Accenture Spend
Trends ReportQ1 2015
2 Copyright © 2015 Accenture. All rights reserved.
Insights Born from Experience
We are pleased to bring you the newest edition of the Accenture
Spend Trends Report, a quarterly strategic report that brings
together the best thinking, insights, and intelligence from our global
team of more than nine hundred category specialists.
Our team helps more than one hundred clients optimize billions of
dollars of spend across the globe. This means they are in each major
supply market dozens, sometimes hundreds of times a year. The
result: powerful aggregate supply market intelligence and a unique
set of cross-client spending and spend management insights.
With this unique combination of intelligence and insight, we have
compiled a summary of the top trends we are seeing in each major
area of spend—whether changing market dynamics or new spend
management strategies—and offer new initiatives to consider.
Our core commitment is to deliver actionable insights and market
intelligence to you, our clients. We welcome and encourage your
feedback to help make this report more valuable to you.
Keith Hausmann
Managing Director, Procurement BPO
Accenture Operations
Author:
Mark Hillman—Manager, Market Insights & Analysis—Accenture Operations
Category Specialist Contributors:
Logistics—Ed Sands, Scott Youngs
IT/Telecom—David Workmann
Marketing—David Pegg, Suzanne Beaudoin
Financial Services—Bhupesh Mulchandani
Travel—Allan Brown
Equipment, Engineering, & Construction (EEC)—Heath Mitchem
Packaging—Barbara Moser, Vladimir Ryabovol
Energy—Cobb Pearson
CATEGORY EXPERTISEANNUAL
PROJECTS
SUPPLY MARKET
EXPERTS
IT/Telecom 2,933 ~ 190
Logistics 251 ~ 50
Marketing 1,438 ~ 115
Energy 1,013 ~ 70
Equipment, Engineering, &
Construction (EEC)2,705 ~ 85
Basic Materials & Packaging 214 ~ 35
Industrial & MRO 481 ~ 60
Human Resources 1,008 ~65
Contingent Labor 281 ~ 30
Professional Services 947 ~ 100
Facilities 805 ~80
Travel 532 ~ 45
TOTAL 12,608 ~ 920
3 Copyright © 2015 Accenture. All rights reserved.
Executive Summary
After a volatile end to 2014, global markets remain turbulent. Significant market swings in everything from interest rates to
currencies and commodities make forecasting more of a challenge. On the other hand, these same market swings create
windows of opportunity to take advantage of favorable interest rates and low-cost capital, use layered hedging strategies,
and drive bottom line value. Although the outlook for Europe is stabilizing and oil prices have rebounded from recent lows,
there are enough concerns about the global economy that volatility—and opportunity—is here to stay.
Notable Macro Trends from the First Quarter:
• Oil Bounces but Supply Still an Overhang: Global oil
prices bottomed near $46 in January 2015 and have since
rebounded over 30 percent. Despite the rapid rise, oil-
related input costs are well below year-ago levels, and
although rig counts are down, ample global supply will
likely keep the recovery contained.
• Is the U.S. Dollar Rally Over or Just Resting? The U.S.
dollar’s dramatic 2014 rally accelerated into March 2015
when the dollar peaked, up more than 30 percent versus
the Euro since January 2014. Despite falling 7 percent
since March, the dollar’s rise could continue thanks to
global monetary easing, the ongoing U.S. recovery, and
looming U.S. interest rate hikes.
• Wage Pressure Lurks as a Risk: Global employment
trends are still improving, and with lower unemployment,
employer surveys point to potential wage pressure on the
horizon, another concern for executives.
• Stock Buybacks Become Favored Use of Capital:
Organizations are announcing record levels of share
repurchases fueled by low-cost debt. Buybacks are
expected to rise 18 percent to $707B in 2015 (2 percent of
the value of shares traded on U.S. stock exchanges).
Q1 Spend Trends: The Big Five
• Logistics: Unprecedented Market Volatility Requires Exceptional Flexibility: For
most of 2014, shippers faced rising demand, tight market capacity, and high fuel costs.
When fuel prices plummeted, new challenges emerged (West Coast Port Strike, etc.)
leaving logistics teams to react to regional cost pressures and opportunities.
• IT: Mobile Data Explosion Puts Focus on Managing Mobile Costs: With the
proliferation of high-speed mobile devices and data hungry apps, mobile data volumes
are exploding. Organizations will need to take a fresh look at how they manage
mobility costs and develop policies to manage mobile devices and users.
• Corporate Professional Services: Market Environment Favors Mergers and
Acquisitions (M&A) and Other Finance Opportunities: M&A is exploding as
organizations capitalize on low-cost capital, elevated stock prices, and currency and
tax-driven opportunities to create value. But organizations can create even more
bottom line impact by formalizing how they approach high-value advisory services.
