KNOWLEDGE PARTNER Benchmarking Study
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1 KNOWLEDGE PARTNER 2015 Benchmarking Study
2 Q1: What is the overall spend managed by Q2: procurement in your business today? What percentage of this spend is on indirect procurement? 40% spend over 1billion on procurement 25% spend 21-30% of procurement spend on indirect y <250 million euros 27% y >500 million euros 15.3% y 500 million euros - 1 billion euros 18% y 1 billion+ euros 39.6% y 0-10% 2.7% y 11-20% 17.1% y 21-30% 25.2% y 31-40% 13.5% y 41-50% 11.7% y 51-60% 7.2% y 61-70% 8.1% y 71-80% 1.8% y 81-90% 1.8% y % 10.8% With more than 57% of respondents operating in procurement organisations managing in excess of 500 million euros this survey provides you with an excellent opportunity to understand the priorities of international businesses with complex spend issues. Equally, with 27% of respondents managing spend in excess of 250 million euros results from this exclusive survey offer you fresh insight from maturing procurement organisations operating in growing businesses. When we asked respondents to tell us how much of their spend is on Indirect procurement more than 70% provided a range of between 20% and 50%. Compared to last year s figures when we asked the same question there is clearly an upward trend with the range in 2014 being between 18% and 35%. This suggests that Indirect procurement is both growing in volume across sectors and becoming more strategic as it does so.
3 Q3: Do you have separate Direct and Q4: Indirect procurement teams? How big is your indirect team today? 76% have separate direct and indirect procurement teams 48% have less than 10 people in their Indirect Procurement team y Yes 77.5% y No 22.5% y > % y % y % y % y % Designed to track maturity of procurement organisations within businesses in different sectors 111 respondents demonstrate in answers to this question that the vast majority, 78%, separate their Direct and Indirect procurement teams. Compared to last year s figures when we asked the same question there is a shift toward order and organisation with 2014 responses offering 72% separating procurement teams. This comes as little surprise as businesses with procurement organisations seek to redesign and grow more efficient teams in support of business growth. Compared to 2014 results for this question, responses this year are fascinating. What emerges is a growth trend among mid-size Indirect procurement teams sized between where in 2014 the percentage hovered just above 20% now we are seeing closer to 30%. Possible conclusions to take from this change include the awareness of businesses that Indirect procurement needs to be resourced to manage a more strategic, complex function within the business.
4 Q5: Which 5 Indirect categories does your Q6: business spend most on today? Which 3 are growing fastest and why? 79% spend most of their indirect budget on IT related services Capital Goods, Professional Services and IT Services are top 3 fastest growing indirect spend categories y IT related services (hardware, software) 79.1% y Professional Services 64.8% (consultants, advisers) y Facilities Management and office 60.4% services (Telecoms, furniture, cleaning, catering, printers) y Capital Goods (Plant & machinery) 59.3% y Utilities (gas, electricity, water) 53.8% y Marketing related services 51.6% (media buying, agencies) y MRO (Maintenance repair operation) 49.5% y Travel Management 40.7% y HR related services 29.7% (recruitment agencies, training) y Consumable (Grease, Oil etc.) 11% One of the most requested questions to ask when we designed the survey with CPOs and Heads of Indirect this provides us with a good idea about how businesses are prioritising spend categories. According to the 91 respondents to this question the top 5 are IT with a huge margin of 14%, Professional Services, Facilities Management, closely behind are Capital Goods and Marketing Related Services. y IT related services (hardware, software) 58.2% y Professional Services 54.9% (consultants, advisers) y Capital Goods (Plant & machinery) 39.6% y Facilities Management and office 31.9% services (Telecoms, furniture, cleaning, catering, printers) y Marketing related services 27.5% (media buying, agencies) y HR related services 24.2% (recruitment agencies, training) y MRO (Maintenance repair operation) 23.1% y Utilities (gas, electricity, water) 18.7% y Travel Management 15.4% y Consumable (Grease, Oil etc.) 6.6% According to the 91 respondents IT Related Services, Professional Services and Capital Goods are the 3 fastest growing categories for most businesses. While each business will have specific drivers for their responses it is interesting to see a pattern emerge in the rationale for responses given including Greater IT Outsourcing, Overseas Business Expansion and Re-investing in Capital to Drive the Business Forward. All point quite positively to a general mood of confidence and belief in growth as well as underlining the key role Indirect procurement continues to have in enabling growth
5 Q7: What level of competency would you Q8: say your procurement team has in the following categories? Stakeholder Management Category Management Supplier Management Risk Management Responsible Sourcing 45% say their procurement team has a high level of competency in Category Management y None y Low y Medium y High y Best-in-class Although the vast majority of the 91 respondents scored their procurement competency in all categories as medium between 35% and 45% feel they are highly competent in category management, stakeholder management and supplier management. As the key skill sets required to deliver best-in-class indirect procurement this is encouraging but still there is a way to go before even half of the sampled businesses are proficient. Where there is clearly a need for focus is on risk management where 33% of respondents identified their procurement organisations as having a low competency. As a key area for the 2015 ProcureCon Indirect event focus day solutions will be available this year. Beyond savings businesses are increasingly measuring procurement on its ability to create value, which 3 ways do you create value for your business? Process Compliance Vendor Management Strategic Sourcing Process optimisation Spent analysis Early involvement Yearly cost reductions Right quality at correct time and at lowest possible cost Bringing supplier innovations into the business Risk mitigation Total cost analysis Supplier Management Cost avoidance & value in e-procurement Increase penetration in countries Provide better suppliers Increase working capital Decrease fixed costs (outsourcing) Process optimisation Spent analysis Early involvement Strong contract management & continues improvement Supplier relation management program & innovation board Balanced risk & assurance approach Innovation Fit-for-the-purpose defininiton Market background Optimize processes Optimize service delivery Value engineering With value creation on a path to becoming culturally more significant for all procurement organisations the way value is created ranges dramatically from business to business. While we can t list all individual responses here patterns emerged pointing to a few key metrics for value including how well procurement Focuses on Compliance ; Manages Risk ; Optimises Service Delivery; Increases Working Capital and Engages Early.
