Presented to:By:

Procurement Intelligence – Priming Procurement Leaders for Business Power Play

Indian Institute of Materials Management Valekumar Krishnan

Current state and Pressures

The coach and management think we are not exploiting all scoring areas while batting

The competition is ahead of us identifying new opportunities and executing plans

We are conceding more runs per wicket

Our field setting is not complementing our bowling strategy

2

3

Evaluate best scoring options and implement

them successfully

Ensure maximum returns and minimize

loose shots

Monitor evolution of the game, analyze external innovation and adapt successful

practices

QuickWins

Opportunity Assessment

External Benchmarking

Batting Strategies

4

Bowling Strategy – Power Play

COGS, SG&A Optimization

External Benchmarking

Procurement Organization

Procurement metrics & Peer Benchmarks

Supply Market

Established and emerging players

Capacity trends

Consolidation & Fragmentation

trendsConsolidation & Fragmentation

trends

Differentiation& Innovation

Risk Mapping

Competitor activity

Supplier Engagements

Innovative Remuneration

Models

Contract Best Practices

Backward integration

Supply base rationalization

Price

Price Trends & Forecasting

Price Driver Analysis

Cost Modeling

Visibility

5

Opportunity Assessment

6

External Market Intelligence Internal Spend, Supplier and Category Information

Opportunity Identification & Evaluation

In-depth category information aids faster decision making and improved speed to market

Mitigation strategy for category roadblocks

Identify and incorporate category best practices from peers

Arriving at cost savings target and execution roadmap

Enabling better SRM measures through standardization of KPIs

Typical Benefits of Opportunity Assessment

Internal Opportunities External Opportunities Internal and External Opportunities

Quick Wins Long Term

Red

uct

ion

p

ote

nti

al

Time to achieve reductionLow

Hig

h

High

Lo

w

Integration of Brand Agency Team

SOW reconciliations

Administrative Tools

Agency Staff Onsite

E-auctions

Production consolidation

Agency Review

Agency Staff Plan Evaluation

In-house Agency /Freelancers

Agency Consolidation

Opportunity Grid – Sample

7

COGS/SG&A Optimization

Payables to Revenue Ratio

Inventory to Revenue Ratio

COGS as a Percentage of

Revenue

Purchase Price Variance

Transition

Procurement generates significant bottom-line benefits through negotiations, value chain optimization, and innovation, which can not be measured using Purchase Price variance. COGS, Inventory & Payables ratios will provide a better picture of procurement’s performance vis-à-vis competition.

Continuous tracking of cost structure, capacity levels and supplier financial performance at category and spend pool levels enables

identification of opportunities as they arise

8

Bowling Strategy – Middle Overs

Cost Avoidance / Cost Reduction as % of

total spend

Order Fill Rate

Maverick Spend Percentage

Spend per Procurement FTE

Managed Spend Under Contract

Number of buyer generated quality problems

Number of make/buy decisions with

procurement’s involvement

Innovative ideas introduced by

suppliers

Procurement Contribution to Product Development

PPV

Procurement Performance Management

9

Innovation

Cost

Supply, Quality, Regulations

Process and Product Re-engineering

Risk Management Supplier

Collaboration/Strategic Partnership

Increased Speed to market

The future State – Collaborative & InsightfulBusiness partner

10