Mirren Conference: Dealing with Procurement, David Wilson

Stirling Consulting Group

Confidential. All rights reserved Stirling Consulting Group

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Procurement: how to work with ‘em and win

David [email protected]

+1 602 952 8451


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Hatfields and McCoys Redux?

“Procurement wants to pay less than enough” (Tara Comonte, Mediabrands COO & CFO)

“Client procurement departments are challenging every aspect of our industry’s economics” (John

Seifert, Head O&M North America)

“Advertising agencies have to grow up. And quick.” (David Rae, Procurement Leaders)

“Simplistic cost cutters vs. fluffy money wasters” (Unknown, Media Week)


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Objectives

Pull back the curtain on Procurement

Identify what you might prepare to obtain a better outcome with Procurement

Show that not all the cards need be held by Procurement

Identify how you might leverage a relationship with Procurement


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Agenda

What’s going on? Procurement Overview Procurement Tools & Techniques Successful Negotiations Leverage the Relationship Q&A


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Agenda



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What’s going on?

CFO Pressures#1 Reduce operating expenses (74%)

#2 Optimize working capital (50%)#3 Increase profit (39%)

CFOs with positive view of Procurement

2009 78% 2007 63%

Source: Aberdeen Group, 11/2009


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Procurement business case

$1 80-95 cents

Source: Aberdeen Group, 11/2009


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So what?

Clients will continue to deploy Procurement

In that context, position front-line teams to Leverage the relationship with Procurement Negotiate a beneficial contract that achieves your

goals and delivers against your standards

On-going management of clients’ contracts


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Your challenge - Redefine the balance of power

Gain visibility into client’s decision-making

Harness client self-interest

Identify additional value


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Agenda



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What is (strategic) procurement?

An on-going process of reducing overall costs and managing supply risk, while improving internal and external processes


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Procurement principles

Rigorous Ethical Cross-functional Focuses on total cost (not just price), quality,

service, other criteria Clear objectives Objective decisions (to the extent possible) Grounded in strategy


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Typical strategic procurement process

First 3 Steps• Baseline creation• Not generally

visible to agencies

Next 3 Steps• Strategic and

economic evaluation, contracting

• Generally visible & familiar to agencies

Last Step• Depends on

organization structure and maturity of Procurement

6. Implement 7. Monitor &

Measure3.Develop Approach

2.Analyze Market

1.Analyze Spend

4. Negotiate

5. Award


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Procurement maturity levels

•Silo •Transactional

•Tactical

•Developing strategies•Projects •Growing support

•Aligned strategies

•Cross-functional•Policies•Strong support

•Fully aligned•Scale leverage•Engagement across value

chain•Innovation

•Change mgt•Relationship mgt

•Contract mgt

Source: Corporate Executive Board research


15Source: Procurement Strategy Council research

Common procurement challenges

Discovering true standing with

supplier

Harnessing supplier’s self-

interest for mutual gain

Attracting supplier interest through

compelling proposition

External Challenge

Demonstrating value of

Procurement

Internal Challenge

Managing commitment

Getting right behaviors adopted

Rectifying unintended

consequences


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Decision criteria

Cost Quality Service Technology

Innovation Other


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Selection might look like this

Low

High

Cost

Stra

tegi

c& O

ther

High

Supplier B

Supplier E

Supplier A

Supplier F

Supplier C

Supplier D

FINALISTS

Source: A.T.Kearney


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What else should you be looking for?

Transition supportContract management

Relationship management


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Agenda



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Procurement tools emphasize analysis to drive strategy & tactics

CategorySpend

Dynamics

CostTCO

Drivers & Should cost

SupplierRelationship

Positioning


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Procurement also pushes on its internal clients to prepare

ContractNeeds

Walk-away

ClientNeeds

Objectives

DecisionCriteria

Weights


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Agenda



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Successful negotiations

Of the client Of yourself

Understand needs, priorities

Assess positioning, leverage points

Assess client view of agency positioning, leverage

Assess Procurement maturity

Understand needs, priorities

Assess positioning, leverage points

Enlarge the pie Be objective Determine strategy Know walk-away

positions


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Successful negotiations

Prepare!


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Agenda



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You can have a beneficial relationship –really!

YOU

Proc

urem

ent d

oes

for y

ou Ethical process

Relationship mgt

Contract mgt

Advocacy

Introductions

You

do fo

r Pro

cure

men

t

Be known

Prepare

Respect process

Improvements


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Let’s summarize

Procurement is here to stay! Procurement analyzes, prepares, herds internal

cats Savings for the client can come in many forms You hold some cards too Procurement can help you


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Questions?Contact David at

[email protected] on

+1 602 952 8451

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Mirren Conference: Dealing with Procurement, David Wilson

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