Upload
curtis-hamilton
View
218
Download
0
Embed Size (px)
DESCRIPTION
© AberdeenGroup 2009 Research Background The CPO’s Agenda 2009
Citation preview
© AberdeenGroup 2009
Andrew Bartolini, Vice President & Group Director
Aberdeen GroupJuly 1, 2009
The CPO’s Agenda 2009
Smart Strategies for Tough Times
2 • © AberdeenGroup 2009
Discussion Topics
Research Background CPO 2009 Best-in-Class Performance Recommendations
© AberdeenGroup 2009
Research Background
The CPO’s Agenda 2009
4 • © AberdeenGroup 2009
The CPO’s Agenda: 2005 to 2009
5 • © AberdeenGroup 2009
“Companies that deliver improved execution during the tough times will be the ones best positioned to capitalize on the economic turnaround which will most certainly occur. To be successful in 2009 we need to deliver on improving execution across the supply chain.”~ Bob Eckert, Chairman and CEO, Mattel Inc. 4/17/09
6 • © AberdeenGroup 2009
Research Approach
Hypothesis The global recession is taking no prisoners. Neither industry,
nor region, nor company-size has provided shelter from its impact. Most business functions have been impacted. Yet, as this business downturn continues, the Chief Procurement Officer's agenda and the CEO's agenda have started to converge. The CPOs who successfully devise and execute smart strategies in these tough times will continue to rise.
Approach Aberdeen Group conducted an initial web-based survey to
target professionals in our research membership pool Conducted interviews with 20+ CPOs
7 • © AberdeenGroup 2009
Report Demographics: 220+ Participants
Enterprise Size
53%
28%
19%
Large (Revenue > $1B)
Mid-Market (Revenue:$50M to $999M)
Small (Revenue < $50M)
Geography
62%
27%
8% 3%
North America
EMEA
Asia-Pacific
Rest of World
Source: AberdeenGroup, April 2009
8 • © AberdeenGroup 2009
Source: AberdeenGroup, April 2009
36%
5%9%
27%
13%
10%CPO
VP/SVP/EVP
C-Level
Director
Manager
Other
Job Title
Report Demographics: 220+ Participants
Industry Segments
Manufacturing – 12% Hi-Tech – 7% Food/Beverage – 6% Chemicals – 5% Financial Services – 4% Health Care – 4% Mining/Energy – 4% 30 other industries
9 • © AberdeenGroup 2009
“We intend to operate with strict financial discipline, maintaining a maniacal focus on cash. We're also closely managing all of our costs, renegotiating contracts around the world, localizing our sourcing…”~ Indra Nooyi, CEO, Pepsi
“We have worked closely with our strategic suppliers to achieve sustainable cost improvements….”~ Olli-Pekka Kallasvuo, President and CEO, Nokia
“And while we were committed to driving revenue across all channels, an equal focus was placed on improving operational efficiency, driving down costs and lowering inventories…”~ Howard Lester, Chairman and CEO, Williams-Sonoma
CEO Perspectives: Q1 Earnings Calls (April ’09)
© AberdeenGroup 2009
Chief Procurement Officer 2009
The CPO’s Agenda 2009
11 • © AberdeenGroup 2009
“My primary challenge is keeping my people aligned and focused while receiving such rapidly changing guidance from our executives…We don't even know what our plan for 2009 is.” ~ CPO, Fortune 100 Company
“We face the extraordinary challenge of right-sizing to our business which has contracted by 45% in the past year. This means fundamentally restructuring our organization and resetting the scope of operations and our overall mission.” ~ CPO, Global Manufacturer
CPO Perspectives
12 • © AberdeenGroup 2009
The Economy’s Impact on Procurement 2009 Budget
31%
30%
18%
19%3%
No Change
Decrease (<10%)
Decrease (>10%)
Increase
Not Sure
2009 Headcount
48%
22%
10%
17%4%
No Change
Decrease (<10%)
Decrease (>10%)
Increase
Not Sure
55% of CPOs have delayed a major 2009 initiative
Source: AberdeenGroup, April 2009
48% 32%
13 • © AberdeenGroup 2009
The Economy’s Impact on the Role of the CPO
Source: AberdeenGroup, April 2009
34%
29%
28%
2% 5% 2%Improved visibilityViewed as more strategic No ChangeLess visibilityViewed as more tacticalDon’t Know
63%
14 • © AberdeenGroup 2009
“Procurement is center stage. Our plan for 2009 is built into the P&L [profit and loss statement] of each business unit. In the past, we have been key to them making their plan. ” ~ CPO, Fortune 100 Company
