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Unite to Bridge the Digital GapTransforming Indirect Supply Chains
Simon Roberts, Richard Scourfield and Erika Mizun
CIPS Breakfast Briefing 27.02.2020
The context: indirect procurement matters now more than ever
Globally indirect spend
is growing 7% pa
Worries about contracting
rogue suppliers are up by 10%
since 2015
CPOs required to reduce spending on indirect spend
Brexit and CSR risks
highlight that 65% of CPOs lack
supply chain visibility beyond
tier 1
Indirect spend accounts for
more than 20% of total spend - for some companies it’s
27-30%
85% of CPOsexpect suppliers to drive innovation
Page 2
The context: procurement is slowly catching up to the promiseof digital transformation
85%
Executives believe in the power of digital
transformation*
25%
Procurement professionals had the capabilities in 2018*
68%
CPOs include eProcurement in their strategy for 2020**
Embracing e-procurement
A steep jump
In 2018 most functional executives
believed that digital transformation
will have a profound effect on their
organisation.
But only 25% within the procurement
function had the capabilities to bring
about digital transformation.
In 2020 a high number of CPOs -
68% - consider e-procurement as an
important part of their overall
procurement strategy.
They have the tools but do they also
have the skills and the right approach?
Page 3 | Source: * The Hackett Group; ** ProcureCon
The problem: an increased pressure to deliver and demonstratevalue beyond cost savings
CPO Planning Guide 2020*
How to deliver and demonstrate value?
Most CPOs (87%) reported pressure
on procurement and supply chain
leaders to deliver value beyond cost
savings.
However, demonstrating the value
that procurement delivers to the
organisation’s bottom line remains a
challenge (74%).
30
67
44
20
60
70
14
4
6
2
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Strongly agree Somewhat agree Neither agree or d isagree Somewhat disagree Strongly disagree
Demonstrating value
Delivering value % of respondents: CPOs
% of respondents: CPOs
Page 4 | Source: * The CPO Planning Guide 2020
“There is a new vision for indirect procurement, enabled not just by new technologies but understanding the value it can generate.”
Source: McKinsey & Company
Page 5
The 6 new elements of indirect procurement that form part of an agile organisation –currently enabled by some of these systems
ERP / e-procurement systems
Intelligent Spend
Engines
Advanced Analytics Solutions
Seamless B2B
Ordering
Zero Based Budgeting
Auto-mated P2P
Financial P&L
Interlink
Agileorganisation
Page 6 | Source: McKinsey & Company
Digital transformation of indirect requires going beyond technology solutionsand cost savings: it requires buy-in from people
Intelligent Spend
Engines
Advanced Analytics Solutions
Seamless B2B
Ordering
Zero Based
Budgeting
Auto-mated P2P
Financial P&L
Interlink
Agileorganisation
Internal stakeholdersMindset “value beyond cost savings”
Empower end-users to do their own buying
Free up the time of category managers
CPO/CFO support
Cultural questions
Analytical/digital skills and training
Communication: awareness of available products/suppliers
Page 7 | Source: McKinsey & Company
Most importantly, it requires recognition of the value that suppliers bring and timely delivery of content
Intelligent Spend
Engines
Advanced Analytics Solutions
Seamless B2B
Ordering
Zero Based
Budgeting
Auto-mated P2P
Financial P&L
Interlink
Agileorganisation
External stakeholdersSupplier content digitisation
Communication, collaboration and data sharing with suppliers
Lack of standardised content: fragmented data
Contract and supply chain management
Visibility beyond tier 1 suppliers
Page 8 | Source: McKinsey & Company
“We’ve changed our entire S2P, so it’s not simply making transactions, instead we look upstream at how we create value and manage suppliers.” “We’ve focused on ensuring that
our change management team goes right across our business functions and regions, so that each area’s needs are served.”
Source: Chris Ayscough, Director of Regional Procurement, Equinix
Equinix did it well by including internal and external stakeholdersin the digital transformation of their source to pay lifecycle
Page 9
Why does indirect procurement pose such a challenge for organisations?
80%
20%20%
80%
Direct Spend Indirect Spend
£ Volume # Suppliers
Indirect mindset: “trivial many”
Changing an outdated approach
Pareto principle: 80% of the effects come
from 20% of the causes.
Indirect spend represents roughly 20% of a
company’s overall spend (it’s often more and
it’s growing).
Indirect procurement suffers from “the vital
few and the trivial many” phenomenon
(Source: Dr. Joseph M Juran).
The suppliers considered as “trivial many”
within indirect are easily overlooked.
However, they present the greatest risks,
spend leakage and innovation opportunity.
Page 10 | Source: GEP, 2011
Indirect spend curve: the large number of suppliers requires differentiation in SRM*
TransactionalStrategic Tactical
Supplier Relationship
MarketplaceDirect Integration Digital Gap
One vendor, millions of productsSingle integration required
Punchout or content1:1 trading relationship
Two ends of the curve
Existing solutions
Strategic suppliers are key
contracted commodity
suppliers with a high volume
of spend justifying direct
integrations.
Transactional suppliers
account for the tail end of
the spend curve with a low
volume per supplier. Efforts
to consolidate suppliers in
the tail end has given rise to
marketplaces because they
act as one vendor.
