to print, sell $$$s and change the rules
- Property rules
- Civil liberties
- Globalization, global cooperation
- Urbanization
- Migration
- Population growth and aging
- Climate change
- Employment/unemployment systems
- Inequality
Example, Supplier Visibility: Continually monitoring and measuring disruption risk through the cycle
Forget everything you think you know about how COVID and concurrent events (e.g. oil prices) will play out. This is a ‘100-year’ black swan event; there are no playbooks.
The organization is dependent on third-party goods and services suppliers in all parts of its supply network, operations, strategic initiatives and capital projects.
Global, regional and local supply markets will be increasingly disrupted and distressed, with different risks/confluence of risks in different businesses, and continually changing.
Meeting customers’ and retails’ needs requires enterprise-wide supplier visibility, gathering, analyzing, and sharing real-time data to proactively identify disruptors and hidden dangers.
Critical supplier data we need to successfully manage/navigate as an enterprise is siloed within business units, departments, teams and individuals on the front lines with suppliers.
Source: FCL
Example, COVID unwind + 2020s Recession Modeling: Investingtime in strategic thinking, analyzing hypotheses, new frameworks
Strategically and proactively identify supply/demand circumstances in key GFR and GSFOU categories of spend for products, materials and services, and deliver differential value to the diverse business units by:
• managing key risks and deploying new innovations in constrained supply markets,• exploiting opportunities for total cost of ownership reductions and new innovations in abundant, hyper-
competitive supply markets, and• leaving areas alone, not wasting time or resources, where status quo preserves value.
Source: FCL
Digital and data is nice… but really, we ONLY succeed through our teams and the environment we create for them
QUESTIONS?
10 Minute Q&A