A Procurement Leaders Guide to Enabling Agility

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A Procurement Leader’s Guide
to Enabling Business Agility
Presented By:
October 26, 2016

| Confidential
Agenda
• Introduction: 2015 in Review
• 2016 Key Issues: Agility in procurement
• Developing procurement’s culture and talent
• Building an agile information and technology architecture
• Enabling an agile service delivery model
• Closing Thoughts
• About Tradeshift

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Introductions
Vishal Patel
Director, Solutions Marketing
Tradeshift
Christopher Sawchuck
Principal, Global Procurement Advisory Practice Leader
The Hackett Group

Christopher Sawchuk
Principal, Global Procurement Advisory Practice Leader
The Hackett Group
A PROCUREMENT LEADER’S GUIDE TO
ENABLING BUSINESS AGILITY

5© 2016 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
In 2015, procurement’s #1 priority was to elevate its role to a trusted advisor
72%
Ranked elevating
the role of
procurement to a
trusted advisor as a
critical or major
objective in 2015
Source: Key Issues Study, The Hackett Group, 2015
77%
64%
61%
57%
53%
47%
36%
35%
35%
5%
4%
Consistently deliver on the basics
Hire and retain high-caliber staff
Increase agility
Develop category management strategies
Deliver high-quality market insights and research
Build better awareness of procurement’s services
Discover and recommend innovative suppliers
Prove value through small projects
Improve the overall buying experience
Other
N/A
Stakeholders
are not always
seeking
innovation
Cost
Quality
Performance
In past Key Issues studies, respondents have indicated that becoming a trusted advisor to
the business is a critical objective. Which capabilities will help the most to achieve this
status?

In 2016, the priorities are similar; agility is top of mind… but procurement is
struggling to address it
74%
74% ranked improving agility
as a critical or major objective
in 2016
36%
Only 36% said they have a high
ability to improve agility today

To adapt, procurement must weave agility into every aspect of its service
delivery model
Service Delivery Model 2.0
Intensifying
competition
Disruptive
innovation
Extreme
Volatility
The Insight
Imperative
The Digital
Imperative
The five forces of change
 Make and implement decisions
quickly
 Respond rapidly to changes in
business demands and priorities
 Forecast and plan continuously to
identify future risks and
opportunities
What’s required for agility?

Developing
procurement’s culture
and talent is critical to
fostering agility

The characteristics of an agile procurement culture
Agile procurement organization
Low agility Agility enabler High agility
Change averse culture, preserve status
quo, focus on resource utilization
Embrace change, view change as an
opportunity, focus on business
outcomes
Talent tied to specific roles, common
talent management strategies for all
roles, limited learning and development
Flexible talent placement, talent
management tailored to needs of roles,
continuous learning and development
Bureaucratic decision-making, lacks
empowerment, fosters inappropriate
risk taking
Delegated decision-making authority,
change-oriented leadership, calculated
risk taking
Leadership
Culture
Talent

Culture: At the US BPC, Pfizer’s presentation highlighted the importance of
driving positive change through its culture champion network
If interested, the highlights
from this presentation are
available in a Hackett
research paper.

What makes it agile?
“Our most important asset is our people. We’re trying to
approach recruitment differently than in the past. I’m not
convinced we necessarily need to hire only people who
have done sourcing before. Rather than hiring for
experience, we look for candidates with the right skills to
succeed. Sometimes you need a combination of skills and
experience, but ultimately, I want people with an
entrepreneurial spirit, who want to build something new,
are quick learners and logical thinkers, but who can also
build relationships. We can train them in our sourcing
process, but softer skills are more difficult to teach.”
Frederic Khalil
VP, Head of Source-to-Pay
and
Corporate Services
Guardian Life Insurance
Company of America
Leadership: Guardian recruits and develops future leaders by fostering an
entrepreneurial spirit, focusing on relationship skills (versus sourcing expertise)
 "Outside the box" recruiting
(offshore and onshore)
 Cross-training and lunchbox training
 Career track program
Recruit,
train and develop
careers
 Single mission
 Shared cascading objectives
 Team events (incl. Community
volunteering)
 Physical seating
Build “One Team”
 Department meetings
 Intellectual capital building
 Process improvement
 Corporate projects volunteering
Foster ownership
and initiatives
 Newsletters
 Recognition and rewards program
 Department trophy ceremony
Reward and
recognize
performance
Source: Guardian

