Welcome to The Denali Group presentation of: Stop Sabotaging Your Procurement Transforming Efforts 5 Mistakes to Avoid

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1 Welcome to The Denali Group presentation of: Stop Sabotaging Your Procurement Transforming Efforts 5 Mistakes to Avoid Since 1991, the Sourcing Interests Group (SIG) has provided forums for networking, relationship building, knowledge sharing and education in a non-commercial environment. SIG, a recognized industry-leading, membership-based organization, helps members to achieve improved business results, sooner, at a lower cost and with reduced risk across the spectrum of outsourcing, offshoring, insourcing, procurement and shared services. SIG members are from both the user and provider communities drawn from Forbes 1000 and Fortune 500 companies.

2 Upcoming Tuesday SIG Webinars: February 14, 2012 Best Practices for Overcoming Common VMO Challenges Presented by Expense Management Solutions SIG s Weekly Webinars are offered every Tuesday at 2:00 pm Eastern (11:00 am Pacific) February 21, 2012 Show Me the Money: How to Drive Down Costs in the Healthcare Industry Presented by Emptoris an IBM Company Register for all webinars at

3 SIG s Regional Roundtables provide education and local networking for members and invited non-member corporate users

4 PRE-SUMMIT Executive Roundtables for Sourcing/ Procurement, Outsourcing & Legal 12 Advanced Workshops SUMMIT KEYNOTES Susan Schwab, Former U.S. Trade Ambassador on Global Trade, Policy and Politics Colonel Bernard Banks, West Point s Deputy Department Head, Behavioral Sciences & Leadership on Developing Character-Based Leaders SUMMIT 4 General Sessions 5 Focused Tracks 38 Breakout Sessions 2 Speed Networking Sessions 3 Special Evening Events Free Spouse Program

5 Tackling the Bottlenecks in Your Enterprise: Optimizing Technology, Processes and Results Procurement s Business Imperative: What Got Us Here, Won t Get Us There How Proctor & Gamble is Using Innovative Approaches to Dispute Resolution Debate: Outsourcing is Finished vs. Outsourcing is the Future Procurement Outsourcing Journey: Moving from One Partner to Another Transition and Implementation Launching an Enterprise Vendor Governance Office Prudential's Journey What's All the Fuss About Data Security and Privacy Risks? A Practical Approach to Explain the Legalese When Deals Go Wrong Part II: A Hands-On Workshop on Diagnosing and Remediating Troubled Outsourcing Relationships

6 Stop Sabotaging Your Procurement Transformation Efforts 5 Mistakes to Avoid February, 2012

7 Denali Group Presenters John Evans Managing Partner Denali Group Conrad Snover Partner Denali Group 7

8 About Denali Group Expanding Procurement s Value for The Global 1000 Since 1996 Innovative Collaborative Fast and Efficient 3 year growth rate: 237% 8

9 Agenda Understanding Procurement Transformation Five Common Mistakes Strategies for Avoiding Failure Wrap-Up 9

10 Procurement Transformation Defined Procurement Transformation: A holistic approach to improving all aspects of a procurement operation for improved results and long term sustainability What it is: An improvement approach that focuses on all dimensions of procurement effectiveness A program with goals to increase & expand Procurement s total value A balance of long term and short term objectives What it isn t: A short term, project-based initiative Purely a cost reduction effort Just about sourcing 10

11 Polling Question #1 How would you rate your organization s Procurement Transformation efforts? A. Very successful, flawless no significant issues, great results B. Successful, but some lessons learned and stumbling points along the way C. Mixed results didn t realized the benefits expected, but got some results D. Disaster would not recommend E. What s Procurement Transformation? 11

12 Five Common Mistakes of Procurement Transformation Not having a clear vision Thinking that it s just about sourcing Thinking that it s just about savings Trying to transform everything Forgetting the soft side 12

