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November 12-14, 2018 | Las Vegas

Procurement’s Digital Transformation Journey: What Does Success Look Like?

Kurt Albertson – PrincipalThe Hackett Group Procurement Advisory

Principal and NA Procurement Advisory Practice Leader

Kurt Albertson is a Principal with The Hackett Group with program responsibility for

North American Advisory programs focusing on client relationships and delivery,

business development and research. Mr. Albertson works with over one hundred Global

1000 companies leveraging research and thought leadership to provide strategic

direction and best practice business advice within Procurement and Finance.

Prior to joining the Hackett Group Mr. Albertson spent six years as a management

consultant in Sourcing and Procurement during which he worked with executives from

dozens of large corporations on sourcing, business and technical strategies,

organizational and business process design, and cultural change.

Mr. Albertson also has five years of automotive experience working in manufacturing,

quality, and operations. In this role he designed and implemented global manufacturing

processes and supervised production operations.

Mr. Albertson has been quoted in the Wall Street Journal and other major publications,

has been the key note speaker at many national events, and travels globally to support

client objectives.

Kurt Albertson

[email protected]

2018 Key issues Study | 3© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Learning Objectives

▪What does digital transformation mean for Procurement?

▪What is the value associated with Procurement’s digital transformation?

▪What are some of the best practices for delivering on Procurement’s digital transformation

journey?

4© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

About The Hackett Group A leader in organizational effectiveness and best practice insight

Profile

▪ The Hackett Group is an IP-based consultancy focusing on enabling world-class

performance improvement by leveraging our intellectual capital from over 13,000+

benchmarks and performance studies with over 2,700 clients

– More than 20,000 performance metrics

– More than 1,800 best practices across 95 business processes

– Best practice process flows, capability maturity models, and configuration guides

– Enterprise and Functional Service Delivery Model Frameworks

Approach

▪ We help clients measure performance compared to world-class performance

▪ We identify opportunities and an actionable roadmap

▪ We implement our recommendations which result in accelerated benefit realization

Results

▪ Sustainable performance improvement leading to an agile enterprise with lower costs

and improved service levels

Accelerating the time to

sustainable benefit realization

93%Dow Jones

Industrials

87%Fortune

100

88%Dow Jones

Global Titans

87% DAX

30

58% FTSE

100

Hackett Value Grid™

1

23

A

B


▪ Library of 2,500+ Best Practice Research Perspectives, Books of Numbers, and Hackett Certified Best

Practices through the Best Practice Intelligence Center

▪ Unlimited inquiry access for members to Hackett experts for transformation steering

▪ Peer-to-Leader 1-2-1 Best Practices sharing, and Best Practices networking events

▪ Enterprise, functional and process-based performance studies & value accelerators

▪ “Gold Standard” Benchmark – over 13,0000 conducted, the empirical backbone for your transformation

at the SG&A Enterprise, Functional, and Process level

▪ World-Class, Peer and Custom Peer comparative metrics and best practices

▪ Ability to provide multiyear world-class program view of performance over time

▪ Hackett Performance Exchange (automatic accumulation of performance data from Oracle or SAP)

▪ Finance

▪ Human Resources

▪ Information Technology

▪ Procurement

▪ Supply Chain and Operations

Membership Advisory &

Research (Provides Insights Into World Class

Performance)

Benchmarking(Defines World Class Performance)

▪ Enterprise Performance Management

▪ Shared Services, Global Business Services & Outsourcing

▪ Merger Integration

▪ Working Capital Management

▪ Oracle EPM (Platinum Partner)

▪ SAP ERP (Gold Partner)

▪ Hyperion

▪ Kronos

▪ Workforce Management

▪ Application Managed Services

▪ Source to Pay technology solution selection and implementation support

Business

Transformation(Transforms Performance Into World

Class)

Best Practice

Technology Enablement(Implements Technology To Enable

World Class)

