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Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1
The Future of Procurement (and
other musings)
Dubai, UAE
March 2016
Jason Busch, Founder and Head of Strategy, Spend Matters
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 22
Some quick background on us …
• TheSpendMattersNetwork™helpsorganizationsspendandmanagecashmoreeffectively.
WecombineoneofthefastestgrowingB2Bdigitalmediaplatformswithasetofexpert
analyst,researchandadvisoryproducts.TheSpendMattersNetworkincludes:
– Expertandinfluentialprocurement,supplychainandfinancecontentthatconnects withindividuals
– Innovativesubscriptionproductsthatimprovehowbusinesses interactwithmarkets
– Customresearchandadvisorysolutionsforclients
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 33
Spend Matters Network – by the numbers
SpendMattersNetwork
• 12 differentsites/brands/researchservices
• 1,500-2,000+unique companies visitdaily
• 1,000+subscribers(paidmembers)
• 95%+ofFortune500visitmonthly
• 150+ freeandsubscriptionarticlespublished
weeklyacrossthenetwork
• Theonly globalprocurement,supplychainand
tradefinancingmediaandresearchplatform
• Amixofexpertcontributinganalystsand
supportingeditorsandjournalists
Parentcompany:AzulPartners,Inc.
• Privately-heldbythefoundersandmanagement
team;noexternalshareholders
• 30+teammembers
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 44
Behind Spend Matters Network are expert voices and faces that
connect with our audience including …
JasonBusch
Founder,ManagingDirectorAZULPARTNERS,INC.
EditorialCoverage:
TradeFinancing,Procurement, P2P,Risk
LisaReisman
ManagingDirector,Co-Founder, CEO
AZULPARTNERS,INC.
EditorialCoverage:DirectProcurementandCommodityManagement
(US)
PierreMitchell
Chief ResearchOfficer,ManagingPartner
AZULPARTNERS,INC.EditorialCoverage:
Chief ProcurementOfficer(CPO), ServicesProcurement,SaaS,PaaS,Procurement
Architecture
PeterSmith
Chief ResearchOfficer,ManagingDirectorSPENDMATTERSUK/EUROPE,PUBLIC SPENDMATTERSEUROPEEditorialCoverage:
UK/Europe, ServicesProcurement
XavierOlivera
EditorSPENDMATTERSMEXICOY
AMÉRICALATINA
EditorialCoverage:E-Procurement, E-Invoicing,P2P,andMexico/LATAM
DavidGustin
Editor,Co-FounderTRADEFINANCINGMATTERS
EditorialCoverage:
WorkingCapitalManagement,Receivables
Financing,PayablesFinancing
StuartBurns
Editor-at-large,Co-FounderMETALMINER
EditorialCoverage:
DirectProcurementandCommodityManagement
(Europe/Asia)
RauldeFrutos
LeadForecastAnalystMETALMINER
EditorialCoverage:
Commodity PriceForecastingandHedging
JohnConolly
ManagingDirector,ChiefMarketingOfficer
SPENDMATTERSNETWORK
EditorialCoverage:CommodityManagement
andTrading
KatieBenchinaOlsen
VPStrategicAccountsMETALMINER
EditorialCoverage:
DirectProcurement,StainlessSteelMarkets
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 55
Exploring Spend Matters: our coverage
Analytics Centric
Master Data / Information Management
Core Procurement Workflow (“Foundational Process Architecture”)
Software App Services
Advisory Services
Spend Matters Procurement Taxonomy
Contingent Labor-Based
Source-to-Pay
Procurement/Supply Performance Management
Item / Catalog Management
Supplier Information Management
Product Lifecycle
Management
Supply Chain
Cost / Price Management
Supply Risk & Compliance Management
Logistics
Supply Network Analytics
Environment, Health
& Safety
Talent Management
Systems & Architecture
Metals
Benchmarking
Global Trade
Outsourcing
Commodity Risk
Discrete Manufacturing
Metals
Raw Materials
Healthcare
All – At High Level
Supplier Networks
Working Capital
SOW & Project-Based
Process (Other)
Public Sector
Supply Market / Category Intelligence
Finance
Asset Management
Analytics Infrastructure
Knowledge Management
Shared Services / GBS
Enterprise Governance,
Risk and Compliance Transformation & Change
Retainer / Subscription Professional Services
Procurement Value
Contribution
Innovation
Customer Relationship
Management
Supplier Diversity
Sustainability
Quality
Globalization
& Localization
Customer / Demand
Management
Category Management
Procurement
Provider
Market
Time & Expense
Info
rmat
ion
/ Te
chn
olo
gy
Are
as
Kn
ow
led
ge
Are
as
Topic Areas Adjacency Areas Commodities / Categories
Direct Procurement
Industry
(Core Market
Coverage)
Master Data Management Infrastructure
Supplier
Management /
SRM
Indirect Goods
Indirect Services
Contract
Management
Sourcing Req-to-Pay
(P2P)
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 66
Agenda
• AGlobalProcurementUpdate
• SpendMattersCrystalBall
• ClosingThoughts
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 77
Considering the big economic picture in early 2016
• NegativeinterestratesinEurope(ECB)
• Aflightto(perceived) safetyinthedollar
• LacklustergrowthinChina
• Commoditiesvariationandvolatility
continuesunabated
• USGDPgrewat1%inQ4
– Becauseof inventorylevels!