Transaction costs
Tail end
Page 11 | * SRM: Supplier Relationship Management
Ord
er/s
pend
vol
ume
# Suppliers
Challenge: non-digitised suppliers in the middle of the curve create a lack of visibility
Middle of the curve
The Digital Gap
Many tactical suppliers that
are important to the business
are not digitised.
They are often the main
source of free-text orders
because they deliver special
and repetitive products.
However, without their
visibility, you cannot inform
category spend management
or drive procurement
strategy. Not enough volume to warrant 1:1 digital trading relationships
MarketplaceDirect Integration Digital Gap
TransactionalStrategic Tactical
Supplier Relationship
Page 12
Ord
er/s
pend
vol
ume
# Suppliers
What doesn’t work: uniting the fragmented indirect spend with existing solutions
Extending direct integrations like punchouts is not
only costly but creates a fragmented purchasing
experience for end-users; hindering user adoption.
Page 13
Extending the marketplace solution will result in
losing 1:1 trading relationships, supply chain visibility
and control.
Use only B2B marketplaces with vetted suppliers.
MarketplaceDirect IntegrationMarketplaceDirect Integration
Extending direct integration Extending the marketplace
High integration costFragmented UX
Lack of supplier capability
Lose existing supplier relationshipsLose control of risk management
A network ecosystem
Best of both worlds
You get the connectivity and
identity of a network and the
transactional relationship of
a trusted marketplace for all
your tail end spend.
You get to retain your 1:1
trading relationships and
discover new suppliers
without having to integrate
their individual content.
All within one UI and by a
single creditor*.
What works: uniting the fragmented indirect spend with Unite
TransactionalStrategic Tactical
Supplier Relationship
Page 14 I *Single creditor feature is currently only available through our partners for Unite.
Supplier network for 1:1 trading Trusted B2B marketplace
How it works: how to create your Unite Mercateo supplier ecosystem
Onboard: you will be redirected to the Unite portal to choosesuppliers from our network or invite your own21 Add: register your business on the free Mercateo Procurement
Platform to add suppliers (or the e-procurement system of our partners)*
makita
Add your existingframework catalogues
Page 15 | * Here we walk you through the experience of using Unite through the interface of the Mercateo Procurement Platform. Our partnerexperiences will differ but the benefits of having 1:1 agreements onboard remain the same. Find a list of our partners (or Enablers) on slide 19.
How it works: adding suppliers to Unite
3 Compare: prices and delivery conditions from your onboardedsuppliers will appear alongside the same marketplace product*4
Mercateo Marketplace suppliers
Onboarded 1:1 suppliers and your framework agreements
View: your onboarded suppliers will appear on your Mercateo Procurement Platform, above the Marketplace
Page 16 | * This feature is only available using the Mercateo Procurement Portal. Unite integrates the Mercateo Marketplace into our e-procurement partner systems where they appear as being sold by the ‘Mercateo Shop’, a multi-brand vendor.
Internal benefits
Timing of content is crucial
Today’s end-users want to
freely buy special and
ad hoc products with a
great online experience -
saving time for the
procurement function.
Today’s indirect
procurement employees
want to grow. Empower
them with tools, time and
data to identify innovative
suppliers and sourcing.
Benefit: creating behavioral change for the entire organisation
Page 17
TransactionalStrategic Tactical
Supplier Relationship
Empower Indirect Category Buyers Empower End-Users
Save time Mitigate Risks
Why it is important
Page 18 | Source: Porter, 2012
Sustainability is not philanthropy or
CSR, it’s an economic opportunity to
create shared value with suppliers.
“CSR is a form of risk mitigation that
often limits companies to a
compliance-only approach. It
compromises the business benefits
awaiting companies that move beyond
checking boxes to truly engage
suppliers”. Source: EcoVadis
As a digital supplier network,
Unite makes it effortless and safe to
engage with the large volume of
indirect suppliers, including smaller,
more innovative and local ones.
Enables supplier diversity and
local procurement to deliver on
sustainability goals and demonstrate
value beyond cost savings.
Indirect’s innovative vision: create shared value (CSV)
Supplier networks provide a competitive advantage for the entire organisation
Create shared valueSustainability
Mitigate risksCSR
Give away resourcesPhilanthropy
Through Unite
Customer satisfaction
Employeedevelopment
Innovation/Sustainability
CSR Business resilience
Supply chain diversity
Strategic business objectives
supplier network
Inno
vatio
n
Join the movement that helps indirect procurement realise its value
Enablers Suppliers
Buyers
Content
Interface SRM
Page 19 | * Our partners (ERP and eProcurement systems) are shown here as “Enablers”
Unite
At the heart of enabling supplier content and
collaboration between our growing list of
customers and partners.*
m +44 (0) 7517 996375
Supplier Manager
m +44 (0) 7935 220947
Sales Director
Richard Scourfield Mike Elliott
Get in touch with our team in the UK and Ireland
Managing Director
Simon Roberts Erika Mizun
Marketing Director
[email protected] [email protected]
m +44 (0) 7841634466 m +44 (0) 7787357069
Page 20 |
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