The Hackett Group is a leader in driving transformation improvement, organizational effectiveness and providing best practice insights


Agenda

▪ Procurement’s Key Priorities

▪ The Value of Procurement Digital Transformation

▪Hackett’s Procurement Digital Transformation Model


3.1%

3.9%

In 2018, revenue growth will continue to outstrip FTE and budget plans in procurement: Doing more with the same level of investment continues to be important

Efficiency

Gap

Productivity

Gap

Revenue growth Number of staff (FTEs) Operating budget

Source: 2018 Key Issues Study, The Hackett Group

3.40%

1.60%

-0.49%

3.6%

0.5%

-0.3%

2016-2017 Actual 2017-2018 Projected


Top 10 important priorities for Procurement in the achievement of overall enterprise goals

46%

58%

54%

43%

57%

55%

51%

45%

50%

52%

28%

41%

25%

29%

35%

20%

21%

25%

23%

17%

15%

38%

87%

CriticalHigh

Elevate the role of procurement to a trusted advisor to the business

Reduce purchase costs

Source: Key Issues Study, The Hackett Group, 2018

Increase internal stakeholder satisfaction

Improve OPEX savings

Enhance operational process efficiency

Expand purchasing’s scope/influence

Deepen influence on complex spend categories to drive value beyond sourcing

Improve procurement’s business agility

Support enterprise innovation strategy, objectives and initiatives

Increase level of supplier collaboration

Support enterprise digital transformation strategy, objectives and initiatives

83%

83%

78%

77%

76%

76%

68%

67%

67%

66%


Importance of the procurement agenda from 2017 to 2018 looking at “Critical” procurement priorities only

0%

5%

14%

9%

7%

23%

8%

23%

23%

25%

38%

38%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Strengthen/protect the company’s brand



Deepen influence on complex indirect spend categories todrive value beyond sourcing

Support enterprise innovation objectives

Support enterprise digital transformation objectives

Biggest Change (Critical)

2018 2017

+15%

+31%

+16%

+9%

+8%

+18%

YoYδ



Improving agility, enabling digital transformation and elevating the role of procurement to a trusted advisor are key development areas in 2018

Reduce purchase costs


Improve procurement’s business agility (i.e., the ability to adapt quickly to meet changing stakeholder demands)


Elevate the role of procurement to a trusted advisor to the business

Deepen influence on complex spend categories to drive value beyond sourcing

Improve CAPEX savings

Improve OPEX savings

Improve cost avoidance efforts

Enhance operational process efficiency

Improve purchasing compliance

Support enterprise digital transformation strategy, objectives and initiatives

Support enterprise digital transformation

Low Importance

Lo

wM

od

era

te/H

igh

Ab

ilit

y t

o A

dd

res

s


Critical development area

Well supported


Some common definitions or misconceptions around digital transformation

▪ It is a market facing transformation and less relevant to internal support functions like procurement

▪ It is something that only the most technically advanced organizations need to think about

▪ It is about getting rid of the remaining paper within the source-to-settle process

▪ It is about implementing an end-to-end suite of source-to-settle technology

▪ It is about taking advantage of emerging technologies such as RPA and blockchain

▪ It is an IT driven strategy


Agenda





The main objectives of enterprise digital transformation is revenue generation and improving competitiveness…it isn’t considered optional

PRIORITY

Remaining competitive in a rapidly changing business environment is ranked as the highest-

priority objective of the enterprise-level digital transformation strategy, followed by maintaining

or accelerating revenue growth. These are the primary objectives of digital transformation.

Enterprise organizations ranked their most important objectives for digital transformation

Remain competitive in rapidly changing industry

Reinvent the company

Maintain or accelerate revenue

growth

Maintain or reduce operating

cost

Improve agility

Improve customer focus/customer-centricity

Accelerate rate of

innovation

1 2 3 4 5 6 7

Most

important

Least

important

2017 Digital Transformation Performance Study | 14© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

How do we define Digital transformation?

