Napp 2009 Keynote Address

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On February 9th 2009 Andrew Bartolini Vice President & Group Director, Global Supply Management for Aberdeen Groups gave this tremendous presentation on many different facets of the Procure to Pay cycle. Bartolini breaks of costs of processes and best practice benchmarking to deliver real value.

Transcript of Napp 2009 Keynote Address

  • 1. P2P RisingAndrew BartoliniVice President & Group Director,Global Supply ManagementFebruary 9, 2009 AberdeenGroup 2008

2. P2P Rising Table of ContentsIntroduction 2009 Revive, Refresh, Renew CPO Rising A/P Rising Summary & Recommendations Q&A2 AberdeenGroup 2009 3. Introduction AberdeenGroup 2008 4. P2P Rising My Bio Title Vice President & Group Director Summary Recognized expert in sourcing, procurement, and supply management Leader of Global Supply Management Research at Aberdeen Group Twice named a Pro to Know by Supply and Demand Chain Executive Experience Leadership roles in sales, marketing, and services at Ariba and Commerce One; Rich experience in strategic sourcing, business process transformation, and software implementation. Background also includes consulting and investment banking Education MBA Indiana University BA Holy Cross College (MA) 4 AberdeenGroup 2009 5. P2P RisingAbout Aberdeen Group (Boston, MA) Founded in 1988394,000+ Panel Members and over 2 million readersBenchmarked over 700,000 enterprisesAberdeen research is used by more than 90% of theFortune 100010 distinct research coverage areasAberdeen will publish over 1800 Reports in 2009 whichwill be read by more than 1 million readersALL Reports are FREE (some for limited time) 5 AberdeenGroup 2009 6. P2P RisingAberdeens Research CoverageGlobal Supply Management (GSM)ManufacturingSupply ChainEnterprise TechnologyService ChainCommunicationInformation TechnologySales & MarketingProduct InnovationEnterprise AdministrationOver 5500 On-Line Research Documents are availableserving 300,000+ User Sessions / Month6 AberdeenGroup 2009 7. P2P Rising Aberdeens GSM Research Coverage Role-BasedAnalyze SourceContractProcure Pay Research Source-to-SettleCPO CFO CIOComplex Categories SuppliersT&E Contract Labor & Professional ServicesReal Estate & Facilities Strategic MeetingsPrint/Marketing7 AberdeenGroup 2009 8. P2P RisingGlobal Supply Management Research Panel:68,893 & GrowingSize of Companies Roles at Companies % of Users By Revenue % of Users By Title18%15%8%11% 51% 34% 43%20%$1BC-Level VP/Dir. Manager Other Geographical Representation Research Advisory Council% of Users by Region24+ Industry Leaders 13%3%22% 62% N. AmericaEMEA Asia Pac. Rest of World 8 AberdeenGroup 2009 9. P2P Rising Research and Demographics (for todays discussion)Hypothesis 900+ ProfessionalsAberdeen believes that 2009 will be ayear of significance for the SizeProcurement & Payables, a year ofLarge (Greater than $1B) 58%the P2P Rising rising to meetMid-Market ($50M to $999M) 29%new challenges, rising to newSmall (Less than $50M) 13%operational heights, and rising inprominence within the enterprise. Yet,with increased visibility comes an Regionexpectation of consistent executionNorth America 62%and delivery.EMEA 31% Asia Pacific 7%Approach IndustryAberdeen Group conducts web- Manufacturing 11%based surveys to targetTechnology 8%professionals in our researchmembership poolFinance 7%We then followed up with interviews29 other categoriesfrom survey respondents9 AberdeenGroup 2009 10. 2009 The Year Ahead Revive, Refresh, Renew..Rebound? AberdeenGroup 2008 11. P2P Rising Times are Changing It is not necessary to change. Survival is not mandatory. - W. Edwards Deming If you dont like change, you will like irrelevance even less. - General Eric Shinseki Change is inevitable. except from a vending machine. - Robert C. Gallagher11 AberdeenGroup 2009 12. P2P RisingTimes are Tough Global Crisis Bailouts & Credit Crunch Layoffs & UncertaintyTough Times Demand Smart Strategies12 AberdeenGroup 2009 13. P2P Rising2009 - The Year Ahead2009 will be a very challenging year71% of CPOs expect significant increase in SupplyRisk44% of CPOs have already delayed major initiativesBudgets are constrained or shrinkingCPOs remain focused on increasing Spendunder ManagementCost Savings remains the top goal13 AberdeenGroup 2009 14. P2P RisingSmart Strategy #1 Manage Supply Risk Case Study Supply Risk and Contingency PlanningA Global manufacturer (and Fortune 100 company) notedthat supply base risk management is the absolute toppriority for his team in 2009 and has invested significanttraining in financial ratio analysis and contingency planningfor a team of 30 buyers of the most risky categories."We expect the recession will have severe consequences forour top tier Canadian suppliers. We don't know whichsuppliers will be impacted, but we spent the last six monthsdeveloping a contingency plan for every North American-based supplier.North American VP of Direct Materials 14 AberdeenGroup 2009 15. P2P RisingWhat if a CEO had: A CFO who did not know the company's cost of