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Imperatives for CPOs intent on driving business performance improvement
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Procurement
at the heart of the high performing business
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t Zycus, we believe that well equipped procurement and supply management organizations have the power to drive business performance on both the profit and revenue lines. But procurement can only succeed as an explicit driver of business performance by,
T horoughly understanding the spending needs of the business, E xtracting the greatest possible value from global supply markets, B uilding collaborative relationships with high-performing suppliers, M inimizing supply risks, Obtaining both collaboration and correct behaviors from the people who spend, and Aligning every strategy and activity that procurement undertakes with such business performance measures as cost of goods sold, working capital, cash flow, profit, shareholder value, market leadership and innovation. Becoming that well-equipped procurement and supply management organization means recruiting the right talent into procurement, adopting proven best processes and using technology strategically to: overcome human limitations for processing information; remove physical obstacles to collaboration; ensure efficiency and maximize return on investment in procurement. To get to this vision, CPOs must focus on the six imperatives outlined in this paper.
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Visibility 4
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hile the past decade has seen many companies make enormous progress in establishing spend visibility, the coming decade will see companies taking more holistic approaches to procurement visibility. The most competitive procurement organizations will become capable of connecting information — generated both internally and externally — from many sources, systems, locations, languages and formats to create 360˚ visibility that supports a full range of strategic procurement activities (not just spend management and strategic sourcing). Near-term objectives for procurement executives are to:
Fill holes in their solution and information infrastructures, Ensure that information can always flow easily from one solution to the next, Ensure data is accurate, complete and structured so it can be broken down, recombined and combined with external information, on the fly, in meaningful ways, Adopt global standards for structuring proprietary information so it can be paired with externally generated information (market, supplier, legal and so forth), and Begin ‘imagineering’ the possibilities that such capabilities might yield for formulating innovative/competitive procurement, sourcing and supply-base management strategies.
Global market ply Intelligence e sup •m
Performance Management d nd an rsta nde •u
Global legal Intelligence
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Contract Management
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e-Sourcing
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Global market Intelligence
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Contract Management
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e-Sourcing
Fail! sourcing
Spend Analysis
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Financial Performance Management
Supplier Performance Management
Alignment & Collaboration
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he strategic imperative for procurement is to become the hub — the function that can capture knowledge and information effectively and efficiently from many sources, transform and redistribute it where needed. So, for example,
Supplier performance data captured from operations might be used to predict and minimize exposure to supply risk, Information extracted from contracts might be used by finance to improve cash flow, Forecasts and other qualitative input captured from sales might be used to generate intelligence about future demand and sourcing requirements, and Information about supplier innovation captured through sourcing RFIs and RFPs might be passed along to R&D and used there to inform a company’s long-term technology and product-development roadmaps.
When procurement deploys solutions that enable knowledge capture and collaborative decision making, the possibilities for achieving competitive advantage and driving business performance increase exponentially.
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Utilization tracking & metrics Templates
Permission control Presets
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Audit trails
Workflow Version control
Automated/ semiautomated processes
Configurable decision support tools
Collaboration support Project management tools and dashboards
Compliance
D
riving business performance from procurement means convincing employees to line up with and adopt preferred procurement processes, strategies, standards and decisions. A recent in-depth Zycus study covering some 600 procurement organizations worldwide finds compliance in general growing from a platform that combines alignment of objectives, communication, collaboration and consistent technology adoption. Well-engineered procurement solutions drive compliance by empowering procurement executives to codify corporate objectives, standards, workflows and strategies. So, for example, a contract authoring tool with templates that incorporate preferred commercial terms and legal protections creates a powerful platform for managing legal and financial risk exposure. Configurable filters in a spend analysis tool make it easy for procurement executives to promote specific strategies. One year, for example, the analytics tools may promote supply-base rationalization while the next year they promote supply base globalization. Likewise, a decision optimization tool for e-Sourcing might be weighted heavily in favor of suppliers who perform best on the product quality metric, preventing sourcing professionals from overemphasizing cost in a business enviroment that values product quality more highly. Of course, relying on solutions to promote compliance assumes people can easily adopt and use the solutions.