Enterprise digital transformation:

The creation of business value by improving

customer experiences, operational efficiency

and agility by fundamentally changing the

way organizations innovate, operate, deliver

products and services, engage with

stakeholders and execute work, using digital

technologies as the enabler of holistic

transformation.

Procurement digital transformation:

Improving customer experiences, operational

efficiency, agility and business value

contribution by fundamentally changing the

way procurement services are delivered using

digital technologies as the enabler of holistic

transformation.


0.104% 0.067%

0.364%

0.274%

0.059%

0.062%

0.050%

0.045%

0.577%

0.447%

Last year, Hackett released a research note highlighting the expected impact of digital transformation on future efficiency due to digital transformation

Baseline

22% reduction

Digital transformation: World-Class

World-Class

Procurement cost as percentage of spend

Knowledge based Technology Other

0.197%0.099%

0.379%

0.303%

0.078%

0.054%

0.079%

0.056%

0.733%

0.512%

30% reduction

Digital transformation: Peer

Baseline

Peer

Digital

Digital

Transactional


Core process automation is foundational to digital transformation. If processes are still manual the ability to increase value delivery will be limited

Even without digital transformation, core process automation has and continues to have a significant impact on our organizations

66% 26% 84% 56%HIGHER SAVINGS

OVERALLFEWER CLERICAL

STAFF

MORE LIKELY TO CONSIDER THEIR DATA ACCURATE

AND RELIABLE

MORE LIKELY TO BE VIEWED AS A

VALUED BUSINESS PARTNER

Organizations with high levels of process automation adoptions demonstrate:


Procurement digital transformation top performers have achieved significant improvement against peers when it comes to many operational value drivers

Few organizations exceed expectations, but the good news is: more than 50% of organizations are meeting expectations in all five areas.

Current performance – Operational value drivers

29%

13%

29%

38%

9%

13%

41%

75%

67%

88%

63%

100%

52%

100%

83%

88%

55%

25%

4%

8%

10%

9%

5%

TP

Peer

TP

Peer

TP

Peer

TP

Peer

TP

Peer

Falls Short Meets Exceed

Customer

satisfaction

Compliance with

applicable laws

and regulation

Service delivery

cycle time

Quality of

Services

Procurement cost,

efficiency and

productivity


Procurement digital transformation top performers have achieved significant improvement against peers when it comes to many strategic value drivers

Business strategy

enablement

Enterprise innovation

objective realization

Procurement business

value contribution

Procurement

agility

Current performance – Strategic value drivers

13%

46%

13%

21%

38%

67%

13%

26%

88%

42%

38%

67%

50%

29%

75%

74%

13%

50%

13%

5%

4%

13%

TP

Peer

TP

Peer

TP

Peer

TP

Peer

Falls Short Meets Exceed


Agenda





Report that digital transformation will fundamentally change the way procurement

services are delivered over the next 3-5 years

95%

66%… but

only

have actually developed a strategy for getting there.

… and

only 46%

report having resources and competencies in

place to execute the strategy today

Source: Key Issues Study, The Hackett Group, 2018

While procurement believes digital transformation will fundamentally change the way it delivers services…strategy and resources are lacking


Digital transformation is certainly about emerging technologies and we have seen organizations aggressively building out core procure-to-pay infrastructure

E-Procurement

Spend Analysis

MDM (Master Data Management)

Contract / Compliance Management

E-Sourcing

E-Invoicing ExpenseManagement

Supplier Relationship/Performance/Risk Management(Life-Cycle Management)

Supplier Portal/Network

Core Support

Supplier Item Contract Order

Market Intelligence/Research

Reporting & Analytical

Core Procure-to-Pay Infrastructure Support Tools

Partner Systems

Product Lifecycle Mgmt

Supply Chain

E-Catalogs

E-Payables/ SCF

P-card

Self Service

Purchase Order System

Services Procurement

Supplier Discovery/Spot Buy Marketplaces

Cognitive/AI/Chat Bots/ Block Chain


…but it isn’t just about technology

• Move beyond just automating existing processes

• Define completely new ways of doing things

• Enable with new technologies (e.g., cloud, big data, RPA, social

media)

