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Procurement Capability: Driving value for local councils ……
Jonathan Dutton FCIPSLGP NSW Conference Sydney, 1st December 2017
• Population growth & urbanisation • Aging demographics • Diversity, sustainability & social responsibility • Technology – deployment & analytics • Housing affordability • Amalgamations • New legislations & regulatory frameworks• Rate‐capping and limited resources?
PROCUREMENT challenges
• Savings tend to ZERO over time … VALUE not • Reducing supply vulnerability and RISK• Integrating SUSTAINABLE procurement & provenance • Enabling procurement as an instrument of POLICY • Baking in probity, compliance & strong PROCESS • Winning the argument for PROCUREMENT • Defining and delivering VALUE through alignment
Sources of “Value” defined
Service Innovation
RiskCost
• Defined by the Customer
• Customer complaints• Delivery / Quality• Information sharing• Instrument of policy
• Price• Cost reduction• Cost competitiveness• Compliance• Lifecycle Cost
• New products / Growth• Systems and technology improvements
• New approaches to Category
• Continuous Improvement in cost, risk & service
• Safety• Reputation• Financial• Supply Continuity• Regulatory• CSR / Probity
P 5Source: Robert Pease
Measuring the value … in future
P 6
Traditional Measure New MeasureCost Direct Savings
Cost avoidance Extra volume
Cost competitivenessSpend coverageProcess compliance
Risk Quality / SafetyZERO Instances
Policy complianceMarket intelligence
Service Delivery In Full On TimeCost to ServeTime to Serve
Customer satisfaction(both internal & external)
Innovation New ideas that work Supplier confidenceNew solutions/services
People Skills assessment Talent Index
The 7 challenges facing LGP in Australia
1. Managing AUSTERITY expectations
2. Defining procurement’s VALUE proposition
3. Capturing INNOVATION 4. Building CAPABILITY & confidence 5. Forging COLLABORATION &
shared services 6. Commercial LEADERSHIP 7. Deploying TECHNOLOGY
Silke Therhaag BLOG Nov 2017
www.openwindows.com.au
Do we have the CAPABILITY to match our AMBITION?
WHAT is CAPABILITY?
Capabilityca·pa·bil·i·ty [ˌkāpәˈbilәdē]
nounpower or ability: to perform,
synonyms: ability, capacity, power, potential, competence, proficiency, adeptness, aptitude, faculty, wherewithal, experience, skill, skillfulness, talent, flair, know-how
Powered by © Oxford University Press
WHAT is CAPABILITY?
WHAT is CAPABILITY?
MORE than TALENT
WHAT is CAPABILITY?
MORE than TALENT ‐ PEOPLE who are trained‐ And equipped ‐ And enabled ‐ And directed
WHAT is CAPABILITY?
MORE than TALENT ‐ PEOPLE who are trained MORE than PROCESS – The confidence of rigour
WHAT is CAPABILITY?
MORE than TALENT ‐ PEOPLE who are trained MORE than PROCESS – The confidence of rigour MORE than TECHNOLOGY – Timely INFORMATION
People, Process & Technology – The 3 levers on procurement CAPABILITY
PEOPLE
What do you want to be?A GP?
An obstetrician? A cardiologist?An oncologist?A surgeon?
A physiotherapist
Or be all of them
… be a VET
Building commercial capabilityThe TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen2. Legal & process knowledge 3. Project management competence 4. Strategic procurement capability5. Soft skills & relationship management expertise 6. Wider business perspective7. Technical comprehension & knowledge 8. Market awareness 9. Entrepreneurial approach – Intrapreneurs?10. Supply chain & logistical appreciation
The CONFIDENCE to operate
ully 62% of the 324 global CPO’s surveyed declared that they did NOT elieve that their procurement teams had the RIGHT skills for future needsELOITTE CPO SURVEY 2016
The TEN skills required in future by procurement professionals 1. Commercial awareness & business acumen2. Legal & process knowledge 3. Project management competence 4. Strategic procurement capability5. Soft skills & relationship management expertise 6. Wider business perspective7. Technical comprehension & knowledge 8. Market awareness 9. Entrepreneurial approach – Intrapreneurs?10. Supply chain & logistical appreciation
“If you think EDUCATION is expensive, try IGNORANCE”
Lincoln
So, why are we not training our teams? To save money?