– Businesscapital/infrastructure
spending waning
– Exportsadrag
• Europe:Ireland,PolandandLithuaniaarethe
onlybrightGDPspots,despiteaweakeuro
drivingexports;Germanygrowthsubdued
• Decliningmanufacturingpurchasingmanager
index(PMI)inUS– negativeterritory PMISource:InstituteforSupplyManagementPMISource:InstituteforSupplyManagement
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 88
GDP trending and the Eurozone only tell part of the overall
picture: into the global procurement/finance maelstrom!
FinanceandTrade
§ Smallandmiddle-marketcredit crunchisstillrealandworseinemergingmarkets— mitigated inmanycasesonlythroughexpensive financingcosts
§ Moralsuasiontoaccelerate cashinthesupplychainremainsmorepolitics thanpolicy
GlobalManufacturingandSupplyChain
§ Demandandsupplyvariability,artificialmarketsandgeneralvolatility
§ Currencyimpactofstrongdollar,weakeuro
PoliticalandEconomic
§ GDPforecastuncertaintyandslowingPMI
§ Elephant(Panda?)intheroom:China
§ Energy,environmentalstandards
§ Thefuture(orlack)ofintervention
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 99
Despite a weak currency driving exports, European GDP
growth is still in the doldrums…
Source:TradingEconomics,Bloomberg
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1010
… And downward trends and volatility in commodities is
continuing in 2016
Source:MetalMiner/SpendMatters
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1111
Agenda
• AGlobalProcurementUpdate
• SpendMattersCrystalBall
• ClosingThoughts
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 12
We admit, this crystal ball thing is a bit of an inexact science
practiced by snake oil salesmen … but we’ll try!
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1313
Pulling out the Spend Matters Crystal Ball for 2016
1. Thepowerfulworldandintersection
offinancialandphysicalsupply
chainstakesoff– andcomeswith
newdangersaswell.
2. Gamification,socialandmobile–
exploring thefutureofprocurement
3. Spendgoesthreedimensional– the
riseofmultitiereverything(spend
analysis, sourcing, riskmanagement,
etc.)
4. Straighteningoutthedirectspend
fiasco – willsomeonepleasestepup
andtakeownership oftheintersection
ofdirectpurchasing, supply chain,
R&Dandmanufacturing?…
5. …Andtrulyseizingcontrolofindirect
procurement(andspend)inthe
meantime– beyondjust“P2P”and
strategicsourcingefforts
6. Appreciatingthespeed(andrise)of
commoditymanagement – notjust
infood,agricultural,CPGandretail
anymore!
7. Gettingthedivisionlaborright
alongwithservicesprocurement–
exploringtheemergingimportance
ofservicesprovision tothebusiness
andhowthischangesthestructure
andcharterofprocurement(and
howthefunction isperceived)
8. Becomingtrulyintelligentabout
marketintelligence– ofallkinds
(spend, supplier, supplymarket,
geography,geopolitical, risk, etc.)