• Industrial Equipment: Focus Shifts to Outcome-Based Metrics: With increasing
regulation governing everything from emissions to water and energy use,
manufacturers are increasingly focusing on output-based metrics to align supplier
incentives, verify that compliance requirements are met, and that ROI is achieved.
• Energy: Recent Price Trends May Be Flashing Buy Signs: Once an organization
defines its tolerance for price risk, it needs a disciplined way to approach when and
how to lock in long-term energy contracts. Our recent analysis indicates that now may
be an opportune time to lock in a portion of demand.
4 Copyright © 2015 Accenture. All rights reserved.
Macroeconomic Backdrop
Source: International Monetary Fund World Economic Outlook
Worldwide Growth Outlook Stabilizes Thanks to Improving Europe and
Lower Oil Prices: Although there is no shortage of concerning macro
factors—namely the ongoing negotiations over Greek debt and bailout
funds, slowing Chinese growth, poor first quarter growth in the U.S., and
lower commodity prices affecting emerging economies, to name a few—the
biggest positive change is the improving outlook for growth in Europe
overall. The European Central Bank’s (ECB) quantitative easing program is
helping to lower interest rates and borrowing costs, and push the value of
the Euro lower, improving the competitiveness of European exports. This is
most beneficial for Germany, the largest, most export-driven European
economy, where GDP forecasts are rising. Overall, European stocks remain
near their highs, and business confidence is rising. Thanks in part to
improvements in Europe, the International Monetary Fund (IMF) maintained
its 2015 global GDP growth forecast of 3.5 percent (after lowering its
forecast the prior two quarters), and raised its 2016 forecast slightly to 3.8
percent.
As the Euro Area is showing signs of stabilizing, the U.S. economy is also
forecast to show solid 3.1 percent growth in 2015 and 2016. Although there
are some concerns over the fact that first quarter U.S. GDP growth was a
disappointing 0.2 percent, and some other first quarter economic indicators
were weaker than expected, a recent analysis showed that since 2010, first
quarter GDP growth has averaged 0.6 percent while the rest of the year has
averaged 2.9 percent growth. This abnormally large discrepancy may
indicate a problem in how seasonal adjustments are being applied, but with
consumer and business confidence at near cycle highs and with
employment, housing, and investment data continuing to improve, 3 percent
U.S. GDP looks achievable.
Meanwhile, Chinese GDP growth is hovering near 7 percent and is forecast
to slow to the 6.5 percent range while India is forecast to improve to a 7.5
percent rate from 6.9 and 7.2 percent in 2013 and 2014. Latin America is in
transition particularly impacted by Brazil which is expected to report
negative 1 percent GDP growth in 2015, while an improving Mexican
economy should show growth of more than 3 percent in 2015 and 2016.
Forecast as of:
2.2%
-0.5%
7.0%
2.9%2.4%
0.9%
6.8%
1.3%
3.1%
1.5%
6.6%
0.9%
3.1%
1.6%
6.4%
2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
U.S. Euro Area Emerging Asia Latin America
IMF Regional GDP Forecasts
2013 2014 2015E 2016E
3.4%
4.0%
3.3%
3.8%
4.0%
3.3%
3.5%
3.7%
3.4%3.5%
3.8%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2014 2015 2016
IMF Worldwide Gross Domestic Product (GDP) Forecast Updates
Jul-14 Oct-14 Jan-15 Apr-15
Source: International Monetary Fund World Economic Outlook
5 Copyright © 2015 Accenture. All rights reserved.
Macroeconomic Backdrop
Divergent Global Monetary Policies Create Complexity and
Opportunity: 2014 and early 2015 have been punctuated by significant
currency movements. Around the world, central banks are taking action to
stimulate growth (through lower interest rates and currency devaluation) or
stem rising inflation (through higher interest rates) (see map at right). With
global monetary easing and rising U.S. interest rates on the horizon, the U.S
dollar rose 30 percent against the Euro from January 2014 to March 2015.
The dollar has pulled back by 10 percent in the past month, but this
heightened currency volatility makes forecasting difficult for corporate
finance teams. At the same time, divergent global interest rates and tax
regimes create opportunity (discussed in detail later in the report). Global
firms have rushed to issue Euro-denominated debt at record low interest
rates, and M&A activity is set to reach record levels in 2015 based on low-
cost capital, elevated stock prices, and tax inversion opportunities.