SUPPLY ASSURANCE
PURCHASE COST REDUCTION
TCO REDUCTION
DEMAND MANAGEMENT
VALUE MGMT
Procurement is working to evolve its value proposition…
Value Proposition Role of Procurement
Safely harnessing the power of supply markets for competitive advantage
Negotiations
Customer relationship management; money management; demand/specification influence
Cost modeling; supplier/market analysis; supplier management; SRM; supply planning; project management; risk mgmt
Tactical Ordering
Right goods and services at the right time at the right place…
And at the right price…
…by reducing total supply costs (not just supplier profits).
…ultimately stimulating good demand and increasing business value derived from Spending (and supply markets) rather than just reducing Spending magnitude.
Reducing unneeded demand activity, complexity, immediacy and variability…
Incr
ease
val
ue (a
nd re
quire
d ca
pabi
litie
s)
As procurement effort matures, so focus moves from price towards value Source : Hackett Group
Trusted advisor
RelationsMGR
Supply Expert
Negotiator
Buyer
SUPPLY ASSURANCE
PURCHASE COST REDUCTION
TCO REDUCTION
DEMAND MANAGEMENT
VALUE MGMT
Procurement is working to evolve its value proposition…
Value Proposition Role of Procurement
Safely harnessing the power of supply markets for competitive advantage
Negotiations
Customer relationship management; money management; demand/specification influence
Cost modeling; supplier/market analysis; supplier management; SRM; supply planning; project management; risk mgmt
Tactical Ordering
Right goods and services at the right time at the right place…
And at the right price…
…by reducing total supply costs (not just supplier profits).
…ultimately stimulating good demand and increasing business value derived from Spending (and supply markets) rather than just reducing Spending magnitude.
Reducing unneeded demand activity, complexity, immediacy and variability…
Incr
ease
val
ue (a
nd re
quire
d ca
pabi
litie
s)
As procurement effort matures, so focus moves from price towards business value Source : Hackett Group
Trusted advisor
RelationsMGR
Supply Expert
Negotiator
Buyer
Does our capability investment match our ambition?
WHAT’s the future of corporate learning?
• Classroom lectures• U shaped PowerPoint shows • 70/20/10 • You Tube • E Learning • Conferences & events• Peer to peer
learning networks
SKILLS Assessment • Skills or knowledge?• Or CAPABILITY?• Free ASSESSMENTS ONLINE• Generic • Compara
• Procurement knowledge evaluation• Skills self‐assessment • Behavioural assessment
• ArcBlue• DATA history• CIPS links & educational assessed programs• INCO solutions
• Others • Other roles – policy, non Procurement people
PROCESS
The FIVE RIGHTsProcurement 101
• The five rights :
• RIGHT goods• RIGHT quality• RIGHT place• RIGHT time• RIGHT price
•
The first responsibility of the professional BUYER is assurance of supply
The IRON triangleof PROJECT MANAGEMENT
Cost
Quality Time
The SIXTH right – the RIGHT source
• The right supplier • The right supply chain
The SIX rights • RIGHT goods• RIGHT quality• RIGHT place• RIGHT time• RIGHT price• RIGHT source
The 7th RIGHT …The new urgency of buying in the RIGHT WAY – the right process
The SEVENTH right • RIGHT goods• RIGHT quality• RIGHT place• RIGHT time• RIGHT price
• RIGHT source… the RIGHT way
• Right process (Our process) • Fair process• Competitive process
• Compliance • Probity
• Confidence • Transparency • Pressure – boards, shareholders, consumers, voters
“Shareholders and citizens alike want their organisations to do the right thing
and be transparent enough to be seen to be doing the right thing.”
Open Windows white‐paper; Feb 2017
The right way – not the wrong way Key drivers: Commercial • RISK reduction – mostly of blow‐outs • No delays, no stuff ups …. Legal • Compliance • Probity Moral • Confidence • Transparency • Pressure – boards, shareholders, consumers, voters
Do the commercial ends, justify the purchasing means?