9. Realizingthepowerofdigital
disruption
10. “Leap-frogging”emergesasacore
strategyforemergingprocurement
organizations
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1414
• DiscountingandSupplyChainFinance (SCF)havebecome
industrybuzzwords,andCFOs/treasurersofcorporationsare
increasinglybecoming responsibleforSupplyChainfinance
solutions(notA/Pandprocurementalone)
• There isageneral confusionastohowSCFworks&therole
ofdifferentplayers.Forexample,today'sbuzzwordsinclude
reversefactoring,vendorfinancing,payablesfinancing,
receivables purchasingandtradepayablesbackedfinancing,
whichalltendtobevariationsonthethemeoftheumbrella
termofSCF
• Therearemanybenefitsforprocurementbecomingmore
involvedindiscountingandpayablesbeyondjustleveraging
one’sbalancesheettoprovidefinancingandtoearnasolid
APR;onebenefit,forexample, isoverallcontrolandoversight
oftheend-to-endtransactionwithsuppliers toreduce risk
1) Exploring the powerful world & intersection of financial and
physical supply chains
*Partsofthissection,includingthedefinition,are
sourceddirectlytoSpendMatterspartner,David
Gustin (GlobalBusinessIntelligence).
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1515
2) Gamification, consumerization, social and mobile – the
future of work
• Whathappenswhenourkidsjoinusintheprocurementworkforcealready(hint:theyhave)?
– Social(imagineapplicationsandproceduresbuildaroundasocialconstructratherthantraditionalvisualworkflow)
– Internalcompetition
• Savings
• Games,point systems
• Nameandshame
– Predictionmarkets
– Mobile (nextgeneration interfaceswilllookandactthesameonnotebooks/desktops andlargertablets;smallermobiledevices/smartphoneswilloffercontextualnavigation)
– Consumerization – alreadyhereandgettingmoreimportantbytheday
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1616
3) Spend goes three dimensional – the rise of multitier
everything (spend analysis, sourcing, risk management, etc.)
Focusontwothings:
• Understandwhatlurksunder thetier-onesurface
• Appreciatethespacethatexistsinbetweenorganizations– e.g.,newinformationexhaust
Leadership,talentandsystemsarekey
• Requiresanewmindsetfocusedonunderstanding thebroader supplychainaswellastheabilitytomustertherightresourcestomakeithappen
• Therearemultiple internal(andexternal)customersforthisdata;whichalsoraisesthequestionofsecurityanddataownership (butmoreonthisinaminute)
• Newapplications,networksandplatformswillchangeeverything aroundtransactionalfacilitationandinsight (andarestartingtodosoalready)acrossmultiple tiers
Furtherreference:SpendMattersPRO– SupplyChainData:HowManyPuzzlePiecesareYouMissing(October2013)
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1717
4) Straightening out the direct spend fiasco…
Will someonepleasestepupandtakeownershipoftheintersectionofdirectpurchasing,
supplychain,R&Dandmanufacturing?
Source:SpendMatters/ISM
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1818
5) … And truly seizing control of indirect procurement (and spend) in
the meantime – beyond just “P2P” and strategic sourcing efforts
• “Justdoit– yesterday”
– Itemlevel spendanalysis(yes,itmatters)
– Strategicsourcing&spendportfoliostrategy(e.g.,
MRO)
– eProcurement
– E-invoicing(truee-invoicing)
– Supplieron-boarding,enablementandvisibility
– Contingentspend/VMS
– Supplierdiversity
• “Planandact”
– Market/categoryintelligence
– Supplierdevelopment/partnering
– Supplier riskmanagement
– Servicesprocurement(beyondtheVMS)
• “Getsmartandexplore”
– Advancedsourcing
– Financial supplychain
DataSource:SpendMattersPRO
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 1919
6) Appreciating the speed (and rise) of commodity management –
not just in food, agricultural, CPG and retail anymore!
ValuePropositionof
Procurement
Right goods /servicesat right time & place
Right goods and services AND at the right price
Shift from lowest price to Total Cost of Ownership
Reduce demand activity, complexity and variability
Increase business value derived from spend
SupplyAssurance
Price
TotalCostofOwnership
DemandManagement
ValueMgmt.