Oil Prices Rebound from Lows, but Where Do We Go from Here? The
oil price plunge was one of the top stories of 2014. The global Brent price
fell further to a low of $45 in January 2015. As we enter 2Q 2015, prices
have rebounded to around $64 per barrel, but current prices are still more
than 40 percent lower than the 2Q 2014 average price of $109. Lower-cost
oil should be an input cost tailwind for most businesses for the next quarter
or two, and related commodities are still much lower versus the year ago
period. Organizations are closely monitoring whether lower energy costs will
translate into better consumer spending in the rest of 2015.
Earnings Growth Will Be a Challenge in 2015, but Organizations
Should Seize Near-Term Opportunities: Analysts currently estimate that
Q1 2015 earnings for global S&P 500 companies will grow by only 0.1
percent, representing the lowest year-over-year quarterly earnings growth
rate since Q3 2012. Full-year earnings are forecast to grow by only 2
percent in 2015. Despite the challenges posed by violent currency and
commodity price fluctuations, overall corporate profit margins have the
potential to stay at current record levels or rise as organizations take
advantage of cost optimization opportunities in areas like corporate finance,
travel, telecom, marketing, and energy discussed in this report, and take
advantage of low cost capital for strategic investments in growth areas.
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Jan
-14
Fe
b-1
4
Ma
r-14
Ap
r-14
May-1
4
Ju
n-1
4
Ju
l-14
Au
g-1
4
Se
p-1
4
Oct-
14
No
v-1
4
Dec-1
4
Jan
-15
Fe
b-1
5
Ma
r-15
Ap
r-15
Euro
British Pound
Japanese Yen
Australian Dollar
+23% vs. Euro
+13% vs. Yen & AUD
+7% vs. Pound
U.S. Dollar vs. Euro, Yen, Pound, and Australian Dollar
(Jan 2014 to date)
Source: Capital IQ
Worldwide Interest Rate Policy on the Move
Source: Accenture
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ENERGY
EQUIPMENT,
ENGINEERING, &
CONSTRUCTION
TRAVEL
FINANCIAL
SERVICES
MARKETING
& MEDIA
LOGISTICS
INFORMATION
TECHNOLOGY
PACKAGING
Top Trends in Logistics
Diesel, Jet Fuel, and Bunker Fuel Prices Closely Track Oil Price
Logistics Teams Forced to Adapt to Unprecedented Market Volatility: In early 2014, shippers were adjusting to a persistent reality:
steadily rising logistics costs driven by rising freight demand, very tight truckload market supply, high fuel costs, and driver hiring and
retention challenges. But several prevailing trends abruptly changed, and shippers have had to adapt to a volatile operating
environment. Oil prices started their more than 50 percent slide, and the threat of a major West Coast Port work stoppage loomed.
Shippers diverted some cargoes to East Coast ports and supply networks are still adapting to those new flows. North American energy
production is falling in reaction to falling oil and gas prices and this is opening up some rail capacity and reducing competition for
drivers in some markets. And with the West Coast port strike resolved, shippers with West-bound freight may have a savings
opportunity as carriers offer enticing rates to get the truck capacity they need to move backlogged cargo at the ports. More broadly,
spot rates look favorable on a year-over-year basis, thanks in part to lower fuel costs, but the strong U.S. dollar is likely to support
continued imports and freight volumes, and there is no telling where the next market shock will come from. Is your team prepared?
Key Action: The lesson of the past year is that shippers need incredible flexibility to respond to market volatility. We are working with
clients to proactively look at various supply chain network design options to prepare for potential shocks and take advantage of local
market opportunities like short-term supply/demand imbalances that produce temporarily favorable rates. The recent volatility in the
logistics market is likely here to stay, but volatility also provides opportunity after suffering through an extended period of rising rates.
2014 Now Next Twelve Months?
Shale energy production boom ramping rail demand;
competition for drivers
Oil & gas rig counts declining loosening
demand for rail capacity and driver competition
Long-term energy production should be
strong; short-term unpredictable
Oil prices peak at over $100/barrel before unexpectedly
plummeting
Oil prices drop more than 50 percent carriers
dealing with loss of fuel surcharge revenue; oil
market searching for stable price range
Oil prices may have bottomed, but
expect continued volatility
West Coast port strike looms Some cargo diverted to
East Coast; supply chains adjust to new flows
West Coast port backlog Network adjusting to
West Coast demand and new East Coast flow
Will some volume shifted to East Coast
stay permanently?
Intermodal demand spikes rail hub congestion
exacerbated
Rail congestion and slower average train speeds
make service levels a bigger consideration
Will energy rebound?
Polar vortex drives energy price volatility and freight
demand volatility
Q1 severe weather abnormally calm (e.g., tornado
activity very low following quiet hurricane season)
Is Q1 the calm before the storm?