• Move beyond internally focused transformation

• Design from the “outside in”, starting with customer needs

• Design new ways to engage the customer (internal and external)

• Embrace a fail fast philosophy

• Execute pilots in targeted areas and scale up rapidly

• Shift focus from discrete projects to continuous transformation

New Ways of

Doing Things

A Customer-

Centric

Approach

Velocity of

Change


Four pillars support

procurement’s digital

business strategy

Data and analytics

form the foundation

Hackett introduced a digital transformation framework for Procurement to help clients think through their strategy

Digital Capability pillars to support the digital strategy

Omni-channel,

personalized

stakeholder

experience

Digitally

enabled

procurement

workforce

“Smart”

orchestration

of source-to-

pay services

Ecosystem of

networked

solutions

Analytics-driven insights


CUSTOMER-CENTRIC

DIGITAL INSIGHTDIGITAL OPERATIONS

Social technologies

Cloud RPA Block-chain

Mobility Analytics Data integration

Artificial Intelligence

Big data Predictive modeling

Data visualization

Design thinking Digital customer engagement

Customer journey mapping

Segmentation Individualization Omnichannel

Internet of things

▪ Internet of things opens up new ways to request goods and services in a more natural way (e.g. travel)

▪ Omnichannel design and individualization give users intuitive and adaptive tools to meet their highly specific

needs (e.g. mobile, saved preferences, history)

▪ Journey mapping and segmentation allows us to tailor relationships based on internal and external customer

needs (e.g. map out from the stakeholders perspective how they interact with Procurement)

▪ Design thinking enables category managers to build strategies that align with stakeholder objectives (e.g.

start with stakeholder objectives and think creatively)

How the digital transformation landscape will impact the “experience” of stakeholders


Virtual service assistants and agents go beyond simple Bots

▪ Virtual Service Agents orchestrate building blocks of automation capabilities together such as desktop

automation, RPA, and chat bots to deliver an orchestrated service that goes beyond simple

conversational services, is able to trigger requests to execute process steps or even self-remediate.

▪ Current use case examples include:

– IT HELPDESK

▪ IPsoft’s Apollo. Apollo will cost 20% less than Amelia, providing automating basic technology

work and have some elements of cognitive technologies. Able to request everything from

being able to access a printer to provisioning IT resources for an application development

project

▪ Cantoche LivingActor: as used by Atos, Toshiba, EDF, Naxitis. Provides animated avatar,

engages customer though AI/natural language processing (NLP) including live translation and

chat capabilities, real-time knowledge management and data analytics.

▪ Other AI platforms include TCS Ignio and Wipro’s Holmes.

– CUSTOMER SERVICE: complaints and resolution including paying refunds or claims.

▪ IPsoft’s Amelia. Amelia is designed , to replace the work of a call-centre employee. Clients

include SEB, Enfield Council, Barclays and Vodafone

▪ Celaton inSTREAM: Virgin trains customer relations cognitive agent

Source: Hackett Research


The travel industry has undergone its own digital transformation. How can we apply these practices to procurement’s stakeholder experience?




business strategy

Data and analytics

form the foundation

Hackett’s digital transformation framework for Procurement


Omni-channel,

personalized

stakeholder

experience

Digitally

enabled

procurement

workforce

“Smart”

orchestration

of source-to-

pay services

Ecosystem of

networked

solutions



It’s not just about the elimination of work. It’s also about capability augmentation…an opportunity to blend technology with human capabilities

HUMAN

-

MACHINE

An opportunity to join forces, a way to succeed in

the new working environment

WORK

ELIMINATION

Understanding the tasks that will be eliminated vs.

those that will be augmented (repetitive vs.