“Each year, we survey our top 50 to 60 internal users of our services. I sit in on as many of these as I can. It is important for our stakeholders to know that I’m fully vested in our performance and it’s motivating for my staff to know that I am getting first-hand feedback on how well they are doing. ” ~ CPO, Pharmaceutical Industry
Smart Strategies
15 • © AberdeenGroup 2009
The CPO’s Agenda
Source: AberdeenGroup, April 2009
25%
35%
40%
No formal plan
Formal one-year plan
Formal multi-year plan
16 • © AberdeenGroup 2009
The CPO’s Top Priorities (next 24 months)
Source: AberdeenGroup, April 2009
Top Three Priorities45%
35% 32% 31%
PEOPLE: Enhancedepartment staff
skills andcapabilities
EFFICIENCY:Improve operating
efficiency ofcurrent department
SPEND: Increasespend under
management ofprocurement group
SUPPLIERS: Improvesupplier
development andcollaboration
17 • © AberdeenGroup 2009
Top CPO Pressures
Source: AberdeenGroup, April 2009
24%
26%
47%
91%
Optimize workingcapital
Improve processes
Mitigate supply risk
Identify costreductions
18 • © AberdeenGroup 2009
“Any procurement, sourcing or supply professional should be employing whatever tactic he or she can in order to take advantage of a depressed market and with it, an abundance of competitive opportunities.” ~ CPO, Industrial Chemicals/Products
“It’s not just about unit cost reduction. Demand management is a critical area to manage as well.” ~ CPO, Financial Services
Smart Strategies
19 • © AberdeenGroup 2009
Top CPO Strategic Actions
Source: AberdeenGroup, April 2009
25%
30%
37%
50%
Improve contractcompliance / reduce
maverick spend
Develop supply riskmitigationstrategies
Develop strategiesto improve cash
flow
Increase sourcingactivity
20 • © AberdeenGroup 2009
“We are focused on process improvements and improving our use of technology. In some cases, we already have the technology in place and need to increase adoption and expand our capabilities ” ~ CPO, Government
“We have a big initiative to move to completely automated workflows, with a global roll-out of a procurement system this year.”~ CPO, EMEA-Based Enterprise
Smart Strategies
21 • © AberdeenGroup 2009
The CPO’s Agenda - Technology
Source: AberdeenGroup, April 2009
41%
34%
39%
30%
63%
50%
39%
49%
e-Sourcing
Supplier Networks or Portals
e-Payables
Contract Lifecycle Management
Commercial Cards
e-Procurement
Spend Analysis
Supplier Performance Management
Currently use
22 • © AberdeenGroup 2009
The CPO’s Agenda - Technology
Source: AberdeenGroup, April 2009
41%
34%
39%
30%
63%
50%
39%
49%
21%
37%
35%
44%
15%
30%
44%
41%
e-Sourcing
Supplier Networks or Portals
e-Payables
Contract Lifecycle Management
Commercial Cards
e-Procurement
Spend Analysis
Supplier Performance Management
Currently use Plan to use
23 • © AberdeenGroup 2009
The CPO’s Agenda - Technology
Source: AberdeenGroup, April 2009
41%
34%
39%
30%
63%
50%
39%
49%
21%
37%
35%
44%
15%
30%
44%
41%
38%
29%
26%
26%
21%
20%
18%
10%
e-Sourcing
Supplier Networks or Portals
e-Payables
Contract Lifecycle Management
Commercial Cards
e-Procurement
Spend Analysis
Supplier Performance Management
Currently use Plan to use No plans to use
24 • © AberdeenGroup 2009
Top CPO Challenges
Source: AberdeenGroup, April 2009
33%
38%
47%
52%
Recruiting and retaining skilled talent
Managing executive demands &expectations
Aligning processes to systems
Engaging the larger enterprise
25 • © AberdeenGroup 2009
“In the past, you might have data signals - 1, 2, even 6 months in advance. Now we're getting notices along the lines of 'Effective Monday, we are closing our plant.’” ~ CPO, Global Manufacturer
“We have a pre-alert system designed to identify at-risk suppliers. This includes working with rating agencies, local banks, and performing financial analysis.” ~ CPO, Financial Services
CPO Perspectives
26 • © AberdeenGroup 2009
CPO’s View of Supply Risk
Source: AberdeenGroup, April 2009
Change in Last 18 Months
71%
19%
6% 4%
Increased
No Change
Decreased
Not Sure
27 • © AberdeenGroup 2009
CPO Plans for Supply Risk Management
Source: AberdeenGroup, April 2009
42%
43%
43%
58%
Define ownership for managingsupply risk
Use external information services tomonitor and assess supply risk
Contingency planning for supplydisruptions
Clearly define metrics for supplyperformance and risk
28 • © AberdeenGroup 2009
“We have been driving a payment terms initiative that has extended our usual terms from 20 days to 60 days, resulting in an estimated annual cash benefit of between $50 and $60 million. ” ~ CPO, Fortune 500 Company