13 1 Don t embark without a clear vision Before you start, clearly articulate what Procurement Transformation success looks like Be descriptive, measureable and specific This isn t about slick vision statements, but about understanding clearly what your desired outcomes will look like Ensure solid linkage from corporate visions, goals & objectives, down to the individual level Operational Level Department Levels Corporate Level Supply Chain A B C A Sourcing Logistics A/P A Clear linkage of vision & objectives at all levels Portfolio/Supplier/Individual Level A A A A A A A A 13

14 Typical Procurement Transformation Objectives & Deliverables Most Procurement Transformation programs have two primary objectives: EXAMPLE Bottom Line Financial Results Sustainable Procurement Excellence Realized hard dollar savings, with a strong focus on external spend cost reduction Immediate savings from In-Flight Negotiations Quick wins on target categories Mid to long-term Wins from Strategic Sourcing of prioritized categories Metrics designed and implemented to track cost, quality & service performance of new sourced agreements A new procurement blueprint design that will position the procurement organization for continued results beyond the cost reduction initiatives Transfer of knowledge, skills and intellectual property to ensure that the right organizational resources, skills, tools and external partners are in place for long term sustainability 14

15 2 It s more than just sourcing Effective Procurement Transformation requires attention to a holistic suite of dimensions 15

16 3 It s not just about savings Think about the ideal end-state, in terms of overall goals and objectives Sample Procurement Dashboard Think broadly efficiency AND effectiveness, cost AND quality AND service levels Develop your ideal dashboard of the future, with metrics and targets that you d like to achieve in 3 months, 6 months, 1, 3 and 5 years out Use this to guide your transformation efforts what changes will you need to make to enable your organization to achieve the range of targets? 16

17 4 Don t try to transform everything Your position Understand your current performance along the Procurement Transformation dimensions Identify areas with the largest gaps, and target those first Be realistic about your capacity for transformation activities; match your capacity against the highest priority initiatives Establish a realistic transformation roadmap 17

18 5 Don t forget the soft side Be as collaborative as possible Involve as much of the organization as possible Include the organization & stakeholders in the up-front design of the procurement transformation effort, as well as in the implementation phases Understand your current talent landscape, and have a plan to acquire, develop, motivate & retain key people Develop a formal change management & communication plan for the transformation efforts; designate specific change leaders Emphasize employee performance management Invest in people development Identify & reward high-performing employees Have a succession plan to manage top talent 18

19 Building the infrastructure to create an effective team The following four elements are essential to delivering strong sourcing capabilities Process Knowledge Technology Knowledge Training & Knowledge Mgmt Category Knowledge Sourcing Methodology Job aids and templates Supply Market Analysis Spend Analysis Business Specific Tools Project Tracking & Reporting Esourcing Tools Sourcing Training curriculum Skills Certification Knowledge management System Category SMEs Sourcing Project experience Sourcing Best Practice Database Market Intelligence 19

20 Polling Question #2 If you ve been involved in Procurement Transformation, which of these would you most want to change (in hindsight)? A. More clearly articulating the vision up-front B. Being more holistic - Expanding the scope of the transformation to include areas outside of Sourcing C. Focusing on more than just savings D. Prioritizing initiatives more effectively E. More focus on the soft-side (people) 20

21 Final Thoughts - Planning for a Successful Procurement Transformation Procurement Transformation is not a one size fits all program; program design can depend on such factors as: - Maturity of current sourcing/procurement organization - Skill level of current employees - Company culture - Buy-in from internal clients regarding progressive procurement practices - Current level of automation & technology sophistication - Spending level and distribution across spend categories In order to design a Procurement Transformation program that will succeed, careful analysis of the current state of procurement should be completed before the detailed design is started Key stakeholders, inside and outside of Procurement should be included in the up-front assessment activities The planning phase is a fact-based data and information gathering process that should create valuable insight into the design phase 21

22 Thank you! John Evans Managing Partner Denali Group Conrad Snover Partner Denali Group 22

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