creative…the “so what”)


Vodafone – Real Time, Smarter, Faster Decision Making With Cognitive

Source: Vodafone, Self-disruption: How Cognitive Computing Will

Recreate Procurement

Cognitive And Digital Sourcing, SCM Operations And

Enablers, Vodafone Procurement Co

✓ Business Insights

✓ Value add content

✓ Automated decision making

✓ Risk mitigation

✓ Management and control, policies and procedures

Case Study


Thriving in the digitally enabled workforce will require these skills

Business Acumen

Understand key business drivers

Knowledge of factors, priorities and business demands

Identify problems and prioritize alternatives

Relationship Management and Collaboration

Advanced interpersonal skills

Positively influence decisions

Open and approachable

Supply Risk Management Expertise

Assess and prioritize business and category-specific risks

Measure, prioritize, and address risk

Develop risk mitigation plans for high-priority drivers

Data Analysis and Modeling

Process data and extract relevant information

Knowledge of analytical tools and methodologies

Translates analyses into actionable plans

Strategic Mindset

Develop strategic frameworks and visions

Anticipates market changes

Address challenges and outline future direction

Savings and Financial Analysis

Translate savings and value improvements to P&L impact

Develop tools to track, measure and forecast savings

Analyze supplier financial statements for detailed insights

Agility and Change Orientation

Welcomes change

Comfortable with shifting priorities

Able to deal with ambiguity

Creativity and Innovation

Create diverse and novel ideas, or novel combinations of ideas

Create and recognize new patterns/categories

Curiosity, broad interests, constructive criticism

Agile and

Trusted

Business

Advisor


We will see the emergence of new procurement roles…many of which are already emerging in select organizations

Late Majority Early Majority Early Adopters Innovators

Purchase Ops

and content

specialist

Internal business

partner

Supply risk specialist

Supply analytics

specialist

Purchasing /

Supply controller

Technology success

manager, solution

architects

Communications and

social media lead

Innovation scouts

Senior innovator

Digital SME: robotics,

cognitive, blockchain

Advanced analytics SME:

Big data, python, R

(Bring data to life)

What’s different

and new?

Chemists,

physicists,

Market intelligence

specialist

Supply value

optimization

manager

Corporate social

responsibility activist

Smart contract coders




business strategy

Data and analytics

form the foundation



Omni-channel,

personalized

stakeholder

experience

Digitally

enabled

procurement

workforce

“Smart”

orchestration

of source-to-

pay services

Ecosystem of

networked

solutions



Mainstream Technologies

21%

40%

67%

63%

60%

79%

42%

35%

14%

21%

23%

9%

63%

74%

81%

84%

84%

88%

Socialmedia/collaboration

Mobile computing

Data visualization tools

Advanced analytics

Master datamanagementtechnologies

Cloud-basedapplications / SaaS

Mainstream adoption Limited adoption

Mainstream and emerging technologies provide an opportunity to redesign how procurement delivers services to its stakeholders

7%

17%

16%

33%

30%

28%

26%

35%

23%

33%

35%

43%

51%

56%

63%

Blockchain

Virtualassistants/chatbots

Cognitivecomputing/artificial

intelligence

Internet of things

Robotic processautomation

Mainstream adoption Limited adoption

Emerging Technologies

Source: Key Issues Study, The Hackett Group, 2018Projected adoption next 2 to 3 years


Execution of the sourcing process for example is and will be significantly impacted by emerging technologies

Source: Keelvar Intelligent eSourcing presentation

Auto-configure complex bid sheets

Auto-execute early stages

of sourcing process

Reduced cycle time and award optimization


Problem:

▪ Identifying risk exposure at a specific contract level to particular risk events can be a time consuming an manual process requiring the manual review of contracts for identification of specific language or clauses tied to a particular risk event. Auditing for these risk events can be triggered by regulators, market events, management requests, etc.