Logistics costs across most modes trending up due to
solid demand/tight capacity
Capacity is up, spot rates are down, but significant
regional variance as network adjusts to shocks
Spot rates down, but line-haul rates
steady; will carriers maintain margins?
Parcel rate increases by major carriers; Dimensional
pricing introduced parcel rate pressure
Market consolidation (FedEx Corporation/TNT
Holdings B.V.) but also more competition
Will revamped USPS offerings inspire
competition (e.g., flat rate pricing)
7
ENERGY
EQUIPMENT,
ENGINEERING, &
CONSTRUCTION
TRAVEL
FINANCIAL
SERVICES
MARKETING
& MEDIA
LOGISTICS
INFORMATION
TECHNOLOGY
PACKAGING
Copyright © 2015 Accenture. All rights reserved.
Top Trends in Information Technology
Source: Cisco Visual Networking Index: Global Mobile Data Traffic
Forecast Update 2014–2019 White Paper
Multiples of Data Traffic by Device TypeRising Use of Mobile Applications Is Causing an Acceleration in
Mobile Data Use…and Challenging How Enterprises Manage
Telecom Costs: Data growth related to mobile devices was once
simpler to define and predict, but as more users adopt smartphones,
wireless data speeds increase, and mobile applications evolve beyond
messaging into more data-rich apps, data volumes are ramping in
harder-to-predict ways. Mobile carriers are seeing mobile data growth
of around 100 percent across their networks, but many enterprises are
seeing mobile data growth of 130 percent or more.
These trends create challenges for enterprises trying to control mobile
data costs. The mobile data explosion puts increasing importance on
Telecom Expense Management (TEM) solutions and corporate
policies around data usage. As a result, there is increasing client
activity in the TEM area, and more focused efforts by organizations to
become more sophisticated in how they profile mobile users, forecast
application adoption, and predict data consumption.
Key Action: Organizations first need to analyze their mobile user base
to understand mobile usage patterns by employee profile and
geography, how those usage trends are evolving over time, and how usage is being driven by mobile app adoption. Some organizations are
exploring third-party solutions that allow them to control or limit data usage on devices and control data roaming (so that users don’t generate
unnecessarily high costs by inadvertently roaming without appropriate mobile plan coverage). We also see organizations pressuring carriers
to offer more competitive plans that mimic consumer plans with “all-you-can-eat” tariffs.
Corporate Response to the Bring Your Own Device (BYOD) Evolves to More Hybrid Models: Users want mobile access to corporate
data and systems, but prefer their personal devices. Enter BYOD where the user purchases his/her own device (sometimes with a corporate
subsidy) and is responsible for maintaining the hardware, while the company provides the software to access corporate IT assets and may
pay for some or all of the connectivity costs. This satisfies the device preferences of the user, and shifts the hardware procurement and
maintenance burden away from the company. However, BYOD programs also increase the need for robust Mobile Device Management
(MDM) solutions (the ability to remotely decommission or wipe a device); create potential legal issues about who owns the device; and make
mobile threat management more important. More companies are standardizing on a limited number of specific devices (vs. overall mobile
operating system (OS) support) to reduce the complexity and costs associated with MDM, threat management, and app development.
Key Action: When it comes to mobility, more OS and device diversity equals more cost and complexity related to security and threat
management, device management, and mobile app support. Organizations should examine current policy and look for opportunities to
consolidate mobile platforms and devices, without compromising on delivering the right business tools to mobile users.
0
20
40
60
80
100
120
Fe
atu
re p
hone
M2M
Modu
le
Weara
ble
Devic
e
Sm
art
phone
Ta
ble
t
Lapto
p
8
ENERGY
EQUIPMENT,
ENGINEERING, &
CONSTRUCTION
TRAVEL
FINANCIAL
SERVICES
MARKETING
& MEDIA
LOGISTICS
INFORMATION
TECHNOLOGY
PACKAGING
Copyright © 2015 Accenture. All rights reserved.
Top Trends in Marketing and Media
Source: IEG, LLC.
Global Sponsorship Market
As Digital Marketing Channels Mature, Marketers Can Tap New Ways to Optimize and Measure Sponsorship Dollars: The global
sponsorship market is expected to surpass $57 billion in 2015, representing four percent annual growth over 2014. To put this marketing
category in context, organizations spend more on sponsorship marketing than on mobile internet advertising (although mobile digital ad
spend is growing at a much faster rate and is estimated to be an approximately $46 billion global market in 2015). These two markets are not
completely independent, however—digital platforms provide marketers with new ways to leverage sponsorship relationships, deliver more
customized audience experiences, and better quantify and measure the value of sponsorship investments.
