Sales institute11 01 19 v3 [read only](1)
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Procurement has evolved from a tactical, transactional function focused on short-term savings to a more strategic function focused on total cost of ownership and long-term value. Effective procurement requires categorizing spend, developing category strategies, and managing supplier relationships. Suppliers can engage more effectively with procurement by understanding the maturity level of the function, contributing to category management, building trust, and demonstrating how they can help address procurement's goals and challenges over the long run.
Sales institute11 01 19 v3 [read only](1)
- 1. Sales Institute David Coffey The Clearview Group David Coffey – The Clearview Group Stephen Pitcher – Provide Consultants 19TH January 2011 2011
- 2. Agenda Agenda Introduction – Who we are 1. What is Purchasing /Procurement What is Purchasing /Procurement 1. When does it start? 2. What are the different levels of procurement maturity within clients organisations 3. 3 What challenges does procurement face What challenges does procurement face 4. Outline ways to identify the procurement behaviours of clients 2. Procurement Practices 1. 1 What do they do What do they do 2. How do they plan, identify strategies 3. What tools do procurement use 4. 4 What does this mean for you What does this mean for you 5. Identify ways to engage with different levels of procurement 3. How do suppliers respond 1. 1 How to categorise procurement functions How to categorise procurement functions 2. Category and Supplier Management 3. Tools for suppliers 4. 4 Top Tips T Ti
- 3. Introduction David Coffey – The Clearview Group – david.coffey@clearviewgroup.ie / 087.137.0798 David has extensive experience building, managing, and transforming strategic procurement functions across both the public and private sectors. • The Clearview Group : Co-founder (2005 to date), a procurement services company • Supplierforce: Chief Services Officer, with responsibility for professional services delivery. • Takeda Pharmaceuticals North America, Inc (Chicago): US Head of Procurement ($1.2B in supplier spend) • ABN AMRO North America, Inc (Chicago): VP of Corporate Planning and Strategic Sourcing ($1.7B in supplier spend) • PricewaterhouseCoopers US (Chicago): Senior Strategy Consultant Stephen Pitcher – Provide Consulting Ltd – stephen@provide.ie – 086 6235551 Stephen has worked in senior Procurement roles in the UK and Ireland for PLCs such as Allied Domecq, First Leisure and Hibernian/Aviva . He was a founder member of the Aviva International Procurement council. He founded Provide Consulting after leaving Hibernian and provides procurement services to a variety of SME and Corporate clients 3
- 4. Traditional Purchasing g Characteristics Focus on short‐term savings Tactically oriented vs. strategically focused Focus Focused on Tangible Goods Short-Term Pre‐ Defined Specifications Communication Deal Driven (Adversarial) Relationships No consistent measures to assess performance Performance Communications not consistent Relationship Suppliers lack knowledge of Group OPNs.
- 5. Procurement Characteristics Today Focus on total cost of ownership Increased Focus on Service Short-Term Focus Long-Term Strategically vs. Tactically oriented Consistent assessment of performance Communication Clear direction in relationship development p p Relationship Improved communication Performance Enhanced knowledge of company business E h dk l d f b i practices
- 6. Procurement Defined Procurement is the process of creating and sustaining value and managing d t i i l d i external spend and activities through: • 40-60% of a company’s cost base • the acquisition of goods and/or services • significant impact on margins • at the best possible total cost of ownership, ownership • Complex - thousands of • in the right quality and quantity, suppliers with many more • at the right time, relationships • in the right place g p • and from the right source • C Constantly changing l h i • for the direct benefit or use of the environments (business, procuring organisation markets, people, regulation, • generally via a contract contract. compliance etc.) 6
- 7. The capability of your clients and target companies will vary PROCUREMENT CAPABILITY – WHERE ARE YOUR CLIENTS & PROSPECTS? 7
- 8. Behaviours of Procurement Function along the Capability Curve – a look at levels 1 to 3 TRANSACTIONAL COMMERCIAL PROACTIVE 1. Tactical 1. Follow process ‐ tenders 1. Strategic – think in a business context 2. No/Limited sphere of influence 2. Not independent thinkers – follow process 2. Ear of CFO/CEO 3. Weak relationships with business 3. Limited sphere of influence 3. Commercially, analytically strong 4. 4 Focus is on execution, process Focus is on execution process 4. 4 Suspicious 4. Subject matter experts 4 Subject matter experts 5. Not commercially savvy 5. Blinkered, somewhat narrow vision – 5. Independent, self directed 6. Limited decision making process and price 6. Influence, may in fact control 7. Distracted with day to day 6. Traditional negotiation and supplier 7. Open‐minded, progressive management methods – challenge, 8. Broader, more holistic view aggressive 9. Receptive to ideas 7. Short term approach 10. Relationship builders, leaders 11. Change managers 12. Thinkers ‐ innovation
- 9. Managing Procurement is challenging......and it has only become more so Traditional Challenges • Purchasing vs. Procurement – perceptions • Lack of executive awareness • Deliver savings Shift from competitive advantage to • Budgets reside outside of purchasing / competitive survival titi i l procurement • Massive pressure building on the • Lack of procurement expertise in the purchasing function business unit • Look to cost base and New Challenges procurement for sustained • Massive upheaval in global markets profitability • Contracting revenues • “Doing more with less” • Market share is under threat • Same quality / service for less • R d Reduced profitability and d fit bilit d • Manage and drive value competitiveness • Supply chain risk – company failures f il
