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