Sponsorships generally involve cash payments or the provision of services to support an event or organization in return for access to exploit
the commercial potential associated with that property. Sports sponsorships remains the biggest category at 40 percent of the market.
Sponsorships can be an extremely powerful marketing vehicle, but there are several pitfalls that organizations need to avoid. First, ensure
that sponsorships are integrated with overall marketing strategy. In the worst case, sponsorships are treated as “trophy” investments driven
by executives in an ivory tower, and organizations overpay for and underuse these relationships. Second, don’t ignore or underestimate
“activation” costs and resources—these are the investments related to exploiting the commercial elements of the sponsorship, from access to
celebrities and athletes to use of logos and other assets in advertising campaigns, digital experiences, and other audience engagement.
Activation costs, sometimes an afterthought, typically represent 1.0-1.5x the sponsorship cost.
In many categories, sponsorship is a sellers market because “inventory”
is limited, the market can be competitive and somewhat emotional, and
valuing sponsorship investments is as much an art as a science. For
example, providing a client CEO with exclusive access to a sponsorship
experience may be of extremely high value to one organization, while
ensuring the ability to use logos and likenesses for targeted digital
campaigns in the APAC market may be more important to another
organization. If sponsorship strategy is integrated with overall marketing
strategy, procurement can add tremendous value by helping to
benchmark the value of the sponsorship elements that matter the most,
and ensure that the key drivers of value are carefully defined in the
contract and that risk is well managed.
Key Action: The end goal should be a three-to-five year integrated
sponsorship strategy, but in the short term, organizations should assess
current sponsorship activities and whether they are integrated with the
overall marketing strategy. Creating this alignment helps organizations
leverage the spend they have already committed. With alignment
established, organizations should ensure that business objectives and
ROI measurements are aligned, and that the terms and conditions of the
sponsorship agreements support those objectives. Organizations should
challenge themselves to take advantage of all activation opportunities and
leverage social and digital media to maximize reach and engagement.
$48.6
$51.1
$53.1
$55.3
$57.5
0%
1%
2%
3%
4%
5%
6%
$45.0
$47.5
$50.0
$52.5
$55.0
$57.5
$60.0
2011 2012 2013 2014 2015E
Global sponsorship spending ($b)
Year-over-year % change
9
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EQUIPMENT,
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Copyright © 2015 Accenture. All rights reserved.
Top Trends in Corporate Services: Financial Services
Global Financial System Volatility and Complexity is
the “New Normal” Challenging Finance Organizations
to Get Better Visibility, and Become Much More Nimble
and Responsive: The operating environment for Finance
executives is becoming increasingly complex and dynamic.
In the past year, the U.S. dollar has appreciated
approximately 20 percent against a basket of global
currencies, while the Russian ruble and Swiss franc
experienced periods of extreme volatility. Drastic currency
swings put extraordinary pressure on Finance teams’ ability
to forecast and respond to revenue and cost impacts
through currency hedging, pricing, and materials sourcing.
Significant Opportunities Emerge: Fluctuating exchange
rates create management challenges but are mitigated by
historically low interest rates. Low-cost capital makes
acquisitions highly attractive to companies and are being
rewarded by investors—2015 is expected to be the second
biggest year ever for global M&A deal volume. Global
corporations are also rushing to issue new Euro-
denominated debt to take advantage of low interest rates
and pursue tax arbitrage opportunities. The strong dollar
combined with low costs of capital and favorable off-shore
tax scenarios will continue to fuel cross-border M&A and tax
inversion-driven deals.
Complexity in the finance function is only increasing. Finance teams require a much more real-time view of their organization’s
financials to manage forecasts and monitor markets. Companies with better processes, systems, and advisors, can then capitalize on
opportunities as they arise, like issuing debt at favorable rates, or quickly executing on strategic acquisitions.
Key Action: Not surprisingly, we have seen an increase in client project activity around Treasury Management Systems, optimizing
banking relationships, business advisory, investment banking, and tax advisory services. Paramount in selecting a treasury
management system is understanding the level of system integration, utility beyond cash and foreign exchange management, and
impact of reporting and forecasting enhancements. We are also working with clients to facilitate a more systematic approach to
knowledge-based consulting such as investment banking and tax advisory services, including pre-negotiating rates and establishing
preferred partner relationships to verify the right resources are available when needed and avoid unexpected costs that can result
from last-minute, time-sensitive agreements.
Source: FactSet, The Wall Street Journal, The Financial Times.
28.1% average 2014 tax rate
for S&P 500…down 40 bps
vs 2013
54 of S&P 500 companies at
least partially exempt from
corporate income tax
€27.2 billion Euro-based debt
issued by U.S. companies
through March 24, 2015 –
a six-year record
$1 trillion combined dollar
value of announced M&A
through April 8, 2015
10
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Copyright © 2015 Accenture. All rights reserved.
