Chief Purchasing Officers, CPOs, VP Purchasing, Purchasing Director

Who they are, what are their concerns and what they need.

Depending on Organization Roles Can Be the Same or a Director may have more actual authority than a CPO in one organization vs. another

Bill Kohnen October 2014

CORPORATE PURCHASINGFrom 1887 to recently …………

Overview – CPO’s• Who are they• Present State• Where they want to go• Challenges• Indirect Spend Is Important• Need tools to support improvement• What the CPO Needs

Todays CPO Is All of TheseYour price is too high!!!

I am too busy to find a solution

I still have not accepted the ROI of computers

Lets build a relationship

I need global standard solutions

Innovative solutions will transform performance.

Ultra Legacy Enterprise Purchasing and Contract Management Solutions To Avoid Risk of Cloud Solutions and Reduce Cost

I Need an Existing Contract/PO

I Need an New Contract/PO

“I’ll check the files and send to you right away Sir. Can I also bring you some coffee?”

The Boys in Purchasing and Legal will start drafting that right away

Reasonable Discussion Between Stakeholders Contract is Ready

B2B Purchasing Transformation

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Big Data

Cloud

XaaS

Mobile

Open

IoT & M2M M2MM2M

TRADITIONAL B2B PURCHASING

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CPO Challenges• Adoption of Technology Enablers in Purchasing• Massive changes and disruptions with other functions within

their own organizations• Creating complete transparency across supply chain• Alignment of supply chain resources with organizations

strategic goals• Escaping the grip of expensive legacy systems and process

which constrain opportunity and innovation

What Are The CPO’s Investment Choices?

• People

• Resources

• Travel

• Training

People

Resources

Travel

Training

Resources Make Up 12% of Budget – Most going to allocations to legacy systems and overhead and ~ 10% for computers, phones etc

Purchasing ROI

Cost Saving + Cost AvoidancePurchasing Operations Cost

B Kohnen August 2013

• Any ROI above 1 is coming out ahead

• Average Purchasing ROI is 5.5

• Having a huge ROI could be the result of putting few resources into purchasing

• Problem is “Purchasing activities could be happening unaccounted for in higher cost less efficient areas. (Engineering, IT, Operations)

CPO challenge Leveraging Investment in Team

• Too little and negative ROI and absolute savings minimum and not scalable

• Too fast and negative ROI and bloated. CPOs know they need quick big wins to ‘fund” further growth

• Align investment with success to continue to create self funding absolute value to enable support to strategic items

CPO/Purchasing Leader 3 Year Roadmap

2015 Distributed Organization with more Category Expertise

Internal and ExternalMore time spent recruiting.

Disengagement from Legacy Systems Move to cloud Aps

for pain point needs

Traditional Metrics continue to lose relevance replaced by

insights from big data analytics

Indirect as an area of focus and value

SRM challenges as Suppliers CRM changes

2016 Global recruiting and development. lines blurring

between traditional department and career paths

Integrated Cloud SolutionsAP Driven Purchasing in Place

Multi tier Supply Chain Transparency takes hold

Emergence of M2M

Traditional corporate Indirect suppliers disappear or leave

marketsEven for hardware and

commodity companies IT related spend rivals direct

material spend

2017Direct Staff professional,

Strategic. Self directed cross functional and aligned directly

to revenue.Recruiting and training take up

larger portion of time and budget

Integrated end to end cloud based solution drive innovation and open

standards begin to emerge

Integrated Data fully enables organizational best Total cost

decision making

Integration with key supplies systems

Open or AP based integration with others

Sourcing is still important

Organization Technology and Metrics Supply Base

Companies Across all Segments are Actively Seeking Indirect Category Spend Leaders

• Getting the Director is less of a challenge than getting Category Managers with deep content knowledge

• As a result companies must focus on process and technology to optimize results

• With proper attention indirect spend saving can be 15% to 30%

Tactical Enterprise SaaS BPO

Indirect Purchasing Approaches in Practice

Today 5 yearsBest Practice Benchmarks will spark Shift to SaaS to with Hybrid Organiza-tion Approach

Companies Stuck with Legacy ERP Systems

Purchasing Tools Must Cross Chasm To Enable Better Performance

Innovative Cloud Based B2B Purchasing Tools to Optimize Purchasing and Supply Chain

Enterprise ERP Based Purchasing and SCM Tools that Are Good Enough for Status Quo

New tools needed for better results.Purchasing Organizations encountering friction with current tools and are relying on a finite # of purchasing pros to meet goals- which is not scalable.

Innovative Purchasing Tools Into the Majority in 2015 –Why?

• CPOs need tools• Innovators tools more stable and generally more acceptance of Software

as a Service Cloud Solutions• Ironically introduction of legacy ERP Vendors cloud products provides

credibility even if their products remain expensive and not fully integrated and optimized. Some CPOs will have to “settle” for these tools.

• Early Majority results will set benchmarks that even the “establishment consultant and legacy ERP players “will not be able to contain

• Purchasing Teams and organizations using the innovative tools will like them and not accept legacy systems or approach's.

Todays CPO Is All of TheseYour price is too high!!!

I am too busy to find a solution

I still have not accepted the ROI of computers

Lets build a relationship

I need global standard solutions

Innovative solutions will transform performance.

What a CPO Needs?• Fix a specific pain point• Solve it with minimal work by the CPO• Quickly Demonstrate Real Savings and ROI • Then move to broader implementation of

solution or service