capital and lacked visibility into calculating its gross margin or quick ratio 15 AberdeenGroup 2009 16. P2P RisingWhat if a CEO had: A CFO who did not know the company's cost of capital and lacked visibility into calculating its gross margin or quick ratio A VP of Sales who did not know the company's average deal size or sales win percentage and lacked visibility into the current sales pipeline 16 AberdeenGroup 2009 17. P2P RisingWhat if a CEO had: A CFO who did not know the company's cost of capital and lacked visibility into calculating its gross margin or quick ratio A VP of Sales who did not know the company's average deal size or sales win percentage and lacked visibility into the current sales pipeline A VP of Manufacturing who did not know a products total cycle time and lacked visibility into any utilization or quality metrics 17 AberdeenGroup 2009 18. P2P RisingIncompetence or Malfeasance?What are the Implications?Should someone lose his/her job?Should many people lose their jobs?Does the Board need to be involved? Would you buy stock in this company?18 AberdeenGroup 2009 19. P2P RisingWhat if a CEO had a Chief Procurement Officer (CPO) that. Does not have a formal spend analysis program Lacks good visibility into overall spend Fails to leverage spend data in sourcing activities 19 AberdeenGroup 2009 20. P2P RisingWhat if a CEO had a Chief Procurement Officer (CPO) that. Percentage of all enterprises Does not have a formal spend analysis26% program Lacks good visibility into overall spend 42% Fails to leverage spend data in52% sourcing activities 20 AberdeenGroup 2009 21. P2P RisingWHAT ARE THE IMPLICATIONS? For the CEO For the CPO. For the Procurement Dept. For the enterprise21 AberdeenGroup 2009 22. P2P Rising Smart Strategy #2 Analyze Your SpendThe Impact of Spend Analysis on Procurement Performance IncrementalPerformance MetricBenefit 1Average savings achieved from a sourcing effort 93.0%Spend under management 39.4%Contract compliance rates30.6%Maverick spend reduction 16.3% 1 Averageincremental gains achieved by 280+ survey respondents Source: AberdeenGroup October 200822 AberdeenGroup 2009 23. P2P RisingSpend Analysis Automation Fully manual 13% 26% 11% Partially automatedFully automated, disparate systems50% Fully automated, common enterprise-level systemSource: AberdeenGroup October 200823 AberdeenGroup 2009 24. P2P RisingAverage Savings by Level of Automation 11% 8%5% 4%Fully automated, singleFully automated, Partially automated Fully manualsystemdisparate systems Source: AberdeenGroup October 2008 24 AberdeenGroup 2009 25. P2P Rising Why What You Do Is Important: Top-Line versus Bottom-line Impact Revenue (in millions)$350$10 Million inSavings equates$300 to..$250$200$150$100 $50$0FinanceCPG Mfg. Hi-TechSavings Impact: Income Statement & Market Capitalization 25 AberdeenGroup 2009 26. CPO Rising AberdeenGroup 2008 27. P2P RisingOn The Procure-to-Pay Process The intelligence and fidelity exercised in the purchase, care, and use of supplies, influences directly the cost of construction and operations, and affect, therefore, the reputations of officers and the profits of ownersThe subject needs elucidation on many accounts."~ Marshall M. Kirkman, The Handling of RailwaySupplies: Their Purchase and Disposition; 188727 AberdeenGroup 2009 28. P2P RisingEvolution of Procurement/Supply Management Procurement PurchasingClericalOperationsManagerial Strategies Supply Pre-1900Pre-WWI WWI & WWII1950s-1960s1970s-1980sManagement IndependentPurchasing isObtaining rawProcessesEmphasis onfunction inestablished asmaterials,become more purchasingrailroad a clerical role supplies, & standardizedstrategy andindustry servicesdeveloping the became vital to People ability toLimitedtrained for the operationssource goodstraction infunction at an efficientother priceindustries Best practices 28 AberdeenGroup 2009 29. P2P RisingSupply Management - Recent History1980s & 1990sDominant supplier strategy for key commoditiesSpend Under Management via long-term contractsBuying power / aggregationStrategic SourcingQuality2000sTechnology-enabled transformationGlobalizationCPO (C-Level procurement executive) 29 AberdeenGroup 2009 30. P2P RisingThe CPOs Strategic Agenda No formal plan 21% Formal one-year planFormal multi-year plan 45% 34% Source: AberdeenGroup 30 AberdeenGroup 2009 31. P2P Rising Top Ten KPIs KPI % Selected79% of Identified cost reduction/savings72%Enterprises % of spend under management64% track SupplyAssurance Cost avoidance 58% Implemented / realized cost reduction savings55% Procurement ROI (savings / operating costs)52% % of suppliers = 80% of spend51% Supplier performance (price, delivery, quality,49% service, etc.) Procurement spend as % of revenue dollars46% Requisition, PO or invoice transaction volume34% Procurement spend per procurement33% employee31 AberdeenGroup 2009 32. P2P Rising Maturity Framework Definition of MaturityMean Class PerformanceClassBest-in-Class: Top 20% of aggregateMore than 70% of spend under management performersIndustry Average: Middle 50% of aggregate Between