Top Trends in Travel
Source: Accenture
Travel Policy Compliance Remains One of the Most Effective
Tools to Drive Travel Program Savings…So Why Can’t
Organizations Do a Better Job? Most companies have travel
policies and programs in place. The goal of most travel policies is to
control overall travel costs by providing guidance about what
business cases justify business travel (i.e., sales call, customer
support visit), rules for employees about how to book travel
(booking tools, travel agents, advanced purchase requirements),
and drive volume to preferred providers (air carriers, hotel chains,
corporate credit card) to take advantage of negotiated rates.
How a travel policy is constructed, communicated, and enforced
says a lot about corporate culture because of the inherent trade-offs
between the conflicting goals of minimizing total travel cost vs.
maximizing traveler comfort and preferences. The travel policy also
needs to balance rigidity of rules, exception management, and the
“investment” value of travel to support business goals.
Barring significant personal inconvenience, most business travelers
want to do the right thing, but all too often they make decisions
intentional or not) that cost the business money. And these
compliance and other issues are present at every level of the
business. Consider this recent anecdote: a c-level executive
assistant had begun to systematically book travel through internet
sites in order to save the fee charged by the corporate travel
agency…not realizing the cost of lost discounts and preferred rates.
How much is policy non-compliance costing your business?
Calculating the impact is straightforward if you have access to the
right data and tools to manage compliance in near real time.
Key Action: The first step in driving better compliance is in the up-
front stage of communicating travel policy. It’s important to
communicate not just what the policy is, but why the policy is in
place (business goals), and why compliance is important. Give
travelers a sense of how much money is at stake (and how it can
impact things like profitability and bonus pools) if you want to
encourage employees to think like business owners. The compelling
business benefit of improved compliance is readily apparent with the
right analytics and measurement tools (see example below).
Example:
• $2.6M total spend; 12,000 room
nights per year
• 39% compliance to preferred
suppliers
• Avg. preferred rate: $190
• Avg. non-preferred rate: $240
Policy Compliance Savings:
• 50% compliance: $66,000
or 3% savings
• 75% compliance: $186,000
or 8% savings
Keys to Analysis:
• Understand reasons
for non-compliance
• Identify focus areas
to drive compliance
• Target markets for
improvements to
program
Analysis of Travel Spend and Compliance Data Reveals Savings Opportunity and Compliance Focus Areas
11
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Copyright © 2015 Accenture. All rights reserved.
Top Trends in Equipment, Engineering, and Construction
Asset Owners Need to Focus on Output-Based Metrics, Not Just Activity-Based Metrics When Contracting for Industrial
Equipment: Purchasing a large piece of industrial equipment is a high-cost investment with an expected return on investment based on a
business case, but also fraught with potential risk. In the contracting process, most buyers take care to make sure that the supplier provides
ample warranty coverage for the equipment asset to perform as expected. However, we notice that organizations often overlook an
important element—the inclusion of a “performance guarantee”—as an explicit contract element that goes beyond the standard warranty.
Buyers can no longer ignore the question of when and how to use performance guarantees, especially in an environment of increasing
regulations governing everything from environmental emissions to energy efficiency standards to water use.
The scope of a typical warranty is focused on whether equipment is functioning properly, but it lacks a second, and potential ly more
important dimension related to ROI: is the asset performing to defined performance specifications? For example, production run-rates (does
the equipment meet production rates presumed in the business case?) or emissions levels (are emissions compliant with regulatory limits?).
Of course, a buyer can choose to award a large equipment contract to a supplier
without using a performance guarantee, but should they? To answer that question the
asset owner should think in terms of business impact. What is the cost to my business
if this unit goes down? What is the potential penalty if this unit fails to meet
environmental emissions standards? By jointly engaging suppliers in the performance
guarantee discussion early in the process, the asset owner and supplier can align their
interests and clearly define the conditions of performance and measurement.
Is machine
operational or
is warranty
repair needed?
Is output consistent
with business case
specifications (uptime,
output per hr. quality
standards, etc.)?
Is equipment operational
or is warranty repair
needed?
Does equipment meet EPA
and other regulatory mandates
specified in agreement?
Key Action: Performance guarantees are not applicable to every scenario, but
asset owners should be sure that they understand the relevant regulatory hurdles
and business case requirements that equipment must meet. The owner should then
formally define the specific obligations under the contract
performance guarantee in a clear and measureable way,
clarifying the conditions of performance, operating and
testing parameters, and the owners’ and suppliers’
responsibilities associated with the guarantee. The
document should also define resolution options in the
case of insufficient performance.