6 Q9: Creating value often involves change and making change stick, what do you do to ensure your change initiatives are adopted and maintained? Clear communication and change management Follow-up Stakeholder surveys Ensure managment buy-in & commitment Communication, stakeholder Management, buy in Stakeholder management Discipline, persistancy Training, follow up and measure Governance team and identify a stakeholder responsible for the implementation Clear strategy and objectives, strong governance and explicit decision making process. Working collaboratively, being transparant and repeat the message Proper communication and stakeholder engagement Regular monitoring and feed back Plan, check, implement, check, review plan, check Measurement defined Stakeholder meetings Jointly desicion making, allowing some transition period for a change,listen internal stakeholder Organizational effort and stakeholders strong involvement Working with purchasing and technical networks wthin each category Reinforce governance Appropriate present the business benefits related to the proposed changes and their implementation Secure high level buy in with various stakeholders through a Procurement Contracting Board (EXB & VP's, SVP's) agreeing on a clear mandate & allocate resources Compliance reporting Drive change management Measure compliance early involvement of all stakeholders Ensure policies are in place Senior leadership bye-in Secure an initial strong mandate in Executive Committee or department/ function head Basically disccuss with business stakeholders understand the priorities and give preference to their suggestion and develop the most suitable strategy so that we win them as well. Good engagement and communication Moving to a value-centric procurement organisation requires certain skills so this question sought to identify the key ones businesses have had proven success with. Better Communication ; Early Engagement ; Continuous Governance and Readiness for Change were all repeated by respondents demonstrating just how important to value creation continuous communication and cultural flexibility inside the business are. What is clear is that so many different businesses are trying to move toward value creation that the approaches will continue to be quite diverse and business specific.
7 Q10: One key focus for procurement in Q11: 2015 is responsible sourcing, what is Process Compliance Choose the more "sustainable" alternative your business doing over the next 18 months to improve the way sourcing is done? Have implemented CS Screening of suppliers repr. 80% of spend. CS screening as part of sourcing cycle change electricity provider CSR Management, CSR certification, Code of Conduct roll out Maintain Standard process as is Influence travel policy Increased focus on certified Suppliers and transparency through the supply Chain Ensuring the vendors do not breach the human rights, focus on being "green" in many aspects of company operations Embedding eithical business practices into all procurement activity (Directs & Indirects) and ensuring all suppliers as a minimum share our ethical approach Reduce co2 footprint Influence car policy Additional training on our Sustainable Procurement Code and obtain external accredited Ethical Stamp Use of electronic tools Via a 'risk assessment' approach identify areas of the supply chain which require focus, audits etc. And not just within the 'traditional' directs supply chain Cost Leadership Value Delivery Responsible Sourcing Talent Development Operational Efficiency Prioritize the following in order of importance to your business (1 as most important, 5 as least important): 46% say Value Delivery is most important to their business y 5 y 4 y 3 y 2 y 1 Fewer than 40% responded to this question indicating that businesses are either postponing a focus on responsible procurement or do not plan to prioritise this. For those who did respond and who are focusing on developing sustainable procurement practices a range of activities are being undertaking including Improving Process Compliance ; Better Supplier Screening ; Outsourcing to a 3rd Party and Investing in in-company Training. With more than 40 individual responses it is clear that for those prioritising responsible procurement there are numerous and different ways to go about achieving this Not surprisingly value and specifically value delivery is the top priority for the 67 respondents followed closely by cost leadership which we are defining as rallying your procurement organisation around cost management activities. Interestingly talent, normally a top priority especially for senior procurement leaders, scores only as a medium priority for some and a low priority for many. Operational efficiency, a key lever for value creation, scores highly as a medium priority suggesting respondents feel it is still important but either no longer a key focus or something to be prioritised in balance with others.
