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How to shape the Procurement Workforce of the Future

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Daniel Vollath
Vincent Gressieker
Ferhat Ünsal
IN THE PAST FEW DECADES, THE
PROCUREMENT ORGANIZATION HAS
UNDERGONE A DRAMATIC EVOLUTION.
It has grown from the “purchasin...
3 | GETTING ON THE PATH TO WORKFORCE MASTERY
This hurdle certainly exists in the Procurement organization. In
recent years...
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How to shape the Procurement Workforce of the Future

  1. 1. Daniel Vollath Vincent Gressieker Ferhat Ünsal
  2. 2. IN THE PAST FEW DECADES, THE PROCUREMENT ORGANIZATION HAS UNDERGONE A DRAMATIC EVOLUTION. It has grown from the “purchasing department” of old to a more strategic function that delivers greater value beyond haggling and contracting. Accompanying that evolution has been a noted shift in both the organization’s structure and its workforce. Today, with digital technologies sweeping across companies and industries, even more is expected from Procurement and, hence the people who work in it. How should Procurement respond? A small group of companies provides some useful guidance. These companies are changing their Procurement organizations, skills, and behaviors to deliver more with less while navigating the challenges of digitization. Companies have long used technology advancements to help employees do their jobs better. Today, that increasingly means supporting the workforce with powerful digital tools. However, while digital certainly increases productivity and effectiveness, it challenges the status quo in organization structure and required skills. Indeed, according to Accenture Strategy research, 78 percent of business leaders expect their organizations to be a digital business in the next three years.1 However, 44 percent believe a lack of appropriate skills will be a key barrier to transformation.2 2 | GETTING ON THE PATH TO WORKFORCE MASTERY
  3. 3. 3 | GETTING ON THE PATH TO WORKFORCE MASTERY This hurdle certainly exists in the Procurement organization. In recent years, Procurement has made significant strides in applying technology, including digital, to improve workforce efficiency and reduce the function’s costs. These steps are accelerating as the technology becomes cheaper and more commercialized. However, many companies still have a long way to go to develop the organization structure and talent base necessary to generate the value business leaders now expect. For instance, in many companies, Procurement still has too many staff performing manual, non-value-adding work. Moreover, many still try to do all activities in-house. Furthermore, Procurement’s interaction with the business in most companies remains a transactional affair; no embedded Procurement practitioners work to improve collaboration on purchasing decisions. And, the Procurement staff too frequently comprises generalists with limited finance skills and little to no analytics capabilities. This makes it difficult for them to identify more, and more impactful, cost-saving opportunities. THE UPSHOT: IN MOST COMPANIES, PROCUREMENT’S COSTS ARE STUBBORNLY TOO HIGH AND ROI IS UNACCEPTABLY LOW.
  4. 4. This fact is borne out by a comprehensive Accenture Strategy research effort, which sought to understand the maturity of companies’ Procurement capabilities across 13 key dimensions (Figure 1). Only a small group of companies we studied—the 7 percent we deemed the “masters”—demonstrated highly mature Procurement capabilities. These capabilities enable masters to perform well across the board: They execute the basics brilliantly and tap into differentiating capabilities that drive ROI and deliver new value for the enterprise. HOW MASTERS APPROACH THE PROCUREMENT WORKFORCE 4 | GETTING ON THE PATH TO WORKFORCE MASTERY
  5. 5. ECOSYSTEM MANAGEMENT The active management and use of all players in the Company’s ecosystem ranging from mature providers, start-ups, non-profits and academia to drive enterprise-wide objectives. DEMAND MANAGEMENT The evaluation of strategic spend opportunities and should-costs, that integrates with the company’s broader budgeting process (i.e., Zero-Based Budgeting). ACCENTURE STRATEGY’S PROCUREMENT MASTERY RESEARCH FRAMEWORK FIGURE 1 NEW TRADITIONAL INSIGHT MANAGEMENT The adoption of advanced analytics and market intelligence that dives insights throughout the entire Source-to-Pay process, while enabling better and faster decision-making. RISK & REGULATION The constant monitoring of third party imposed risks to the Company’s business activity across multiple dimensions incl. financial viability, security, continuity, price, regulatory changes. FINANCE & CONTROL Procurement’s ability to generate value on behalf of the Company, how it tracks cost transparency and its ability to influence financial discussions as well as the P&Ls of the businesses it supports. DIGITAL The Organization’s capacity to craft next-generation purchasing experiences that are on-demand and human-centered, yet enabled by a combination of emerging and mature technologies. PROCUREMENT STRATEGY The Organization’s vison, goals and objectives, as well as the overall operating model that is uses to fulfill these across process, people, technology and performance management. CATEGORY MANAGEMENT The plan that Procurement organizations use to manage the pipeline of recurring and net-new initiatives, prioritize projects, and identify value-add opportunities. SOURCING MANAGEMENT The defined methodology and process of assessing business needs for goods and services, defining a go-to-market strategy, select suppliers, negotiate and implement contract(s). SUPPLIER MANAGEMENT The capacity to strategically and effectively manage all elements of the interaction and collaboration, performance, risk and innovation with third party providers. CONTRACT MANAGEMENT The active management of an agreement throughout its lifecycle from contract set-up to administration, management, and termination. REQUISITION TO PAY The oversight of order processing, beginning at the time of requisition, following receipt of the products or completion of the defined service and ending with the payment to the supplier PROCUREMENT WORKFORCE The quality, capabilities and number of resources used to fulfill the services Procurement delivers on behalf of the Company. 5 | GETTING ON THE PATH TO WORKFORCE MASTERY