In an era when brands are being held to high standards
for product performance and environmental compliance,
investing the time to evaluate and implement performance
guarantees will be time well spent, protecting the owner
from risk, and aligning the incentives of asset owner and
equipment supplier.
Output vs. Activity-Based Metrics
Source: Accenture
12
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LOGISTICS
INFORMATION
TECHNOLOGY
PACKAGING
Copyright © 2015 Accenture. All rights reserved.
Top Trends in Packaging
Mandatory Packaging Changes Create Another Reason to Be
Proactive about Packaging Substitution and Redesign
Options: In February 2013, New York City Mayor Michael
Bloomberg called for a complete ban of Styrofoam food
packaging in favor of recyclable packaging materials. Fast
forward to 2015, and the ban on Styrofoam packaging materials
is set to finally take effect: as of July 1st, Styrofoam packaging will
be outlawed. The new regulations will not only affect food trucks
and local eateries—the ban applies to food establishments as
well as manufacturers and prohibits businesses from possessing,
selling, or offering single-use Styrofoam containers and related
products including “packing peanuts.” Exemptions are available
for some smaller businesses, but for national businesses that
have standardized on Styrofoam products from coffee cups to
shipping material, the new rules could require significant
packaging redesign and reformulation.
New York City’s ban is not an isolated occurrence. In the United
States, the cities of San Francisco, Seattle, and Portland (and
nearly one hundred other municipalities) have already banned the
use of foam-based packaging containers, and globally, full or
partial bans on foam packaging exist in locales ranging from
Paris to India to Taiwan.
Other common materials have been subject to bans (such as
numerous municipalities outlawing the use of single-use plastic
bags) or significant negative publicity and health concerns (for
example the debate about the safety of Bisphenol A or “BPA”
used in polycarbonate and epoxy resins used in food packaging
applications). Evolving regulations and grass-roots consumer
campaigns as well as corporate sustainability initiatives combine
to create an evolving set of challenges for packaging teams to
negotiate.
The best practice, evidenced by many organizations, is to
constantly explore the potential for packaging innovation and
substitutability to optimize the trade-off between packaging
performance, cost, and local market and customer preferences.
The process of regularly re-evaluating packaging materials and
designs can help organizations proactively take advantage of
market opportunities to reduce costs (for example, an input cost
change that make one material more cost-competitive than
another) and not be caught flat-footed when local-market
packaging regulations change.
Key Action: The drastic fall in the price of oil and natural gas
already has leading organizations re-examining the packaging
materials they use for substitutability and cost savings
opportunities. For those organizations not already engaged in the
practice, New York City’s recent foam packaging ban provides
another incentive for organizations to reinvigorate packaging
innovation efforts. Organizations should start by understanding
customer preferences and trends by local market, evaluate the
sensitivity of packaging materials to input cost changes (including
raw material, labor, and other cost drivers), and consider the use
of supplier innovation councils to institute collaboration with key
suppliers, tap into best practices and foster tighter collaboration.
13
ENERGY
EQUIPMENT,
ENGINEERING, &
CONSTRUCTION
TRAVEL
FINANCIAL
SERVICES
MARKETING
& MEDIA
LOGISTICS
INFORMATION
TECHNOLOGY
PACKAGING
Copyright © 2015 Accenture. All rights reserved.
Top Trends in Energy
If History Doesn’t Repeat Itself, but It Rhymes, What Does
History Suggest Is the Optimal Energy Procurement Strategy in
Today’s High Volatility Environment? One foundational element
of our energy procurement work with clients is developing a
customized Risk Management Plan or RMP. In building a
customized RMP, every organization should consider these
fundamental questions: 1) What is the tolerance for price risk or
volatility? (this determines what portion of demand an organization
will attempt to purchase at fixed vs. floating rates); 2) Given the
price/risk tolerance, how will the organization determine when to
lock-in fixed-rate prices?
The answers to these questions largely determine contracting
strategy. A fixed-price contract provides insurance in the form of
price/cost certainty. However, the buyer pays a premium because a
fixed price transfers risk to the energy supplier. An organization may
pay more over time for fixed-price contracts in exchange for price
certainty, predictability, and protection from spot market volatility.
For these same reasons, some organizations may prefer 100
percent spot-rate contracts on the assumption that over the long
run, they can’t “beat the market,” especially if they must pay a
premium to lock in fixed-price contracts. However, although these
companies may achieve lower long-term costs, the trade-off is much
more volatile and unpredictable energy costs which makes
budgeting and forecasting a challenge.
But once an organization decides to utilize fixed-price contracts, it
needs a strategy to determine when and how to lock in fixed prices.
