What Can Professional Procurement do for You? David Henchliffe FCIPS

Transcription

1 What Can Professional Procurement do for You? David Henchliffe FCIPS

2 Agenda Introduction Goal alignment Modern procurement Basic techniques Keys Conclusion

3 Introduction David Henchliffe, FCIPS Chairman CIPSA Professional Advisory Group Representing the Chartered Institute of Purchasing & Supply Australasia [CIPSA] Chief Procurement Officer at Santos Responsible for Procurement, Material Management & Logistics

4 The Chartered Institute of Purchasing & Supply CIPS is the global peak body for the procurement profession Over 60,000 members in 150 countries Built upon degree level standard full membership: MCIPS as post-nominals CIPS benchmark directly with CPA in Australia and CIMA in the UK CIPS Australasia started in January ,600 members locally Wide range of training & education programmes, events and member benefits. Australasian office: Collins Street, Melbourne Global markets need global procurement professionals

5 What is Procurement? Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that an organisation needs or may need to fulfil its strategic objectives. Supply chain management is the continuous planning, developing, controlling, informing and monitoring of actions within and between supply chain elements so that an integrated supply network process results which meets overall strategic goals The 5 rights... The right things The right place The right time The right spec The right total cost *CIPS Research

6 Goal alignment for strategic relevance The best procurement teams align their goals with the organisation s strategic goals to deliver: Bottom-line cost savings Lower risk service chains Sustainable & socially responsible procurement strategies Speed to respond Cash flow management strategies Service based supply cultures Customer innovations & NPD from Suppliers More effective business outcomes The benefits of professional procurement The best procurement teams can produce a $10 return on your $1 investment in the supply side A focus on service delivery means many organisations need better external resource management

7 Procurement Operating Model A leading practice model addressing all core end to end Procurement related activities STRATEGY Procurement Strategy Sourcing Strategy Procurement Capability Planning Business Planning & Target Setting Strategic Supplier Management GOVERNANCE Compliance Strategy Balanced Scorecard Risk Management Process, Policies & Standards setting Roles & Responsibilities INTERNAL CUSTOMER MANAGEMENT CATEGORY MANAGEMENT Internal Customer Engagement Long Term Demand Planning Spend Analysis Demand Management Category Strategy Project Procurement Management Supply Market Development Supply Market Analysis Supplier Relationship Management COMPLIANCE MGMT Internal customer support and administration Compliance monitoring RFX creation RFX opening RFX analysis SOURCING MGMT Contract Execution Contract Negotiation RFX Recommendation Contract Preparation CONTRACTS MGMT Supplier contract compliance Company contract compliance Contract management SUPPLIER MGMT Supplier on-boarding Supplier development TRANSACTIONAL SUPPORT & REPORTING Order placement Receiving Supplier Payment Benefits Tracking & Realisation Content Management Operational Reporting Contract Review

8 Characteristics of world-class procurement today Senior Procurement Manager on the senior management team Matrix organisation to achieve decentralised cost focus in agencies with centralised process for leverage The procurement team directly addressing up to 100% of external third party expenditure Internal client culture with a role for all in saving cost Forging excellent working relationships with stakeholders across the organisation

9 Characteristics of world-class procurement today Professional staff development programmes in place Working collaboratively with key Suppliers to reduce waste in the supply chain & drive continuous improvement Measuring cost savings, Supplier performance & internal satisfaction Value from direct & indirect expenditure with optimised risk

10 Strategic Sourcing Analysis List spend by Supplier in descending order Focus on top segment 80% spend with top 20% suppliers Map a 2 x 2 model Strategic spend and leverage spend first Obtain market data of potential new Suppliers Multiply possible savings by volume to assess possible opportunity

11 Basic spend analysis -The Kraljic Matrix Low spend: High risk High spend: High risk Vulnerabilities Specialist components, water, C.A.T. tyres, Legal advice Vital supply lines to be secured Strategic relationships to be developed Raw Materials Beef for McDonald's, BPO Services, Iron ore Bottleneck Strategic Low spend: Low risk High spend: Low risk Consumables Stationery supplies, cleaning, FM services Indirect purchases to be commoditised Indirect supply lines to be leveraged High Spend Commodities I.T. Hardware, fuel, utilities, travel, temp labour Routine Leverage Mapping expenditure against risk

12 Supplier View Risk Spend

13 A Comprehensive Category Management focus will achieve 100% Spend Under Management Number of Transactions (%) Value of Spend (%) Type of Spend Transaction Characteristics 70% 20% 20% Catalogue Preferred Supplier Panels Preferred Supplier Initial contracts negotiated and agreed through sourcing process led by Cat Mgr and Cross Functional team (CFT) Business enabled to place orders directly through system Demand and benefits tracked by Cat Mgr through analysis tools 25% Low Risk Low Value Standard, simple sourcing process determined by Category Manager Sourcing process executed by Business and outcomes approved in accordance with Delegation of Authority Demand and benefits tracked by Cat Mgr through analysis tools 15% 35% Medium Risk Medium Value More robust sourcing process determined by Category Manager and executed by Business with outcomes approved in accordance with Delegations of Authority Demand and benefits tracked by Cat Mgr through analysis tools 10% 5% High Risk High Value Strategic sourcing process determined and executed by Category Manager in conjunction with CFT with outcomes approved in accordance with Delegations of Authority

14 Five questions you should know the answer to How much do we spend on external third party goods & services as a percentage of total income? How many suppliers do we use? Which are key to us? Who are the Top 10, Top 50, etc? Are we evaluating and measuring total cost of ownership or just purchase price? Do we understand the risks in the supply network and are we properly managing them? What are the opportunities? Do we have a clear procurement strategy and is it aligned to our goals?

15 A Balanced Scorecard Approach to Procurement Financial Internal Customer Forecast procurement savings Realised procurement savings Procurement ROI ROI Internal customer satisfaction Adherence to to service levels Strategic supplier performance Internal Process Level of of supplier concentration Proportion of of spend under contract Proportion of of spend on on catalogue Payment performance Process Compliance Levels People & Learning Procurement staff staff satisfaction Procurement staff staff turnover Procurement training completed Percentage of of accredited professional staff staff

16 Keys to Procurement transformation Leadership Multi-year strategic planning Total cost focus to begin Supply base rationalization Supplier & staff development Technology that enables process excellence Integrated systems and processes Engaged stakeholders with shared wins Visible, quantifiable, auditable measures

17 Conclusion - What do we need to achieve this? A best practice operating model that is comprehensive in addressing all core end to end Procurement related activities CEO A Procurement organisational structure that promotes single point accountability for Procurement activity in the role of the CPO.. Project Management Group Procurement Strategy and Governance Strategic Category Management CPO Strategic Contract Management Strategic Supplier Relationship Management Procurement Council And a governance and delegation framework that will ensure effective governance of core Procurement activities while meeting the operational needs of individual groups

18 Conclusion - What do we get? It s not just about cost... Procurement professionals do more than cut total cost and capture benefits They deliver sustainable commercial solutions across the business, and... The best procurement teams align their goals specifically to the corporate strategy and policy agenda Other possible outcomes... Better Security of Supply Lower risk profile Greater efficiency Improved quality Increased speed More sustainable options Use of funds Capture innovations Stronger governance

19 CIPS Australia Level Collins Street Melbourne VIC

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