NETWORK LOCALLY,IMPLEMENT GLOBALLY

Ariba, an SAP Company

Michael KochDirector - Solutions Marketing Ariba, an SAP Company

Strategies to Future-proof Procurement: Are You Ready?

Future of Procurement

September 17, 2015SIG Symposium - Columbus

Building on a strong foundation Outsourcing explodes

Strategy scope widens

Talent competition heats up

Innovation comes from without

Suppliers gain power

Going boldly where no procurement study has gone before

How have executives responded to the trends outlined in Vision 2020 in the years since?

What new challenges and opportunities do executives and practitioners consider most important?

Where are there gaps in understanding between executives and practitioners?

A global survey of executives and practitionersIn collaboration with SAP, Oxford Economics is conducting a large-scale global study to discover emerging and enduring trends in the procurement function. We surveyed 500 procurement executives and 500 procurement employees in the following countries:

AustraliaAustriaBrazil

CanadaChina

DenmarkFinlandFrance

Germany

IndiaItaly

JapanMexico

NetherlandsSpain

SwitzerlandUKUS

Key findings From here to where? Changes in the procurement function drive sharply different views of what the

future will look like.

Procurement gets collaborative. Executives and practitioners are spending more time collaborating with other lines of business and external partners.

Goodbye to business as usual. These new ways of working are forcing change on the way procurement operates—and on the way success is measured.

The technology agenda. Procurement today is focused on automation and collaboration though social platforms—but executives and practitioners do not see eye to eye on every issue.

The human challenge. As the nature of work changes and technology advances faster than most workers can keep up, attracting and recruiting the right workers is a challenge for the procurement function.

From here to where?

32%

33%

30%

32%

27%

35%

30%

38%

44%

26%

27%

28%

29%

32%

34%

35%

44%

46%

Geopolitical issuesBig Data

RegulationCloud computing

Talent/Skills shortagesMobile technologyBusiness networksCommodity pricing

GlobalizationExecutives Practitioners

Macro concerns still dominate

Which economic and technology trends do you expect to have the most significant

impact on the procurement function over the next three

years? Choose top 3.

Procurement operates across functional boundariesPractitioners say, at their company…

Agree /Strongly agree

Procurement is becoming embedded in other parts of the organization.

59%

Procurement is playing a more strategic role in the organization.

63%

Differing views on procurement’s future

23%

25%

12%

28%

33%

17%Choose 1.

Procurement gets collaborative

Internal collaboration is a given

70% Procurement is becoming

more collaborative with other parts of the business.

65% Procurement data is being used strategically by other

parts of the business.

Agree /Strongly agree

Practitioners say, at their company…

Reaching beyond the firewallOn which of the following areas

would you like your organization to be most focused today?

Executives say…

Choose up to 3.

41%38% 35% 35%

31% 30% 29%26%

46%

34% 35%

42%

31%37%

30% 30%

Working one-on-one with

suppliers in astrategic way

Managingsupply risk

Optimizing theprocure-to-pay

process

Implementingand training onnew technology

Working onsustainability

and CSRinitiatives

Conductingcategory

managementand sourcing

Working withlines of

business onnew initiatives

Analyzingspend

Today In two years

The cost of collaboration is timeThinking of a typical day at work, which of the following activities take up the majority

of your time?

Practitioners say…

Choose up to 3.

55% 55%46%

41%36%

32% 32%

Working one-on-onewith suppliers on

strategic initiatives

Working one-on-onewith suppliers and

others onadministrative issues

Conducting sourcing/contracting category-

management activities

Working on operationalprocure-to-pay tasks

Training/Upskillingprograms

Recruitment of newtalent

Conducting spendanalysis activities

Goodbye to business as usual

It’s all about relationships

To what extent are the

following trends

affecting the way your

procurement function

operates?

To quite an extent/To a great extent

47%

48%

54%

48%

53%

56%

55%

46%

48%

50%

53%

54%

58%

61%

The use of contingent workers within theprocurement function

The use of contingent workers across thebusiness

Suppliers providing more end-to-endsolutions, instead of just materials or…

An increase in services purchasing,including statement-of-work contracts

Procurement managing accounts payable

Increased competition for high-performingsuppliers

Procurement owning the supplierrelationship

Executives Practitioners

Cost savings are table stakes

EXECUTIVES PRACTITIONERS

1

2

3

1

2

3

Cost savings and cost avoidance (70%)

Supplier quality/ performance (49%)

Inventory turnover/ inventory activity (49%)

Cost savings and cost avoidance (58%)

Supplier quality/ performance (51%)

Procurement ROI (50%)

Which of the following KPIs

does your organization

use to measure procurement's

success?Top 3

responses

65%

54% 53% 52% 52% 50% 49% 48% 48% 46% 45% 45%

Cost savingsand cost

avoidance

Number orpercent oftouchless

transactions

Inventoryturnover/inventoryactivity

Riskmitigation

Order cycletime

Number ofsuppliers with

automatedcollaboration

ProcurementROI

Percent oftotal spend

undermanagement

Impact onrevenue from

innovation

Supplierquality/

performance

Percent ofcompliant

purchasing

Stakeholdersatisfaction

results

A disconnect between usage and value

Executives say…

Only respondents who say their company used a particular KPIs were asked to rate its value.