- 11. The Sourcing Cycle Value Creation Value Capture Define User Profile the Sourcing Tender & Implement Performance Requirements Category Strategy Award Contract Manage 3-5 months 3-5 years • Best practices • Order to chaos – categories, segmentation • Prioritise – categories, suppliers, resources – to deliver value • Cycle, not an event y • From tactical/short term to the strategic/long term • Information rich – business solutions • Plans solutions Plans, • Process + Management • Collaborate and engage – stakeholders and suppliers 11
- 12. Cost Drivers Review Cost Drivers Review Supplier Customer C t Tariff Usage Specification (Unit Cost) Costs Costs Infrastructure Costs/ Transaction Costs
- 13. Procurement Strategy Procurement Strategy Information Poor Service Reduced Cost vs Higher Margin ntification of Issues High Cost Specification o s. r Performance Iden Measurement Poor Service Low Cost Sustainable Cost Savings Procurement Best Practice
- 14. How do Procurement Functions create Procurement Strategy… Business Strategy Dept. Strategy Identify Suppliers Internal Tactics Communications • Focus on Core • Correct • Assess current • Review Specifications • Improve internally and Business product/service supplier base externally • Provide Management • Improve Quality of • Improve Quality of • Set Out Performance Information • Better information flow Information I f ti Information I f ti Criteria C it i • Identify Appropriate • Better access to global • Reduce Cost Year on •Reduce Number • Allocate Resources Budget Allocation information Year of Suppliers • Streamline Decision •Reduce Making Processing Time •Identify Cost at Source • Continuous quality improvement
- 15. The Light at the End of the Tunnel! The Light at the End of the Tunnel! • Structure and Objectivity – Category Management Category Management – Supplier Management • Global Requirements • Non Core Requirements Non Core Requirements – CSR Agendas • Risk, Auditability, Stability, Sustainability k d bl bl bl
- 16. What can Suppliers do 1. Categorise procurement functions 2. Embrace Category and Supplier Management 3. Contribute to the process 4. Tools for suppliers 5. Dos and Don’ts
- 17. Categorise the procurement functions • Review Procurement in light of maturity chart • Who’s at the meeting • Who reads the proposals • Are they looking at reducing invoices, CSR Report y g g p • Who will manage the contract • What issues do they discuss ; cost, volume, y ; , , specification • How will value be measured • What language do they use about Risk, Contingency, Added Value
- 18. Opportunities • Category Management – Visibility Visibility – Structure • Supplier Management – Platform for measurement – Platform for stakeholder management
- 19. Contribute to the process Contribute to the process • Identify ways to help move the procurement function across the maturity chart • Sh Show an understanding of procurement challenges d t di f t h ll • Need for short term savings – Deliver short term benefits Deliver short term benefits • Corporate unwillingness to partner with suppliers – Build trust with stakeholders • Lack of understanding of procurement in client organisations – Demonstrate value of ongoing engagement in supplier management process. Develop communications process Develop communications • Risk in Supply Chain – Demonstrate risk avoidance
- 20. Dos and Don ts Dos and Don’ts Do Don’t Listen to Client Li t t Cli t Tell him what you have T ll hi h t h Use an Executive Summary Abuse an Executive Summary Provide Solutions Provide Solutions Sell your product Sell your product Account Manager to attend Sales people attend Show Trust Start Tender with Confidentiality Clause Show relevant CSR evidence Engage in Corporate Boasting Identify stakeholders Pigeon hole stakeholders Know why you are there Just Tell them you value the business
- 21. Tips for Sales Professionals when Engaging with Procurement Your goals are to win new clients, sell more to existing clients, be retained or increase ‘stickiness’, protect margin. These objectives may not necessarily conflict with the buyer’s objectives t t i Th bj ti t il fli t ith th b ’ bj ti 1. Gauge the capability of the procurement function 2. Identify the key stakeholders, don’t circumvent procurement 3. Understand how the procurement function organises spend, categories 4. 4 See your business through the client’s eyes - understand your category spend client s relative to other categories, complexity, importance to the business 5. Engage procurement – understand sourcing strategy for your category. 6. 6 Heighten your profile by providing objective, strategic guidance such as market objective intelligence, product developments. 7. Help to shape the prospect’s category strategy. They often need your help! 8. 8 Listen and understand the problem they are trying to address 9. Provide value - understand the prospect’s total cost structure for the model. Make those improvements if necessary 10. 10 In tenders, engage and answer the questions be creative and do not provide tenders questions, marketing fluff 11. Implementation is key – do not let the wheels fall off at the first hurdle 12. 12 Management - do not forget the client after the contract is signed – expect improvements, value, risk mitigation over the life of the contract. 21
- 22. Tool: Procurement Capability Framework Client 1 Client 2 Prospect 1 Prospect 2 1. Procurement Strategy 2. Total Cost Focus 3. Category & Supplier Mgmt 4. Stakeholders 5. Organisation (Skills, Structure) 6. Policy & Governance 7. Processes & System 22