Talent: Mead Johnson’s four-phased approach to building procurement’s
credibility includes continuously developing the ‘softer side’ of procurement
Phase
1
Phase
2
Phase
3
Phase
4
Set up a diverse team to support innovative thinking
 External experience brings new ideas and best practices to the team
 Diverse backgrounds (finance, engineering, IT) provide additional tools
Global oversight through Global Collaboration Councils
 Long-term strategies, productivity assessments, risk
management strategies
 Best practice, regional support, cross regional leverage, global RFPs,
category SME
Continue developing soft skills
 Harvard Business School Online training
 Culture Crossing seminar, global effectiveness, influencing, negotiation
global leadership, team building
Business advisors supporting regional initiatives
 Thought leadership
 Viewed as strategic partners who add value
What makes it agile?
 “Culture Crossing” seminars
help improve global
collaboration, improve
effectiveness
 Global councils help break
logjams to improve
productivity

Four characteristics of agile talent management in procurement
1. Training is conducted in the field, not in a classroom. It is creative, engaging, challenging
and specific/based on real-life scenarios.
1. Staff is rotated within and between business units and geographies, developing potential
future leaders who have a broad understanding of the entire value chain.
1. Recruiting and hiring draws from outside the typical pool of procurement and sourcing
specialists. Softer skills like relationship management, intellectual curiosity and business
acumen are highly valued.
1. Procurement’s culture is defined by successfully challenging the status quo, influencing
leadership to try something different. It is a “constructive disrupter,” displacing traditional, less
efficient processes with new, creative solutions that are able to scale with the future strategy.

Ultimately, becoming more agile requires innovators, not optimizers
“A lot of procurement executives have been molded and developed in their careers
to become optimizers, but we need innovators. In the past, managers often took
comfort in hiring like-minded people, which yielded a kind of group-think that is not
sustainable. You may get a temporary lift for a few years when someone comes in
and optimizes something, but when you are challenged to change the model
altogether, it is very difficult. Transformation requires people who bring individual
creativity and thinking to the table and are willing to raise controversial issues and
consider alternative ideas.”
Ramsay Chu
Global Head of Procurement
Rio Tinto Group

Building an agile
information and
technology
architecture

Information and technology enabled agility
Information and technology
Calendar-driven planning, singular set of
planning assumptions
Adaptive, dynamic planning process, multiple
scenarios and dimensions to planning models
Ad hoc response to variances, disjointed KPIs,
manage reactively based on lagging indicators
KPIs aligned with business strategy, proactive
performance management based on leading
indicators
Fragmented systems and data models, poor data
governance, limited analytical tools
Mature systems, data models and governance,
broad adoption of analytics
Fragmented, disjointed, single purpose (i.e. only
invoicing) networks in place
Business networks span from source-to-pay and
include broader trading partner collaboration
Risk forecasting
and planning
Performance
management
Information
governance
Business network
collaboration

Risk forecasting and planning: A hallmark of procurement agility

Agile procurement orgs have a strategy in place to take advantage of
technology developments
Technology
components
Questions procurement should be asking
Internet of everything
How can sensors, location based services, RFID, etc. help to make our supply
chains more agile?
Social media
Can social media be used as a tool to detect supplier risk patterns? Can we
use it to collaborate across procurement?
Mobility Can we conduct the business of procurement on the move?
Analytics What predictive modelling capabilities should we invest in?
Cloud What do we need to know about the risks of sourcing cloud technology?
Cognitive computing How will this revolutionize spend analysis? Risk forecasting?

Information
Talent
Develop
Plan
Source
Make
Enabling
processes
Deliver
Performance
management
Service Customer Sell
Market
Customer-centric business networks: Agile procurement organizations are
rethinking how supplier networks can be expanded to better connect the entire
value chain
Information-driven decision making,
customer-centricity, and operational
responsiveness are all byproducts of
having better end-to-end, real-time
network visibility.
Source: The Hackett Group

Beyond supporting transactions, networks can also be a source of market
intelligence, knowledge sharing and collaboration
Suppliers
Research centers
Industry groups & trade associations
Internal business partners
Government agencies & NGOs
Customers
Universities/schools
Procurement

Four characteristics of agile procurement technology and information
architecture
 Continuous risk forecasting and planning is a hallmark of agility. Procurement’s ability to
react quickly to change hinges on how well its prepared.
 Agility leaders have a plan in place for taking advantage of future developments in social,
mobile, analytics, cloud and cognitive computing.
 Agile supply chains are built on a network of real-time visibility. Supplier networks will evolve
into more holistic business networks to enable faster, more educated insights.
 An agile procurement technology footprint is characterized by an ecosystem of software
solutions, including both mature P2P solutions and emerging vendors in areas like risk, mobile
spend analysis and spot buying