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Adoption 10
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rocurement needs technology — both to standarize and accelerate processes and to overcome human limitations for processing information in a highly complex, global economy. But simply investing in technology is not enough. Successful procurement organizations must also be capable of driving broad adoption and consistent use of procurement technologies at all levels of business enterprises and supply networks. And, while alignment and collaboration may go a long way to supporting adoption of procurement disciplines, processes and technologies, a technology’s usability seals the deal. Usable procurement technology solutions will, Be cognizant of how people prefer to work and the ways in which ubiquitous desktop applications have already trained them to think, Mimic common user experiences (such as B2C e-commerce), Minimize time and effort required of users to perform tasks, Represent the easiest ways to perform tasks and obtain desirable results (such as closing deals, obtaining needed goods or services quickly and gett ing paid), Offer simple solutions to complex problems, enabling organizations to start from wherever they are without undergoing massive training or knowledge acquisition, and Be capable of growing with end users as they expand their abilities incrementally and seek to push past their own boundaries.
User should experience... dashboards autofills and suggested inputs
Wow...getting this work done is so much easier than it used to be! Finally someone is paying attention and giving us tools we can really use.
...while the business benefits from...
advanced capabilities
templates built-in best practices
fewer clicks presets 1-screen views easy download/upload to/from desktop apps
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Contribution 12
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rocurement’s core performance focus - minimizing costs - can often feel at odds with other business objectives. A company’s financial and senior executives may become distracted from the cost line when revenues are growing fast. Meantime, the people responsible for driving innovation or building a company’s brand may feel that too much focus on costs undermines creativity and style. People responsible for operations, quality and customer satisfaction can be quick to blame procurement when problems originate in supply chains. Even when corporate and functional leaders back procurement 100%, it can be still be exceedingly difficult to transform theoretical cost savings and other procurement achievements into facts that show on a company’s financial statement. Procurement’s imperative is to make sure the results of its work materialize either on the top or bottom lines of the business in highly quantifiable ways. Until very recently, this need had been ill met from a procurement technology perspective, but the situation is changing rapidly.
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We’re going to make big changes in the way we write contracts with our critical suppliers this year.
We want to get much faster at discovering and bringing high performing and innovative suppliers into our new product intro processes.
Our rationalization opportunity is essentially exhausted. Time to start focusing more on demand management.
Our percent of spend with high risk suppliers has been creeping up in the past month. We’d better do something about that — and fast. 14
There has been a huge amount of innovation and restructuring in this market. We can exploit it, but need to rethink the way we group our spend categories.
We’ve got our payment terms standardized. Now, it’s time to start moving some other cash flow levers.
Innovation
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usiness enterprises are full of smart people with great ideas and it’s always the unique ideas — executed rapidly and well — that yield competitive market leadership. That is why procurement technology solutions, while incorporating proven best practices, must also be engineered for flexibility and ongoing innovation in procurement strategies and approaches.
When it’s time, for example, to shift strategy from supply-base rationalization to globalization, it should be easy to add a spend analysis filter that redirects discovery of performance improvement opportunities in favor of the new strategy. Or, perhaps some bright sourcing professional discovers a market opportunity that involves bundling spend in an unusual way. It should be easy to see what a revised categorization of spend might look like without waiting days, weeks or months for a company’s core spend classification model to be rewritten permanently. The best procurement technology solutions will deliver best processes and practices without any of the constraints — or sameness — that might stop a procurement team from surpassing their competitors with the next big idea in strategic supply management.
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About Zycus 16
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t Zycus we are 100% dedicated to positioning procurement at the heart of business performance. For more than a decade we have been the world’s most trusted leader in Spend Analysis. With our spirit of innovation and a passion to help procurement create even greater business advantages, we have evolved our portfolio to a full suite of Procurement Performance Solutions — Spend Analysis, e-Sourcing, Contract Management, Supplier Management, and Financial Savings Management — that is finely tuned to the strategic procurement imperatives and activities discussed in this paper. Behind every Zycus solution stands an organization that possesses deep, detailed procurement expertise and a sharp focus on being responsive to customers. We are a large — 600+ and growing — company with a physical presence in virtually every major region of the globe. We see each customer as a partner in innovation and no client is too small to deserve our attention. With more than 200 solution deployments among Global 1000 clients, we search the world continually for procurement practices proven to drive competitive business performance. We incorporate these practices into easy-to-use, flexible solutions that give procurement teams the power to get moving quickly — from any point of departure — and to continue innovating and pushing business and procurement performance to new heights.
Introducing The Complete Zycus Procure Performance Solutions Suite
iContract Repository
CPO
iAnalyze
iSource
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LiveConnect
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iPerform d nd an rsta nde •u
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iContract
iSupplier
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iContract Authoring
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iManage
iOptimize
iMine
iAnalyze
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