▪ Redlining of contracts on supplier paper or responding to redlines from suppliers on a buyer’s paper requires a significant level of time commitment from lawyers and procurement practitioners as they read through the contracts or redlines.

▪ Understanding the overall level of risk associated with a contract can be difficult to quantify leading to overly aggressive terms and conditions which often extend the contracting process. It also makes understanding overall risk across contract difficult to understand.

Solution:

▪ Company is piloting Smart Contracts using Seal Software in conjunction with their current SAP Ariba platform. The solution using AI and Machine Learning to make suggested redline edits to supplier paper, respond to redlines from suppliers and update clauses library as contract changes are made. The solution also can search the contract repository for patterns of terms which would indicate a particular risk exposure as well as summarize risk levels against the overall contract.

Smart contracts will also change the way procurement approaches the contract management process

Case study: Large global software provider pilots smart contracts


Case Study: RPA @ Bosch Services Solutions: Example Indirect Purchasing

Process

Manual Process

Processor - 2

Follow up & escalation

8

STEP

Processor - 1

i-cockpit / SAP Download

1

STEP

Processor - 1

Import data to Access Tracker &

Allocation

2

STEP

Processor - 2

Shopping Cart Validation

3

STEP

Processor - 2

PO Creation

4

STEP

Processor - 2

PO transmission to Supplier

5

STEP

Processor - 2

Update Access Tracker

6

STEP

Processor - 2

Discrepancy Resolution

7

STEP

BOT’ified Process

Processor - 2

Follow up & escalation

8

STEP

Robot

i-cockpit / SAP Download

1

STEP

Robot

Import data to Access Tracker &

Allocation

2

STEP

Processor - 2

Shopping Cart Validation

3

STEP

Robot

PO Creation

4

STEP

Robot

PO transmission to Supplier

5

STEP

Robot

Update Access Tracker

6

STEP

Processor - 2

Discrepancy Resolution

7

STEP

Scope Status

| 36© 2017 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Source: Robert Bosch, reproduced with permission

▪ Process: iBuy (PR-to-PO)▪ Countries: 7 (US, MX, BN, FR, PT, SP, UK)▪ # of SAP P-Systems: 45▪ Provided by Bosch in-house Center of Excellence in RPA

▪ PoC started 03.2016, LIVE since 08.2016

▪ Zero Defects reported by quality team

▪ 82% pass-through success; 44% efficiency realized




business strategy

Data and analytics

form the foundation



Omni-channel,

personalized

stakeholder

experience

Digitally

enabled

procurement

workforce

“Smart”

orchestration

of source-to-

pay services

Ecosystem of

networked

solutions



Supplier Relationship Management has always been important, but objectives and practices need to evolve and extended across the ecosystem

Traditional SRM Goals/Model

▪ Establishing an enterprise wide and coordinated SRM

program

– SRM Center of Excellence (COE) for process

management

– Dedicated SRM staff versus part time

▪ Utilizing broad and holistic supplier measurement

systems

– Addressing the execution of key business outcomes and

capabilities

– Focus on strategic suppliers, not all suppliers

– Supplier metrics integrated with category management

metrics

▪ Focusing on being better customers

– A “Voice of the Supplier” feedback process is utilized

– Supplier development resources are provided to help

suppliers

Source: SRM Book of Numbers, The Hackett Group

Next Level SRM Objectives

▪ Facilitating supplier engagement

– Structured buyer-supplier senior executive relationships

- “supplier advisory boards”, best practice sharing

– Extracting new ideas and technologies before

competitors

▪ Creating an explicit gain sharing and mutual cost

reduction environment

– Suppliers as the key to growth

▪ Leveraging enabling technology

– “CRM for SRM” functionality for supplier account

management

– Collaborative workspaces and applications

– Supplier portals for supplier self-service information

management – with attention to ease of use

▪ Engage a broader ecosystem of connected partners

– Financing, research, data enrichment, etc.