Based on recent Accenture analysis, one strategy that can improve
the odds for buyers is to lock in fixed prices only when futures prices
are at or below 10th percentile levels (i.e., when current prices are in
the bottom 10 percent of observed prices for the past three years).
The chart at the top-right depicts price history for henry hub gas
futures for the winter 2013-2014 period (the polar vortex) showing
what an organization would have paid to lock in fixed prices over the
three years leading up to the delivery period. The green data points
indicate when prices were below the 10th percentile of historical
prices (in other words, at that moment in time, prices were higher
than today’s price 90 percent of the time over the prior three years).
No one can predict the future, but our analysis shows that by using
this heuristic rule, by buying at or below the 10th percentile, buyers
would have achieved price protection while also beating the market
(the settlement price) six of the last eight summer/winter seasons.
Key Action: Why discuss strategies like these now? Because
prices in many markets are at the 10th…or even the 0th percentile
today, signaling a terrific buying opportunity. Accenture works with
organizations to create a customized RMP for energy markets and
employs proprietary tools and disciplines, such as percentile buying,
to help clients execute their strategy and achieve their energy goals.
Source: Accenture, FC Stone.
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
Dec-1
0
Ma
r-11
Ju
n-1
1
Se
p-1
1
Dec-1
1
Ma
r-12
Ju
n-1
2
Se
p-1
2
Dec-1
2
Ma
r-13
Ju
n-1
3
Se
p-1
3
Dec'13-Mar'14 Percentile Buying
< 10th Percentile > 10th Percentile Settlement
14 Copyright © 2015 Accenture. All rights reserved.
Sources and References
EXECUTIVE SUMMARY:
• Wang, Lu and Renick, Oliver, Bloomberg Business, “American Companies
Are in Love With Themselves,” March 3, 2015. Retrieved from:
http://www.bloomberg.com/news/articles/2015-03-03/company-cash-bathes-
stocks-as-monthly-buybacks-set-record
• International Monetary Fund World Economic Update, “Uneven Growth:
Short- and Long-Term Factors,” April 2015. Retrieved from:
http://www.imf.org/external/pubs/ft/weo/2015/01/
• FactSet Earnings Insight: May 1, 2015, Retrieved from:
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_5.1
.15/view
INFORMATION TECHNOLOGY:
• Cisco Systems, “Cisco Visual Networking Index: Global Mobile Data Traffic
Forecast Update 2014–2019 White Paper,” February 3, 2015. Retrieved
from: http://www.cisco.com/c/en/us/solutions/collateral/service-
provider/visual-networking-index-vni/white_paper_c11-520862.html
MARKETING:
• IEG, LLC., “IEG Projects North American Sponsorship Spending to Increase
Four Percent in 2015.” Retrieved from: http://www.sponsorship.com/About-
IEG/Press-Room/IEG-Projects-North-American-Sponsorship-Spending-
t.aspx
FINANCIAL SERVCES:
• FactSet Earnings Insight, April 17, 2015, Retrieved from:
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_4.1
7.15/view
• Cimilluca, Dana, Mattioli, Dana and Raice, Shayndi, The Wall Street Journal,
“Rising Optimism Fuels Deal Rebound,” April 8, 2015. Retrieved from:
http://www.wsj.com/articles/rising-optimism-fuels-deal-rebound-1428538721
• Platt, Eric, The Financial Times, “US Companies Sell Record Euro Debt,”
March 23, 2015. Retrieved from: http://www.ft.com/intl/cms/s/0/36cf4210-
cf2e-11e4-b761-00144feab7de.html#axzz3ZW5wrUDU
PACKAGING:
• Dockterman, Eliana, Time, “New York City Bans Single-Use Styrofoam
Products.” Retrieved from: http://time.com/3660943/new-york-city-styrofoam-
ban/
• The Official Website of the City of New York. “De Blasio Administration Bans
Single-Use Styrofoam Products in New York City Beginning July 1, 2015,”
January 8, 2015. Retrieved from: http://www1.nyc.gov/office-of-the-
mayor/news/016-15/de-blasio-administration-bans-single-use-styrofoam-
products-new-york-city-beginning-july-1-2015.
15 Copyright © 2015 Accenture. All rights reserved.
About Accenture
Copyright © 2015 Accenture.
All rights reserved.
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of Accenture.
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assertion of ownership of such trademarks by Accenture and is not
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Accenture and the lawful owners of such trademarks.
Accenture is a global management consulting, technology
services and outsourcing company, with approximately 323,000
people serving clients in more than 120 countries. Combining
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industries and business functions, and extensive research on the
world’s most successful companies, Accenture collaborates with
clients to help them become high-performance businesses and
governments. The company generated net revenues of
US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home
page is www.accenture.com.