Procurement Service Science

Procurement Service Science

6/22/13Brian Hagaman847-922-3943

[email protected]/in/hagaman

6/24/2013 2

M&A, consulting, business management & strategy, sales management, leadership, shared services, supply chain, procurement, sustainability

Drive for results, Timely decision-making, Taking ownership, Leadership, People Engagement

Broad and deep industry C-Level relationships, lead people and organizations

Consulting, S

ales Manager, S

olution design

Industrial Sector, develop industry insight,

client relationships, electronics, mining,

chemical &

petroleum, consum

er products, retail, banking, financial services,

Global sales leadership, build organization

United S

tates, Canada, B

razil, China,

Japan, Asean, E

U,

plan to grow my T-shape 1. Depth2. Breadth3. Strength4. T-Shaped service

innovation expertise

Brian Hagaman’s T Shape analysis

6/24/2013 3

Promote service innovation and link service innovation in procurement

Procurement Service is the application of knowledge and resources for the benefit of others

Procurement Service innovators are often “T-shaped” professionals with depth & breadth of knowledge, and the ability to span boundaries and rapidly synthesize diverse perspectives.

Modern procurement service systems and platforms scale-up new service offerings globally rapidly (innovation).

Category expertiseLeadership – influenceCost ReductionValue improvement

Procurement EngineersCategory ManagersLeadership skills

Strategic sourcing systems -EmptorisProcure to pay systems - ERPProcurement One PlaceSupplier Connections

Jim Spohrer - ISSIP Intro 20121020

6/24/2013 4

Procurement is becoming a more important function

Service Value

ServiceExecution

ServiceCapability

ServiceDelivery

Procurement Service Systems are composed of

People: CPO, Category Managers, Purchasing Agents, Procurement Engineers

Processes: source to contract, procure to pay

Technologies: procure to pay, catalogues, spend analytics, Sourcing/Auctions/bid evaluations, contract management, supplier lifecycle management

Organizations: center led, global, hybridshared information: spend, categories, demand

Create and deliver value to customers, suppliers/providers, other stakeholders

6/24/2013 5

The insights from the 2013 CPO Study are derived from the analysis of ‘top performing’ procurement organizations; those that are capable, influential, and innovative

Influential

CapableIn

nova

tive

Top Performers• Consists of the companies

that fall into all three procurement performance categories

• 168 respondents - 15% of total

• Disproportionate share with more than $100B in revenue in this category

• 45% of top performers based in North America

Innovative• Based on self reported

assessments of innovation and use of new technologies


• Large share of respondents from Aerospace, Entertainment media and publishing, and Banking

Capable• Based on self reported

assessments of execution capabilities


• Large share of respondents from Telecommunications, Entertainment media and publishing, and Aerospace

Influential• Based on self reported

assessments of influence


• Large share of respondents from Pharmaceuticals, Automotive, Telecommunications

5 Source: IBM Institute for Business Value Analysis, 2012 Procurement Officer Survey (n=1128), 2013 Procurement Leader Interviews (n=15)

Study Context & Methodology

Low Performers• 429 Companies• Represents 38% of the total• 62% report revenue between $1B

and 5B and another 20% report revenue between $5B and $10B

© Copyright IBM Corporation 2013

6/24/2013 6

Capable: Align and Development of Procurement Capability

• quality of services• Improving on procurement basics is

essential, especially for those companies whose procurement organizations are not yet delivering optimal results

ServiceCapability

6/24/2013 7

Top procurement organizations are investing in procurement technologies to help automate the ‘mechanics’ of procurement and thus enable staff to add more value

7

Procurement Automation

Rate the effectiveness of the following procurement technologies at your firm

Top Performers

Sourcing/ RFX solutions

Supplier relationship management

Contract management solutions

Spend analysis solutions

Source: IBM Institute for Business Value Analysis, 2012 Procurement Officer Survey (n=1128), 2013 Procurement Leader Interviews (n=15)

Top Performers

Top Performers

All Respondents

Top Performers

Above Average/ Excellent Effectiveness

Average EffectivenessBelow Average/ Poor Effectiveness

Questions: Q20. Please rate the current effectiveness of the following procurement technologies at your company. This question was used to define effectiveness, which is a component of procurement performance. Responses do not sum to 100% because between1 and 5% of respondents indicated n/a

Observations • Substantial gaps are

evident between the effective use of technology among top performing procurement organizations and their lower performing peers

Implications • The vast majority of top

performers consistently report above average or excellent effectiveness for all procurement technologies, so under the right circumstances these solutions are believed to have a positive performance impact

All Respondents

All Respondents

43% All Respondents

Maintain focus on procurement fundamentals

38%14%

80%16%1

42%36%15%

86%8%2

50%32%14%

89%7%3

53%30%14%

94%5%1


6/24/2013 8

6/24/2013 9

Category management and procurement engineering are delivering service value

• Innovation• Global Growth• Improve business performance across all functions with data-driven

insights• develop and implement cost reduction strategies • Develop supplier base • Implement Design Change & business model changes.

Service Value

6/24/2013 10


6/24/2013 11

Growth of procurement engineering as a major change to enterprise strategy that companies are adopting

• Procurement engineering is focused on improving quality, cost in product design, and getting technical expertise into its supply chain/procurement process.

• Procurement (service) engineers design interactions with the same rigor industrial engineers design physical processes

• Corporations have grown their group of procurement engineering experts, with engineering backgrounds, are dedicated to making sure things are designed efficiently for the supply chain and decide if a product has certain materials or processes that could be substituted with something else, an expert would make that recommendation to the engineer/designer.

• Procurement engineering is focused on value management, that extends beyond procurement in an organization and requires cooperation between numerous participants, both internal and external.

• Multi functional teams, led by procurement engineering, are represented by procurement, engineering, manufacturing, marketing, and logistics as well as key supplier personnel jointly seek solutions to lower total cost, improve performance, or improved accommodation of customer requirements.

• Procurement engineering is driving Pro-Active Customer Cost Reduction in the areas of Operations, Supply Chain Management, Materials and Cost Management via Lean, Six Sigma and Kaizen methodologies.

• Procurement engineering is participating in initial product development activities, such as FMEA, contribute cost reduction ideas and sourcing recommendation.

6/24/2013 12

Procurement and sourcing requires a broad range of analytical and decision making skills

• Influential• resource optimization• global efficiencies with market responsiveness• Optimize operations globally• Reinvent processes and integrate functions, removing complexity and

uncovering new efficiencies• Partnering with other companies in the supply chain that offer better

efficiencies

ServiceExecution

6/24/2013 13


6/24/2013 14

In many organizations the role of procurement/ sourcing in “services procurement” and the services supply chain is not clearly defined.

• This creates unclear expectations in service contracts and a lack of a definitive process for the procurement of services.

• Procuring services• Contracting for services - Service Contracts – Master Service

Agreement (MSA) and Statement of Work (SOW)• Services Procurement, supplemental labor, staff augmentation• Supplier-Side Economics: Making Vendor Relationships an Enduring

Source of Competitive Advantage• Acquisition Integration – Services design, Synergy, • Analytics as a service• Innovation in outsourcing, Procurement practices and incentives

focused on cost are real blocker to effective innovation in outsourcing relationships.

6/24/2013 15

More information• CPO Study landing page at:

www.ibm.com/business/value/chief-procurement-officer

• Questions

• Offer

•

•

Presentations & Public Speaking

Procurement Service Science