Valekumar Krishnan spoke at CPO Forum India 2013 in Mumbai on “The End of Business as Usual in Procurement”. His talk covered the topics like Evolution of Procurement, Challenges and Future Trends in Procurement and Game Changers in Procurement.

1. Presented at:
By:
End of business-as-usual in Procurement
CPO Forum India 2013
Valekumar Krishnan, Senior Research Manager
July 6, 2013
Mumbai, India

2. 1. Which of the following suppliers have a 2012 revenue more than Walt
Disney and Abbot Laboratories combined (USD 79.7 billion) ?
A. McKesson
B. AmerisourceBergen
C. Walgreens
D. Cardinal Health
A and D: McKesson and Cardinal Health
2. Johnson Controls in 2012 had a revenue of USD 40.8 billion. This is
more than that of:
A. Pfizer
B. Johnson & Johnson
C. Merck
D. FedEx
D: FedEx
Pop Quiz
How well do you know the supplier community?
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3. 3
Agenda
• Procurement is on a Burning Platform
• Procurement is Evolving
• Challenges & Future Trends
• Conclusion

4. Post the 2008 economic crisis, the World has changed
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Opposing Economic and Business Cycles
Simultaneously Opportunistic Demand and Plant Closures
Unpredictable Markets and Suppliers

5. This is what it feels like to be in Procurement
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6. Impact on Procurement
• Shorter Lead Times
• Reduced time to market
• Volatility in Raw Materials
• Need for Stable Suppliers
To get the above means you will need to have
• Supplier Loyalty
• Secure Available Capacity
– Operations
– Design, Development Knowhow
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7. Today, many CEO’s across the world are investing in
Procurement
• Procurement excellence is increasingly seen as a business pre-requisite
• Companies that are better prepared have stayed ahead and are
improving faster
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20% 0%40%80% 60%100%
Oil & Gas
Automotive
Hitech
Chemicals
Metals & Mining
Food, Beverage &
Tobacco
Pharma & Healthcare
Pre 2007
80% 100%60%20% 40%0%
Oil & Gas
Automotive
Hitech
Chemicals
Metals & Mining
Food, Beverage & Tobacco
Pharma & Healthcare
2012
Source Beroe

8. However, pace of transformation can only be sustained
with a clear Org. level mandate on these KEY areas
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Process
(Few Examples)
And most
importantly -
People
• Effective category management (with equally
effective supplier integration)
• Cross-functional Integration
• Supply Chain Risk Management
• Procurement as an attractive career option
• Procurement expertize vs. Business thinking
conundrum
• Empowerment to develop strategies (credible
business partners/Leadership growth Pool)

9. Changing the game
The message is clear – very FEW CPOs really understand how their suppliers segment
them – This is a key element in transformational sourcing.
Some key questions we need to ask ourselves:
Source: PwC
We know how our suppliers segment us as customers
We ask suppliers about our stakeholders in the business
We ask our suppliers about business issues they see in our company
We make new connections in the business for suppliers
We share opportunities outside current spend with suppliers
We advocate suppliers in the business
We ask suppliers to bring new business opportunities they see to us
We listen to and learn from suppliers
We ask suppliers for update us on their markets
Supplier intelligence and advocacy (% of respondents using often or very often)
1. How much of future business plans are you willing to share with your suppliers to get the
critical ones to be loyal to you?
2. What do our key suppliers want from our company?
• Predictability, consistency, Low cost to serve, Discipline, Behavior, One face to the Supplier?
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3. What percentage of our supplier conversation are no price negotiation centric? And what %
of supplier’s cost is driven by my company?

10. Winning the game
Common Mistakes
1. We are getting all that we can from our
suppliers !!!
2. We always think we know enough about
the category
3. We do not consider who is competing
for our suppliers capacity in category
planning
4. We always think that we are important
to our suppliers
5. We don’t get all party sign off to
supplier strategies
6. If you tell a supplier your strategy, they
will share it with your competitors
7. We think we communicate enough with
our suppliers
Instead Focus On
1. What do we need to do to get more
from our suppliers?
2. What else do we need to know about
this category? Can our suppliers help us
understand how others are buying this
category?
3. How do we position ourselves to ensure
we get the capacity from our suppliers?
Do we need to fundamentally change
the way we do business with this
supplier?
4. How do our suppliers view us? Are we
their customer of choice? If not, how do
we get there?
Procurement needs to take a high level view to understand various aspects of sourcing instead
of a periscope view
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11. Case Study: How not to Bleed Suppliers..
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Large MN took 4 weeks and a takeover costing 100+ Million Euros to stay in business
Procurement learned the hard way about the benefits of cross business category management
and how important it is to know about the supplier and the market
• European based MN with 25bn Euros spend p.a.
40 plants in 5 countries using the same supplier
No internal co-ordination of demand & no category plan
No understanding on supplier stability or growth potential
• Management demanding lower prices every year
• Procurement negotiating lower prices with supplier each year
– Separate negotiations for each plant; local congratulations for good result
• Suppliers could not continually reduce costs to match lower pricing:
Procurement could not fathom the leading signals
No communication channels were in place with Large MN or any plants
Supplier reached strategic decision and declared bankruptcy
• Supplier provided tool mouldings used on every product that Large MN produced
• Supplier gates closed with tools inside

12. Transformational changes however cannot be
accelerated without the right skills sets..
• The procurement experience vs. business thinking conundrum
– Which is the one you prefer? The center of gravity is seen to be shifting towards
business thinking
• The attractiveness of procurement as a challenging career option
– The level of transformation taking place will definitely help the cause however will
require strong internal and external marketing
• Strategic influencing, process excellence & compliance, exposure to other business
functions are few key behavioral traits that will be crucial in transformation
– Fortune 500 CPO are increasingly looking for these
• Last but not the least CPO’s & middle management need to look beyond
procurement next job options as tacitly impacts thought processes and expectations
– Galvanizes procurement function to see and align to the bigger picture
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13. Case study: Company P – Don’t change the rules
change the game
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• European based MN with 25bn Euros spend p.a.
2500 FTEs in procurement world wide
Low- med level talent
Very little category strategy work done
• Created Procurement brand and marketed it internally and externally
• Raised barrier to enter procurement – very top talent & via assessment centre only
• Broke pay-scale rules but no one stopped it
• Conditions of entry:
2 years stay in procurement, then make a career in other function
Personal growth mandatory
Develop sell and execute category strategies across the business
One mistake allowed
• No procurement experience necessary
• Recruited 672 top talent in 3 years by competing with ATK
• Reduced total headcount to 1800 in same timescale en route to 1200
Totally re-positioned procurement with credibility and success

14. Conclusions
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Businesses will demand more value from procurement organizations
Managing an increasingly volatile supply market, from both a price and
availability point of view
Suppliers must be influenced to such a degree that they work with buying
organizations, rather than against them. Becoming customer of choice is key
Sourcing is complex: Finding the type of procurement professional who is able
to cope will define how procurement organizations evolve
Acceleration on change-Golden time to make the change and sustain it. Adding
value to overall strategy-the burning platform needs to be leveraged

15. What it should really feel like to be in Procurement
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Thank You