Date post: | 17-May-2015 |
Category: |
Business |
Upload: | shared-services-outsourcing-network-sson |
View: | 515 times |
Download: | 2 times |
This document is owned by buyingTeam © 2011 No copying or distribution is permitted without the prior consent of buyingTeam
An Opportunity
Procurement Outsourcing
Guy Strafford
Director | buyingTeam
Tuesday 10 May 2011
2This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Procurement is a prisoner of its heritage
The procurement industry at large (i.e. directs & indirects):
Is in its relative infancy
Is not intellectually mature
Is ill positioned in many businesses• It is not appreciated / recognised
Does not attract the best talent
3This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
..which produces a problem
We typically find that businesses are:
Not fully aware of how much (and what) they spend on procured goods & services Not in control of their spend
Not realising the benefits well run indirect procurement can bring
Not aware of the scale of the money they are wasting
4This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
…which leaves a lot of opportunity on the table
One of the greatest improvements to profit,with the fastest return is to improve your procurement Source: Cranfield research
‘Procurement improvement brings better return than almost every other area priority: 5x the savings of any other BPO.’- Everest, Nov 2008
‘Procurement improvement is easier to realise than almost any other area of cost release. The alternative of reducing employment has high up front costs and there are significant delays to realisation of benefit.’- Financial Dynamics research, Oct 2009
‘5 – 15% of spend reduction depending on level of transformation.’- Everest, May 2009
‘Speed to value can be measured in weeks. Fast ROI is sited by 92% of executives as a reason for action on procurement.’- Black Book of Outsourcing, 2009
Top pressures on the CFO Procurement’s impact on the CFO’s challenges
5This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Procurement needs redefining Indirect/enabling and direct procurement are different
Factor Indirects/enabling(inc Goods Not For Resale) Directs Retail
(Goods for Resale)
Supply market
# of suppliers used High Low Medium
# of potential suppliers in the market
High Low Low
# of categories of spend High Low Medium
# of supply chain integration issues
Low High High
Process
Average transaction £ Low High High
# of transactions High Low Low
Influencers
# of decision makers High Low Low (1)
Procurement is the decision maker
No Sometimes Yes
# of requisitioners High Low (1) Low (1)
# of suppliers per Procurement Manager
High Low Low
Maverick spend issues Yes No No
Business
Business driver Enabling the business to run TCO & certainty of supply Gross margin
Procurement’s main focus Internal & supply market Supply market Supply market & consumer
Source of most value Changing internal behaviours Supply market Supply market
Ability to see savings hit the bottom line
Difficult Easy Easy
6This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
P2P and sourcing face fundamentally different challenges
P2PPurchasingInvoicingSettlement
SourcingCategory managementSourcing Business engagementSpend managementNegotiation/ contractingContract managementSupplier managementPerformance management
Benefits from Sourcing:Price/ TCO improvementsDemand suppressionLeast adequate specificationReduced maverick spending, & thereby increased spend under managementEarly payment discounts *Improved leverageRisk reductionService level improvements at no extra cost
Benefits from P2P:Process cost reduction in AP *Errors in invoicingWorking capital management improvements –cash & stockReduces suppliers’cost of supplying *Improved rebate management
P2P helps
manage Sourcing & enforce
best practice
by proving
control & visibility
Unable to estimate
Average 10- 15% on in- scope spend
1-3% for 10- 15% of supply
base
15-25% on maverick spend
50-70% reduction in AP
headcount
Up to 0.5% of spend
Unable to estimate
* Also applicable on direct spend
Enabler for effective
working capital management
7This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Key elements of outsourced procurement –reality and expectation
What it is Contrast with expectations
Based on ability to drive more value
Not labour arbitrage
Based on indirects/enabling for most part
Not direct procurement
Probably requires spend more on Procurement team and infrastructure
Requires an investment case
Requires proximity to stakeholders
Is not about external aggregation
8This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
The key elements of any solution
Any solution to enabling/indirect procurement must take account of:
Influencing the senior stakeholder to decide / choose smarter, when their priorities are more than savings
Handle a lot of diverse suppliers in a way which can extract material value from them
Deal with the noise which comes from day to day activities of lots of junior stakeholders and suppliers, which otherwise distracts from the above
9This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
The inherent limitations of internal resource provide rationale for outsource
Unleveraged people
Short on market
knowledge
Unleveraged technology investment
Internally run resource is usually sub scale:
Under invested
Outsource
Too slow and insufficient value
Wrongly positioned
10This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Procurement outsourcing trends
11This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Universal Music Group Case Study
12This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Universal Music Group Case Study
Artist
Acquisition
Production
/ A & R
Produce Physical
& Digital Product
Promote &
Advertise
Sell Music &
Merchandise
Creative
Services
Recording Studios &
Producers
Mastering /
Remixing
Photography
T‐Shirts
Manufacturing
Print SRM
Versions
Streaming
PR
CPU
European
Media
Digi‐promoVideo Rights
Licensing Deal
D2C
Recording
Budget Setting
Duplication Award
Manufacturing
Travel
MobilesProperty
Product
Agency
Bespoke
Print &
Packaging
Standard
Product
Spec Back to Back Records
Enabling Spend
MFDs
Posters, FSDUs
Consultancy
CouriersTaxis
Utilities
FMIT
13This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Our vision is a world in which procurement is an indispensible tool at the heart of every business
Our mission is to release procurement’s potential, redefine it, move it to the heart of business, and make our clients leaner, fitter, and stronger as a result
ExpertiseExpertise – Over 200 experts across all indirect categories and sectorsLeverageLeverage – Managing more than €5bn of spend at any timeDeliveryDelivery – Unique multi-client shared services delivery modelInternational International – HQ in UK, offices in Benelux, Canada, France, Germany, Spain, SwitzerlandUncompromisedUncompromised – Unbiased, always working in our clients’ best interestPartnershipPartnership – Deep client relationships, maintained for the long term
14This document is owned by buyingTeam © 2011
No copying or distribution is permitted without the prior consent of buyingTeam
Guy StraffordClient DirectorbuyingTeam
T +44 (0)20 3465 4545 M +44 (0)7967 [email protected]
www.buyingteam.com
Thank you