  6. 6. One of the key aspects we studied was workforce: how the function is organized and structured, and the skill sets required to support the enterprise’s strategy and vision. Just as in other areas, we found a clear distinction between masters and other companies. At a high level, masters are highly adept at shaping their Procurement workforce and organization to maximize the impact for the broader business and the people involved. That’s because, in these companies, the C-suite can answer important questions across three dimensions: organization, talent management, and ROI (see box). It’s also because they excel in using technology to further increase Procurement’s ROI. Digital technology continues to penetrate enterprises broadly and Procurement specifically. As it does so, it will increasingly become a key lever to drive business performance, and to support and empower people. As a result, masters continue to find ways to use digitalization to shape and leverage their Procurement workforce—specifically, across five key dimensions (Figure 2). This enables masters to achieve an impressive 15:1 return on their Procurement organization’s spend. ORGANIZATION • How should we organize to navigate through future challenges, including new partners, different skills and fewer people in different locations? • How many practitioners do we have centralized and how many embedded? • How do we leverage an ecosystem of BPO and strategic supplier partners? • What capabilities are best outsourced and why? THINKING LIKE A MASTER: KEY QUESTIONS TO ANSWER TALENT MANAGEMENT • How do we account for the evolving and expanding role of digital? • What skill sets are required to enable the overall organization to achieve higher business performance? • Can we keep pace with digitization given demographic challenges? • What training can develop the procurement workforce into masters? • Given the challenge that procurement has attracting and retaining talent, should we invest in these skills or buy them? OUTCOME/ROI • How do we calculate the impact of digital and talent investments? • What drives the numerator (value) versus denominator (investment)? • Over what time horizon will the business see a return? • How robust are the different technologies? 6 | GETTING ON THE PATH TO WORKFORCE MASTERY
  7. 7. 7 | GETTING ON THE PATH TO WORKFORCE MASTERY MASTERS LEVERAGE DIGITAL ACROSS FIVE KEY DIMENSIONS TO DRAMATICALLY BOOST PROCUREMENT ROI FIGURE 2 CONNECTEDNESS Reach of procurement (ecosystem) X = Traditional procurement 4% High performers 10% Procurement masters 15% IMPACT Savings as percent of spend MAXIMIZER LEVER SUPPORTING TECHNOLOGY SOURCING Purchase price optimization • Platform/cloud • Social media Traditional procurement 20% High performers 60% Procurement masters 100% INSIGHTS Quality of procurement decisions • Analytics • Sensors/AI Traditional procurement 40% High performers 80% Procurement masters 98% COMPLIANCE Policy adherance a.k.a. bottom line impact • Contract analytics • Bots Traditional procurement 1% High performers .5% Procurement masters .2% EFFICIENCY Procurement operating cost • Robotics process automation • AI WORKFORCE ROI 15:1
  8. 8. CONNECTEDNESS MASTERS SYNCHRONISE ECOSYSTEMS Technology helps the workforce collaborate more effectively on two fronts: with internal stakeholders; and with suppliers and other ecosystem participants (including consumers, independent experts, and outsourcing providers). As they embrace ecosystems more broadly, masters are creating new roles. One is the ecosystem manager, who’s responsible for identifying innovative ways for Procurement to collaborate. This could include procuring professional services through platforms like co-match and working with start-ups to uncover new suppliers. Some companies have implemented alliance managers within each of their business groups to spur internal collaboration. These managers are charged with facilitating discussions between a Group’s CPO and CFO (or COO) to ensure the Group achieves its budget targets and to drive continuous improvement in the budgeting process. Masters also use the ecosystem to help them plug talent gaps. For example, a global professional service firm is cooperating with one of the world’s leading business schools to enhance the finance skills of its employees (including those in Procurement). Another company, a global technology company, has teamed with a university’s supply chain program to recruit students directly after graduation. This helps fill the company’s talent pipeline while teaching students practical knowledge they can apply immediately in their first jobs. Some companies are also looking for ways to tap into the fast-growing freelance labor market. NEXT-LEVEL SOURCING MASTERS LEVERAGE INSIGHTS FROM PLATFORMS TO IN- CREASE THEIR BARGAINING POWER IN CRITICAL CATEGORIES Masters excel in managing their spend in critical categories. This includes attending to the basics, such as putting in place a solid category structure across the company. It also includes 1 2 8 | GETTING ON THE PATH TO WORKFORCE MASTERY