VALU
E
+CommodityManagement
Context
Availability drives Price(need to manage both)
Price is only one TCO element
Price/Cost Forecasting needs good demand forecasting process
Price/Cost Forecasts must feed the business planning process
Strategic Commodity Management is intrinsically linked to business strategy
Furtherreference:Manufacturing’s ProcurementBlackHole:SourcingandCommodityManagement (October2013)
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2020
7) Linking services procurement initiatives in the human supply
chain to broader procurement and supply chain programs
• Servicesprocurement(especiallyoutsideofcontingentlabor)
hasmanytouch-pointswithexistingprocurementandsupplier
managementprocesses
• Sourcing– integratingservicesprocurementintoa
standardstrategicsourcingprocess(e.g.,reverseauction,
multi-roundsealedbid)
• Suppliermanagement– measuringsupplier
performance,developingkeysuppliersand ensuring
contractcompliance
• Compliance/risk– beyondjustworkerclassification!
• Cyber/security
• “Inventory”forservices/virtualgoods
• …Butitisalsocriticaltorememberthatwithservices
procurement,managingtheentirelifecycleisessentialto
managefortotalvalue(notjustcost)andimproveoutcomes
forstakeholders
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2121
8) Becoming truly intelligent about market intelligence
• Starthere:understandingthecompletemarketspectrumanddefinition
– Macroeconomicenvironment
– Exploringdifferentoptions(e.g.,outsoruced, in-house,bundled supplier services,singleservice,etc.)
– Understandingstandardpricingmodels
– Understandingadvancedapproaches
– Understandleversbasedonindustry (e.g.,M&A)
– Supplymarketsegmentation
Source:TheSmartCube
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 22
9) Truly predicting the future with forecasting
• Interestrates
• ChinaPMI
• BDI
• Scrapprices
• Electricityrates
• OECDgrowth
• Capacityutil.
• RMB/USDForex
• Strikes
• Minesafety
• Chinainterestrates
• Stimulusprograms
• Exchangestocks
• VIX
• Housing starts
• Automotive sales
• GDP
• Iron ore costs
• Commercial const.
• Mortgage defaults
• Unemployment claims
• Coking coal costs
• ETF investments
• Water supplies
• Skill shortages
• Environmental
• Canceled warrants
• MW premiums
• Exchange rates
• US trade deficits
• Product substitution
• Demand
• China bank lending
• Consumer durables
• Inventory overhang
• Easy credit
• China GDP
• Inflation
• Import levels
• Commodity spot
markets
• SRB buying
Trackingallof
theinput
variablesand
knowinghow
mucheachof
theseimpacts
the
commodities
youbuy
remainsa
challenge!
Source:SpendMatersPRO/MetalMiner
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2323
9) Besides price, what else can I forecast?
• Budgets
• Demand(duh…)– buthaveyoudoneitforindirectorservicesspend?AnddoyouhaveaformalS&OPprocesstiedintodirectprocurement?
• Supplierperformance(moreonthisinaminute!)
• Supplierquality/SLAs
• Othersupplyriskfactors
• Internalperformance(vs.market)
• Peerperformance(vs.market)
• …andmuchmore
Source:SpendMatersPRO/MetalMiner
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2424
10) “Leap-frogging” emerges as a core strategy
Emergingorganizationswillbeableto‘leap-frog’others
iftheymaketherightsetofinvestmentsandlookto
thefuture,payingattentiontofivekeydisruptors
1. Digital
2. Big data / analytics
3. Social
4. Financing trade and the supply chain
5. Radical new technology / infrastructure
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2525
Agenda
• AGlobalProcurementUpdate
• SpendMattersCrystalBall
• ClosingThoughts
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2626
Keep in mind the “three procurements”
• Thecost/goods/servicessupplychain
• Theinformationsupplychain
• Thefinancialsupplychain
© 2016. Azul Partners, Inc. and Spend Matters. Proprietary and Confidential.
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2727
The cost / goods / services supply chain
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2828
The information supply chain
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 2929
The financial supply chain
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 3030
For more on these topics, check out Spend Matters Plus/PRO
Copyright © 2016 Azul Partners Inc. All rights reserved. Not for distribution. | www.spendmatters.com - spendmatters.co.uk - www.agmetalminer.com 3131
Contact details
JasonBuschFounderandHeadofStrategySpendMattersNetworkandAzulPartnersEmail:[email protected]:773-525-7406Mobile:773-934-0908Assistant:MeaganMena([email protected])