Purchasing Leader Pains
Top 10 Fears for 2016
2 © 2016 Advanced Purchasing Dynamics, Inc.
Attendees will be in listen only mode
A recording of this presentation and the slides will be available on the APD Website
Webinar attendees will receive the slides by email
Welcome to The Cloud Conference
3 © 2016 Advanced Purchasing Dynamics, Inc.
Presenters
Mike Wynn Senior Director
Jeoff Burris Principal
4 © 2016 Advanced Purchasing Dynamics, Inc.
5 © 2016 Advanced Purchasing Dynamics, Inc.
Agenda
Purchasing Leaders Top 10 Pains
About the survey
Four themes for 2016
What companies are doing
Purchasing Competitive Advantage
Competitive advantage assessments
Findings (will and won’t surprise you)
6 © 2016 Advanced Purchasing Dynamics, Inc.
Top 10 Pains of Purchasing Leaders (percentage of respondents identifying issue as a current priority)
Our procurement processes don’t provide “should be” costs for our key commodities
My executive intuition tells me I feel we need to validate that we’re paying appropriately for our key commodities
Our procurement processes aren’t providing us with the data to build effective cost models
Our purchasing team is overwhelmed with administrative tasks, and there's little time to be strategic
Our procurement processes don’t provide enough data to understand our supplier cost structures to drive savings
Our purchasing team lacks skills for building “should be” cost models
Our purchasing team lacks skills for implementing effective commodity strategies
Our purchasing team doesn’t have the time or expertise to do the cost savings projects we should
Our procurement processes do not allow us to manage commodities on an enterprise-wide basis
Our processes don’t provide an easy way to analyze supplier bid date over time to identify cost savings
0% 10% 20% 30% 40% 50%
58%
51%
46%
45%
42%
39%
38%
35%
31%
34%
Survey: APD Purchasing Priorities Survey, 10/15 through 1/16
7 © 2016 Advanced Purchasing Dynamics, Inc.
Survey Participants
80% VPs & Directors 48%
19% 32%
Titles
Director - Purchasing& Supply Chain
Purchasing Managers
Vice President -Purchasing
70% Automotive
8 © 2016 Advanced Purchasing Dynamics, Inc.
Theme 1: Should Be Costs
Our purchasing team lacks skills for building “should be”
cost models
Our procurement processes don’t provide “should be”
costs for our key commodities
Our procurement processes aren’t providing us with the
data to build effective cost models
Our procurement processes don’t provide enough data to
understand our supplier cost structures to drive savings
9 © 2016 Advanced Purchasing Dynamics, Inc.
Why Should Be Cost Models?
Can’t evaluate if you’re paying
appropriately
Too much effort to produce
customer quotes
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Doing About Should Be Cost Models
Add someone to your team who’s done cost engineering
Hire an outside consultant to conduct cost studies on a
project basis
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Swoop Curve
Time
Very
High
Open
Cost
Piece
Price
Level of
Savings
Very
Low
Medium
Cost
Breakdowns
Cost
Estimates
Knowledge Based Models
Hyper Optimized Models
3-7 %
3-6 %
2-5 %
12 © 2016 Advanced Purchasing Dynamics, Inc.
Theme 2: Paying Appropriately
My executive intuition tells me I feel we need to validate
that we’re paying appropriately for our key commodities
Our purchasing team lacks skills for implementing
effective commodity strategies
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Why Paying Appropriately?
Relying on supplier quotes means
leaving money on the table
Some commodities aren’t
being managed strategically
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Doing About Paying Appropriately
Improve cost modeling/strategic sourcing skills
Hire commodity managers
Developing their own strategic sourcing process, starting
with one commodity
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Commodity Segmentation
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Commodity Segmentation
Time
Very
High
Open
Cost
Piece
Price
Level of
Savings
Very
Low
Medium
Cost
Breakdowns
Cost
Estimates
Knowledge Based Models
Hyper Optimized Models
3-7 %
3-6 %
2-5 %
17 © 2016 Advanced Purchasing Dynamics, Inc.
Theme 3: Cost Savings Activities
Our purchasing team doesn’t have the time or expertise to
do the cost savings projects we should
Our purchasing team is overwhelmed with administrative
tasks, and there's little time to be strategic
18 © 2016 Advanced Purchasing Dynamics, Inc.
Why Cost Savings Activities?
Know we’re leaving
money on the table
Too much tactical work,
high performers will leave
Don’t have
skills on
staff
Can’t
make big
impacts
Most skilled
people
leave
19 © 2016 Advanced Purchasing Dynamics, Inc.
Doing About Cost Savings Activities
Lean out the clerical workload
Strategic vs. operations buying teams
Purchasing support services
Adopt purpose-built IT systems for purchasing
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APD and a client performed a side by side time study of time and keystrokes required to source 3 parts.
ProcureForce Provides a 93%
Reduction in Time and Keystrokes
ProcureForce
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Theme 4: Purchasing Systems
Our processes don’t provide an easy way to analyze
supplier bid date over time to identify cost savings
Our procurement processes do not allow us to manage
commodities on an enterprise-wide basis
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Why Purchasing Systems?
Too much effort wasted on
spend analytics
Can’t ensure pricing
consistency across regions
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Doing About Purchasing Systems
Capture 8-10 cost drivers in a spreadsheet
Analyze historical quotes to identify inconsistencies
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Variance Analysis
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Doing About Purchasing Systems
Capture 8-10 cost drivers in a spreadsheet
Analyze historical quotes to identify inconsistencies
Adopt a purpose-built system to handle quoting and
spend analytics
26 © 2016 Advanced Purchasing Dynamics, Inc.
ProcureForce
27 © 2016 Advanced Purchasing Dynamics, Inc.
Summary - What Companies Are Doing
Adding cost engineering resources
Implementing strategic sourcing and commodity
management
Leaning out the clerical workload for their strategic teams
Adopting purpose-built IT systems for purchasing
28 © 2016 Advanced Purchasing Dynamics, Inc.
Agenda
Purchasing Leaders Top 10 Pains
About the survey
Four themes for 2016
What companies are doing
Purchasing Competitive Advantage
Competitive advantage assessments
Findings (will and won’t surprise you)
29 © 2016 Advanced Purchasing Dynamics, Inc.
Competitive Advantage Assessment
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Overall CA Findings
Companies that are best at controlling material costs score higher on all dimensions of the CA.
The order of implementing best practices has a
significant impact on the results.
Example: Purchasing Organizations who EFFECTIVELY
measure cost performance achieve more from cost reduction tools than those who do not.
31 © 2016 Advanced Purchasing Dynamics, Inc.
High Correlation to Cost Performance
Robust program management of cost reduction ideas
Clearly defined roles and responsibilities
Ongoing employee performance management
Clearly defined performance objectives for all individuals
in the organization
Well defined key measures with accurate and timely
tracking of status
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The Payoff
Supply organizations that have successfully
implemented the high correlation processes
achieve year over year cost reductions two times
higher than companies who have not.
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Understand Vision
Develop
Purchasing Strategy
Deploy
KPI’s
Re-work Employee
Development
Tool Deployment
Buyer Training
Supplier Engagement
Competitive Advantage Achieved
Purchasing Leader Pains
Top 10 Fears for 2016