Open Windows white‐paper; Feb 2017
More regulation, not less…
• Federal CPR’s .. and PCP’s• The Indigenous Procurement Policy (IPP)• Modern Slavery Act 2019
• Tender thresholds• Liability management • Panels
• Payment schedules v work plans • Compliance – safety, insurance, standards• Compulsory tendering : Few delegates
And procurement as an instrument of policy …
Better behaviour, not worse … • No supplier bullying• No spurious payment or
rebate demands
• No emotional blackmail• No coercion
• No threats or anti‐competitive behaviours
• No fraud & corruption
Open Windows Software
TECHNOLOGY
INFORMATION
TECHNOLOGY challenges
• The RIGHT information• In the RIGHT place• At the RIGHT time • With RIGHT accuracy
• At the RIGHT cost
.. Sound familiar?
E Procurement suggestions
• A key part of the control framework • Web catalogues great for USER service speed • Link into P2P and ERP for consistent data quality • E Tendering means speed and lower tender costs • Integrate existing systems …… using the CLOUD• Data integrity & reporting capability is the key …• And solving business problems through TECHNOLOGY• Contract mgt automation ENABLES benefits realisation• Start with SPEND analysis
Over 50 e procurement IT vendors
Everyone ‘sells’ everything …
39
40
Efficiency over benefits
realisation??What about solving the business problem?
SOURCE:Changing Face of ProcurementInfosys Portland Survey 2016 (Australia)
SOURCE:Procurement Challenges ProcureCon WBR Survey 2016 (UK/USA)
54%
40% 38% 37%
20%11%
CSR
Innovation
Risk
Benefits expected by BUYERS from implementing procurement technology:
Mkt IntellCosts
Efficiency
Over 50 e procurement IT vendors
Which ONE solves your business problem…?
41
What’s Missing ?
Operations
ERP
Strategic Procurement
P2P
Contracts repository & databaseeAlerts
eTenderingOnline evaluation
Flexible Workflow Processes Project management interfaceProject contract aggregation
Budget – ordering reconciliationPunch‐out catalogues
Order catalogues v Receipting SRM portal for supplier input
Supply market intelligence DatabaseSupply Chain Tier management eApprovals & escalation paths
Supplier communications & recordingCompliance library
Risk management process Sustainable procurement protocols
Real‐time audit trails Analytics dashboard & spend analysis
A Roadmap for Digitising Source‐to‐Pay April 2017
Today’s technology will let you DIGITISE half the Source‐to‐Pay process in most organisations Emerging technologies (RPA, ECS and AI) have the potential to overcome stubborn barriers to automation Industry benchmark figures suggest most firms waste 3% External Spend on transaction costs, inefficiency,
non‐compliance
Start by identifying the end‐to‐end Source‐to‐Pay process you have automated? Build technical platforms now, that can enable emerging technologies next … SAVE 3.5% external spend and free sourcing staff to become more strategic
http://www.mckinsey.com/business‐functions/operations/our‐insights/a‐road‐map‐for‐digitizing‐source‐to‐pay
To do any of this – the FIRST step is to gather DATA
Operations
ERP
Strategic Procurement
P2P
“Digitisation of the procure‐to‐pay process has brought troves of data into the lap of the
enterprise … The trick is knowing what to do with it …”
Zia Zahiri, CTO, Jaggaer
SUPPLY CHAIN Digitisation
Supply Chain Digitisation
Internal
Analytics
External
BIG data
Robotics (RPA)
A.I.
Bar codes, RFID & QR
Cloud & mobility
Integration & IoT
p t gDrones & 3D printing
Cognitivity & Bitcoin
Millions of APPS Billions of USERS Trillions of THINGS
COST to Serve
TIME to Serve
Manual supply chains will be disrupted first
Suppliers often have DATA
FIVE key skills needed for the DIGITAL ECONOMY :1. Innovative & Adaptive Thinking
2. Virtual Collaboration & Social Intelligence3. Ability To Work Across Disciplines
4. Literacy In Different Types Of Media5. Computational Thinking & Analytics
Dr Jaclyn Lee PhD, Singapore University of Technology and Design
PEOPLE SKILLS
Jonathan Dutton, FCIPS• Independent Management Consultant & Trainer • Founding CEO of CIPS Australia ‐ 2004 to 2013• Marketing Director of two UK plc’s• Sales management roles • Professional procurement manager • Fellow of 4 Institutes: FCIPS, FCIM, FRSA, FAIM.• Degree in Economics & MCIPS & GAICD, etc...
A BUYER and a SELLER for over 30 years www.jdconsultancy.com.au