  9. 9. deploying category managers responsible for defining demand and specification plans in line with the broader organizational goals. Masters also use technology to generate higher sourcing savings in specific indirect categories. For instance, masters have a structured negotiation process that uses electronic platforms and special supplier analytics teams. These resources provide market and supply base intelligence, price benchmarks, and detailed cost sheets throughout the negotiation process. Furthermore, masters are 60 percent more likely to drive all but 1 percent of their sourcing through e-sourcing tools, and have internal online catalogues for designated users to place orders directly. Sensors, paired with analytics, are helping masters improve their performance in categories involving substantial human intervention. One example: A mining company is working with suppliers to develop sensors that monitor the health of its trucks to predict failures and boost utilization. Such data can help the company fine- tune its category strategies as well as reduce part proliferation. Another company uses sensors, cameras, and risk-based analytics to reduce security and theft costs from its stores. INSIGHTS MASTERS ASSUME LESS Analytics are essential for driving more sophisticated decision making and business intelligence in commodity pricing, risk management, and product cost management. This is something masters have been quick to recognize: They are 94 percent more likely to use advanced analytics to identify trends, risks, and opportunities, ultimately unlocking greater value for the organization. In fact, the extended use of advanced analytics combined with the Industrial Internet of Things, is a powerful one-two punch. It can lead 3 9 | GETTING ON THE PATH TO WORKFORCE MASTERY
  10. 10. to not only 100 percent understanding of spend, but also the ability to more accurately identify and avoid disruptions to the business. This is precisely what one major airline has discovered through its use of sensors, analytics, and other technologies to monitor its aircraft fleet. With the intelligence such monitoring provides, the airline can predict future faults and take proactive measures. Doing so reduces the likelihood an aircraft will be sidelined for a lengthy period for repairs. The key point is this: Masters understand how putting insights in the hands of the right people will deepen the Procurement function’s market and industry knowledge. Professionals can then apply that knowledge to improve business performance. COMPLIANCE MASTERS PLAY MORE Masters use technology such as analytics to strengthen Procurement’s relationship with the business. Doing so results in more candid conversations, adherence to contracts, higher compliance, and greater savings. Eventually, analytics will make possible live budget tracking and more accurate burn-rate monitoring as the organization consumes its budgets. As a result, category owners will be able to more effectively and proactively identify and correct non-compliance issues in the business. For instance, an emerging platform that combines descriptive and predictive analytics will soon blend with Procurement professionals to dramatically improve compliance control. Such a platform could compare each transaction and other purchasing behavior with the appropriate contract to determine individual and overall compliance, and the cost of non-compliance. This system, combined with other relevant data, could help Procurement executives understand current and projected compliance, as well as pinpoint who’s responsible for non-compliance (i.e., the 4 10 | GETTING ON THE PATH TO WORKFORCE MASTERY
  11. 11. Procurement organization, suppliers, or the business). It also could help them forecast the impact of the Procurement organization’s compliance-management techniques. A major bank provides one example of the beginnings of such a platform in use today. A tool the bank built helps drive 360-degree supplier base visibility. With such visibility, the bank can not only conduct better supplier risk assessments, but also get a more complete understanding of supplier performance and compliance. Like this bank, companies and their Procurement workforce must become skilled at leveraging platforms to spur extensive sharing of real-time, transparent information to systematize compliance control. EFFICIENCY MASTERS DELIVER MORE WITH LESS Masters’ Procurement function costs less while generating more business value. How? Masters have a holistic understanding of the business’s needs and their own capabilities. As a result, they can identify ways to use technology to automate transactional and, to some degree, operational processes. This allows their workforce to focus on high-value-adding activities, which is critical: Because efficiency is the denominator in the value equation illustrated in Figure 2, it has the highest impact of any of the levers. For example, a global energy company automated more than 100 Procurement, finance, and accounting processes, which slashed manual average handling time by 67 percent. By dramatically speeding up activities such as invoice processing (with higher data accuracy as an added bonus), the company has saved $2.5 million annually. 5 11 | GETTING ON THE PATH TO WORKFORCE MASTERY