How valuable are the following KPIs?

Practitioners measure themselves on cost

80%Cost savings/

cost avoidance

52%Supplier quality/

supplier performance

49%Procurement

ROI

47%Percent of total spend under management

45%Inventory turnover/ Inventory activity

Which of these corporate-level KPIs do you feel you contribute to the most in your day-to-day job?

Top 6 responses

Choose up to 3 or none of the above.

Practitioners say…

49%Percent of compliant

purchasing

The technology agenda

The tech imperative

Which economic and technology trends do you

expect to have the most significant impact on the procurement

function over the next three years?

Choose top 3. Ranks listed here from the technology-related responses

EXECUTIVES PRACTITIONERS

2

1 1

2

3

Business networks

Mobile technology

Cloud computing

Mobile technology

Big data

Cloud computing3

Collaboration technologies drive the business

B2B commerce networks

Social media

58% 48%

Internet of Things

52% 46%

Mobile apps and devices

49% 42%

Analytics

46% 47%

Cloud

45% 43%

Knowledge exchange/ collaboration platforms

54% 57%

44% 47%

How important are the

following technologies important to

the progress of your

procurement organization?

Quite important/Very important

Automation today…To what extent are you automating the

following processes today?

Mostly automated/Completely automated

66%

53% 50% 50% 49% 49% 48% 47% 47% 47% 44%

65%

52% 55%51% 48% 50%

55%48% 48% 49% 51%

Spendanalysis

Strategicsourcing

Contingentworkforce

management

Operationalprocurement

Invoicemanagement

Contractmanagement

Supplierperformancemanagement

Procurementperformance

analytics

Supplier riskmanagement

Servicesprocurement

Transactionalcollaborationwith suppliers

Executives Practitioners

…uncertainty tomorrowTo what extent will you be automating the

following process in two years?

Mostly automated/Completely automated

76%69% 68% 66%

70% 68% 66% 67%63%

56%64%

70%

60% 63% 61%56% 57%

63%56% 55% 57% 58%

Spendanalysis

Strategicsourcing

Contingentworkforce

management

Operationalprocurement

Invoicemanagement

Contractmanagement

Supplierperformancemanagement

Procurementperformance

analytics

Supplier riskmanagement

Servicesprocurement

Transactionalcollaborationwith suppliers

Executives Practitioners

The human challenge

People are a priority

Executive investment priorities

1 – Recruiting new talent 2 – Training/Upskilling programs3 – Procurement/Supply chain

technology4 – Outsourcing5 – Funding supplier innovation

programs6 – Hiring consultants7 – Acquiring third-party data

Executives and practitioners alike say recruiting new talent and investing in

training/upskilling are the top investment priorities.

48% of executives and practitioners

say the use of contingent workers is changing the way

procurement operates.

Business skills most difficult to acquireExecutives say…

How difficult is it to find and recruit talent with the following skills to meet the

changing demands on the procurement function?

24%

Supply chainmanagement knowledge

24%

Risk management

24%

Data analysis and critical

thinking

20%

Soft/People skills

28%

Negotiation

34%

Strategy/ Business acumen

28%

Technology

Difficult/Very difficult

Luring workers to the procurement function

Promoting procurement as a training ground for

other functions

23%

Defining clear career paths within

procurement/supply chain

21%

Recruiting out of business/graduate

programs

17%

Offering competitive

compensation

24%

Recruiting out of college

16%

Executives say…

Most important strategy

Practitioners are recruited early

I wanted to use procurement as a training ground for another area of the

business.

29%

Procurement offered me a

defined career path.

43%

I was recruited out of business

school/a graduate program.

55%

I was offered competitive

compensation.

52%

I was recruited out of college.

44%

Practitioners say…

Choose all that apply.

Job satisfaction is high

They plan to stay in the procurement function for the long term.

They are satisfied or very satisfied with their jobs.

Procurement is a training ground for employees moving to other areas of the business.

Practitioners say…

56%

54%

40%

Surprises in the data?

The flexible workforce is having an impact on the way procurement works. Nearly half (48%) of executives say the use of non-payroll workers across the business is changing the way procurement operates. Procurement is also increasingly automating contingent workforce management, pointing to its growing importance.

Social collaboration powers procurement. 58% of executives and 48% of practitioners cite social media as important to the progress of their organization.

Working with other lines of business ranks low on executives’ list of priorities for their employees. Just 29% list it among the top three areas of focus for practitioners.

Next steps

Stay tuned for our reports and graphics

With the final data set, we will produce:

An executive summary

A provocative Think Piece

Infographics and fact sheets

Social media updates