Enabling agile service
delivery

Automation, COE and Outsourcing enabled agility
Agile service delivery
Labor intensive, fragmented systems,
‘swivel chair’ processing
Technology intensive, integrated
transactional systems, high levels of
“touchless” orders (automation)
Limited adoption of COEs, the scope of
work only includes the most
transactional tasks
COEs are used for more advanced
work like spend analysis, market
intelligence, tactical sourcing and risk
forecasting.
Large, all encompassing projects
spanning multiple functions (Finance,
Procurement, HR). Business case
based solely on labor arbitrage.
“As-a-service” outsourcing of select
areas in bite sized, consumable parts.
The business case is tied closely to
performance.
Outsourcing
Centers of
Excellence
Automation

Automation: Agile P2P organizations are piloting robotic process automation
(RPA) – especially in shared service centers
 Large outsourcing providers have begun to reap the
benefits of RPA as a way to lower their own operating
costs. GBS and procurement shared service centers
should explore the potential as well.
 When does RPA make sense?
– Stable, relatively static applications
– Need to access multiple systems
– Limited need for human intervention, exceptions
handling
– Clear understanding of the current cost of manually
completing the work
– High transaction volumes

Centers of Excellence: Looking beyond transactional work, agility leaders
use onshore COEs to reap the greatest return on MI investments
55% are not implemented or in the first
stage of maturity
343x
Onshore COE
183x
Outsource
190x
Offshore
COE
326x
Category
Managers
The ROI
of MI
31%
24%
26%
17%
3%
How mature is your market intelligence program
today?
Not
Implemented
Stage 1
Lagging
Stage 2
Achieving
Stage 3
Exceeding
Stage 4
Leading

Outsourcing: Tactical sourcing desks free up valuable category manager’s
time…
3%
4%
8%
14%
13%
14%
22%
23%
22%
24%
26%
3%
4%
1%
4%
6%
6%
3%
3%
4%
3%
7%
6%
8%
10%
18%
18%
20%
25%
25%
26%
27%
33%
Knowledge Management
Category Mgmt & Strategic Sourcing of Direct Materials & Services
Supplier Performance Measurement
Supply Master Data Maintenance
Analytics
Internal Customer/Requisitioner support/help desk
Requisition and PO Processing Activities
Tactical Sourcing for Indirect Materials and Services
Supply Market Intelligence
Supplier support / help desk
Sourcing technology support
Currently Supported by a BPO Partner
Plan to Outsource All or Part Within 2-3 Years
Which of the following activities are provided by procurement business process outsourcing (BPO) service providers?

… and can help reduce the tail, increase spend influence
Source: The Hackett Group
Savings
Suppliers
80% of
spend
20% 100%
0-2%3-4%5-7%
40% influenced by
strategic sourcing 5% not
influenced
10%notinfluenced
10% influenced
by buying desk 5%
e-catalogs
Totalspendpersupplier
10% not
influenced
15% not
influenced
10% maverick spend
that should have been
strategically sourced
Candidates
for spot buys
5% unknown
Example of tail spend at a company with only 55% spend influence
Good candidates for the
tactical sourcing desk

Three characteristics of agile procurement service delivery
1. Agility leaders are piloting Robotics Process Automation in P2P.
1. Centers of excellence are hubs of more advanced analytics including spend analysis,
market intelligence and risk forecasting.
2. Outsourcing is being used to help address tail spend and increase influence by staffing
tactical sourcing desks and maintaining catalogs.

Five recommended action items
1. Apply the agility test to your own service delivery model. Determine where the gaps are
and how it needs to change to support procurement’s evolving role.
2. Take an honest inventory of procurement’s identity and culture. Is it an optimizer or an
innovator? Is it operating seamlessly across cultural and geographical boundaries? Refresh
recruiting, hiring and training with the idea that chaos is the new normal.
3. Even for non-regulated businesses, risk forecasting and planning is a hallmark of agility.
Evaluate your current risk management program not only for depth but speed and agility.
Benchmark cycle times to strike the right balance.
4. Invest in predictive capabilities, pilot emerging technology and work towards expanding
single function supplier networks into interconnected business communities.
5. Consider outsourcing providers to help manage tail spend. Model the ROI on efficiency
gains and compliance versus savings.

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Forecast
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