  12. 12. Masters increase ROI even further by outsourcing non-core categories where they have only limited capabilities. A global consumer goods company did just that, which reduced Procurement function costs and freed up the company’s own organization to concentrate on supplier innovation in high-impact spend area. Furthermore, a more focused sourcing approach and the third- party partner’s deep experience resulted in greater savings in the outsourced categories. Finally, workforce masters leverage technology to work with a smaller core Procurement team and embed additional Procurement professionals in the business. The embedded professionals spend the bulk of their time addressing business issues while applying Procurement knowledge. The core team uses real-time transparency of information on demand, supply and pricing to handle business strategy, global demand and supply, policy, compliance, and global strategic supplier management. This innovative organization structure reduces costs while aligning Procurement with the business on specifications and overall category management. 12 | GETTING ON THE PATH TO WORKFORCE MASTERY
  13. 13. It’s clear from our research that the elite companies we studied— the masters—have made dramatic progress in enhancing the Procurement organization structure and workforce. They’ve been able to create a workforce with the right skills to best leverage technological advancement, as well as develop and enact strategies to attract the right people. They also understand how to manage an ecosystem of partners (both within and outside of the business). The payoff can be huge. As illustrated in Figure 3, our analysis has found that workforce mastery can generate millions of dollars in Procurement function cost savings alone by combining digital technology with other factors such as operating model enhancements. GETTING ON THE PATH TO WORKFORCE MASTERY 13 | GETTING ON THE PATH TO WORKFORCE MASTERY MOVING FORWARD
  14. 14. POTENTIAL SAVINGS IN PROCUREMENT FUNCTION COSTS VIA MASTERY PRACTICES CONSIDERING $1 BILLION SPEND FIGURE 3 IMPACT Cost as percent of spend Traditional procurement 1% High performers .5% Procurement masters .2% = $8MSAVINGS 14 | GETTING ON THE PATH TO WORKFORCE MASTERY On the other hand, it’s equally clear the vast majority of companies still have a lot of work to do to catch up with the masters. Where should they start? We believe companies that successfully address three key activities can become workforce masters within three years. CHALLENGE THE STATUS QUO. Before setting out on the journey toward workforce mastery, a company needs to know its starting point. Thus it should benchmark its own capabilities with those of Procurement masters to understand where the gaps are and what needs to happen to close them. IMPLEMENT A NEW PROCUREMENT OPERATING MODEL. This should include a new organization structure comprising a mix of Procurement professionals fully embedded in the business and a central, core decision-making team. It also should include an ecosystem to augment Procurement’s internal capabilities. USE DIGITAL AS AN ENABLER. A digital platform is critical to supporting and fostering collaboration across the ecosystem. Digitalized learning programs can help build key workforce skills while keeping training costs low. And automation and intelligent support can make transactions more efficient, free up people to perform more value-adding work, and vastly improve decision making.
  15. 15. There’s no doubt Procurement organizations have made a great deal of progress in the past decade to shore up their operational house. But with business leaders demanding more from the organization today, it’s time to move beyond simply getting more efficient. Companies need to take the masters’ lead: Use technology to drive a top-to-bottom transformation of Procurement’s workforce and operating model so they can begin generating the 15:1 ROI that masters enjoy. 15 | GETTING ON THE PATH TO WORKFORCE MASTERY
  16. 16. JOIN THE CONVERSATION @AccentureStrat www.linkedin.com/company/accenture-strategy CONTACT THE AUTHORS Daniel Vollath daniel.vollath@accenture.com Erlangen, Germany Vincent Gressieker vincent.gressieker@accenture.com Berlin, Germany Ferhat Ünsal ferhat.uensal@accenture.com Stuttgart, Germany CONTRIBUTORS Kevin Doran k.doran@accenture.com London, UK Ryan Pearce ryan.s.pearce@accenture.com Toronto, Canada Alexis Perez alexis.c.perez@accenture.com Chicago, Illinois, US 16 | GETTING ON THE PATH TO WORKFORCE MASTERY
  17. 17. NOTES 1. Accenture Strategy—Being Digital, embrace the future of work and your people will embrace you 2. Accenture Strategy—Being Digital, embrace the future of work and your people will embrace you ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 425,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com. ABOUT ACCENTURE STRATEGY Accenture Strategy operates at the intersection of business and technology. We bring together our capabilities in business, technology, operations and function strategy to help our clients envision and execute industry-specific strategies that support enterprise wide transformation. Our focus on issues related to digital disruption, competitiveness, global operating models, talent and leadership help drive both efficiencies and growth. For more information, follow @AccentureStrat or visit www.accenture.com/ strategy. This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks. Copyright © 2017 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

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