8 About ariba Ariba, an SAP company, is the world s business commerce network. Ariba combines industry-leading cloud-based applications with the world s largest web-based trading community to help companies discover and collaborate with a global network of partners. Using the Ariba Network, businesses of all sizes can connect to their trading partners anywhere, at any time from any application or device to buy, sell and manage their cash more efficiently and effectively than ever before. Companies around the world use the Ariba Network to simplify inter-enterprise commerce and enhance the results that they deliver. Join them at: By Alex Saric Global Vice President, Marketing - Ariba, An SAP Company Business commerce has never been more complex, with companies more dependent on their suppliers, customers and other trading partners than ever before. Procurement is uniquely positioned to help companies navigate and thrive amidst this complexity. As this study shows, procurement is increasingly being tasked to drive innovation, meet CSR objectives, mitigate risk, improve working capital and support many other, non-cost objectives. While certainly a challenge, this is also an opportunity to elevate the function. To succeed, procurement leaders must consider 3 factors: People, Automation & Connections. People: Procurement professionals must change their traditional mindset, and innovate. Traditional mindsets look at how to squeeze a few extra percent out of suppliers or bring a new category of spend under management. Innovative mindsets think about how to bring ALL spend under control (even uncontracted spend) and how to maximize value through the supply chain. Procurement also needs to rethink its approach to engaging with stakeholders, and this report highlights some of the approaches procurement leaders are using to better align to the business. Automation: Tactical and operational activities must be automated to the maximum extent possible to free up capacity for strategic work. There are a few criteria to consider when blueprinting technology: v Automate the entire source-pay process. Automating only a portion, or having disconnected solutions is often a short-sighted approach, and can create new obstacles. v Drive automation for ALL spend. That includes all categories of managed spend (complex services, contingent labor, travel ) as well as uncontracted spend. v Consider access to insights. Your systems should provide access to relevant insights at each point of the source-pay process, allowing you to optimize processes and make better decisions. Connections: Automation won t address your challenges if it ends at the four walls of your organization. Business networks extend processes to all trading partners. They also: v Provide access to 3rd party and community insights never before available at the right point in your process. For example, peer reviews and 3rd party risk information on potential suppliers during supplier discovery help reduce risk while meeting new objectives. v Enable entirely new processes, such as: q Spot purchases of uncontracted spend. Business networks now let you access online marketplaces through your existing eprocurement solutions to secure competitive prices from reputable suppliers in a compliant manner. q Crowd sourcing to drive innovation by bidding business requirements rather than specs to the online community of potential suppliers, inviting not just price bids but creative solutions that can both lower costs and drive innovation in your end products. With the right people, automation and connections, leading procurement organizations around the world are thriving in today s complex environment. Ariba is proud to be a partner to so many of them.
9 About PROCURECON INDIRECT ProcureCon Indirect is the annual international meeting for Indirect Spend Leaders and their senior teams to identify new operating models, benchmark and network in one place at one time. Taking place in the heart of Amsterdam in 2015, from April 2015, ProcureCon Indirect is the only indirect procurement conference you will need to attend this year. With 45+ speakers taking part in over 50 interactive sessions, you will be able to receive workable strategies and take-aways to improve your indirect procurement strategy. How? Identify Key Risk Factors Before Operating in Europe this Year: Benefit from fresh insights, including findings from a recent risk assessment project offered exclusively onsite by Marjolaine Ranque, Director of Procurement Europe and Brazil, Reed Elsevier so you can identify and prepare for economic risks to your business this year on April 21st. Learn how to Buy More Responsibly: Benefit from 12+ case studies and open discussion focusing on how to buy more responsibly and reduce risk for your business on April 21st. Move from Cost to Value Leadership: Meet and learn from CPOs of Unicredit, KPN and CEVA Logistics and Heads of Indirect from Qinetiq, Danfoss and Barilla as they explain how to create more value through your Indirect procurement strategy on April 22nd. Sustain Value Delivery to Your Internal Business Partners: Find out how to continuously deliver value to your internal partners from experts including Lianne Deeming, CPO, Tata Steel, Sylvie Noel, CPO, Covea Insurance and Heads of Indirect including Eric Danjoux, Vice President Global Indirect Spend, Firmenich, Ron van den Akker, VP Global Indirect Procurement, DSM and Rene Schalk, VP Global Indirect Procurement, Adidas. To find out more about what s being discussed at ProcureCon Indirect and how it will benefit you, visit: About wbr WBR is the world s biggest large-scale conference company and part of the PLS group, a leading global provider of strategic business intelligence with 16 offices worldwide. Our conference divisions consistently out-perform their industry sector competitors on the quality of the events we produce and the relationships we nurture with both delegates and sponsors. Every year over 10,000 senior executives from Fortune 1000 companies attend over 100 annual conferences a true Who s Who of today s corporate world. From Automotive events in Bucharest to Logistics conferences in Arizona and Finance summits in Hong Kong, WBR is dedicated to exceeding the needs of its customers around the world. In addition to our industry leading conferences, our professional services marketing division, WBR Digital, connects solution providers to their target audiences with year-round online branding and engagement lead generation campaigns. Demonstrate the thought-leadership of your organisation today by producing a benchmarking survey, whitepaper or webinar in partnership with WBR Digital. Contact: Tanyel Ali, Head of Digital Sales Tel: +44 (0) Tanyel.Ali@wbr.co.uk
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