“We're very focused on the working capital impact of the contracts we negotiate, how inventory is managed, and our payment terms.” ~ CPO, Manufacturing
Smart Strategies
29 • © AberdeenGroup 2009
CFO’s Top Priorities for 2009
Source: AberdeenGroup, April 2009
43%
53%
70%
73%
Mitigate risk
Forecast financial performance
Optimize working capital (cash mgmt)
Reduce costs
© AberdeenGroup 2009
Best-in-Class Performance
The CPO’s Agenda 2009
31 • © AberdeenGroup 2009
“There has been a change in context, speed, and risk. It's time for procurement to be the hero.” ~ CPO, Oil & Energy
“Our goal is to achieve Best-in-Class performance. In good times or bad, we're focused on the right behavior." ~ Vice President and Director of Procurement and Strategic Sourcing, Retail
CPO Perspectives
32 • © AberdeenGroup 2009
Maturity Framework
Definition of Maturity Class Mean Class Performance
Best-in-Class: Top 20% of aggregate performers
88% of spend under management8.5% cost savings as a percentage of total spend
Industry Average: Middle 50% of aggregate performers
64% of spend under management5.2% cost savings as a percentage of total spend
Laggard: Bottom 30% of aggregate performers
23% of spend under management3.7% cost savings as a percentage of total spend
Source: AberdeenGroup, April 2009
33 • © AberdeenGroup 2009
Maturity Framework
Source: AberdeenGroup, April 2009
Best-in-Class Average Laggard
Process
Ability to leverage spend data to drive sourcing projects
79% 56% 40%
Percentage of addressable spend that is formally sourced
71% 52% 32%
Formal spend analysis program
74% 38% 31%
Conduct regular reviews contract compliance
61% 33% 31%
Organization
Center-led procurement organization
56% 45% 20%
Cross-functional collaboration with finance, HR, product, travel, etc.
74% 55% 45%
34 • © AberdeenGroup 2009
Maturity Framework
Source: AberdeenGroup, April 2009
Best-in-Class Average Laggards
Knowledge
Formal supply risk management program43% 30% 18%
Enterprise-level spend visibility across all categories62% 48% 39%
Training to improve supply market knowledge55% 26% 16%
Technology
Supply management solutions currently in use:65% Automated Spend Analysis64% Supplier Performance Management50% Supplier Networks or Portals38% Optimization-based sourcing analytics
36% Automated Spend Analysis49% Supplier Performance Management32% Supplier Networks or Portals14% Optimization-based sourcing analytics
24% Automated Spend Analysis36% Supplier Performance Management27% Supplier Networks or Portals8% Optimization-based sourcing analytics
35 • © AberdeenGroup 2009
Current Staff Training
Source: AberdeenGroup, April 2009
68%
55%46% 43%
33%
50%
23%32%
28%21%
Process Supply marketresearch
Financialanalysis
Sales/Marketing Supply riskmanagement
Best-in-Class All Others
36 • © AberdeenGroup 2009
Best in Class Characteristics
Formal spend analysis program Holistic sourcing process with significantly higher
volumes Active compliance program Training focus/investment Superior collaboration & communication Multi-year strategic plan aligned with enterprise goals
© AberdeenGroup 2009
Recommendations
The CPO’s Agenda 2009
38 • © AberdeenGroup 2009
Aberdeen Recommendations
Perform spend analysis on a regular basis. Develop and track a pipeline for spend under
management. Incorporate savings quotas (or bounties) in the
staff's incentive plan. View strategic sourcing as a holistic process and
leverage process automation wherever possible. Conduct regular contract compliance audits.
39 • © AberdeenGroup 2009
Aberdeen Recommendations
Enhance supply risk management capabilities.
Lead your team…and defend it.
“Cash is King” - Engage the CFO to develop cash
management strategies.
Hire category experts from industry (i.e. energy,
steel, chemicals, services).
40 • © AberdeenGroup 2009
A Penny Saved is Ten to Fifty Earned
Source: AberdeenGroup, April 2009
Revenue (in millions)
$100$161
$270
$476
Financial Services Telecom Airlines orSpecialty Retail
Food/Drug Retail
Revenue, By Industry, Needed to Generate $10M Profit
41 • © AberdeenGroup 2009
Q&A (Contact Info)
For More Research Please Visit: www.aberdeen.com
Andrew Bartolini, Vice President & Group DirectorGlobal Supply Management,
AberdeenGroup [email protected]
617.854.5310