Ultimately: Driving innovation from the value chain is key to enterprise innovation

Hackett Findings:

▪ Procurement’s enablement of the innovation cycle are critical to the enterprise

▪ Value chain partners are deeply entwined in enterprise innovation and in some cases are the

main source of product innovation in globally integrated supply chains.

▪Managing value chain partners’ involvement is ranked as the most effective of all innovation-

enabling practices.

▪While fewer than 50% of procurement groups have adopted supplier innovation practices, close

to 80% of those groups consider it to be effective.

“We need to deepen Procurement

skills related to how our suppliers’

products and services get

embedded in our solutions/

portfolio”

“The better the supplier understands the

stakeholders’ requirements, the better they are

able to provide Procurement with the most

useful information to communicate the

information of the value internally. Ask more

questions.”


Past Hackett studies have shown that Top Performing Supplier Relationship Management organizations deliver greater value to the bottom line

5.00%4.13%

3.60% 3.37%

1.20%2.48%

1.93%2.90%

Peer Group Top Performer Peer Group Top Performer

Cost Savings/Avoidance FromSRM

Cost Savings/Avoidance fromSourcing

Total monetary value delivered from SRM processes as a percentage of total spend

Currently In Three Years

“As global sourcing finance head, I monitor the financial performance impact of global sourcing on top and bottom line. Of the overall

benefit pie, we are now starting to see shift toward higher cost avoidance contributions compared to P&L savings. We are just kicking off

a more centrally driven SRM program. I think that not only will a robust SRM program drive the next wave of savings…”

The Hackett Group SRM Study, 2011

Note: Hackett data shows that cost

reduction typically is 75% of overall

savings




business strategy

Data and analytics

form the foundation

Hackett introduced a digital transformation framework for Procurement to help clients think through their strategy


Omni-channel,

personalized

stakeholder

experience

Digitally

enabled

procurement

workforce

“Smart”

orchestration

of source-to-

pay services

Ecosystem of

networked

solutions



Fundamentally, it is about harnessing big data from internal and external sourcing to evolve across the five levels of business intelligence

Optimization

Predictive modeling

Forecasting

Simulation

Alerts

Query/drill down

Ad hoc reporting

Standard reporting

Com

petitive a

dva

nta

ge

Complexity

AnalysisWhy did it happen?

MonitoringWhat’s happening

now?

ForecastWhat might

happen?

PredictThe probability of it

happening?

ReportingWhat happened?


Case study #2

What is it?A combination of Statistics and Data Science enabling

computers to learn and identify patterns without being

explicitly programmed

Machine Learning

Program ComplianceDetect agreements that should

be part of a Procurement

sanctioned program

Supplier PO ConsolidationDetect similar supplier books

of work that can be

consolidated

Similar Deals SearchDetect similar deals during

negotiations

ForecastingWhat will it likely be?

PersonaHow is it clustered?

DetectionIs it one or the other(s)?

Is it an anomaly?

Is it one or the other(s)?

What will it likely be?

How is it clustered?

Is it an anomaly?

The 4Q’s ML Can Answer

Employee Hardware RefreshPredict & Forecast up and

coming asset refreshes and

which assets will be purchased

Sourcing PipelinePredict & forecast up and

coming sourcing events to

better allocate resources

Programmatic Spend & Volume Predict & Forecast Spend & Volumes

for a Procurement program allowing

for a proactive approach

Supplier PersonaIdentifying distinct

groups of supplier

segmentations Traveler PersonaIdentifying distinct

groups of MS Travelers

Case Study

Source: Microsoft, Hackett Best Practices Conference Atlanta, 2017


An analysis of analytics related initiatives in procurement based on level of adoption show that master data management efforts are foundational and ongoing

Analytics Initiatives By Life-Cycle Stage

23%

23%

31%

15%

19%

19%

19%

19%

31%

58%

46%

35%

19%

31%

24%

31%

31%

46%

19%

19%

46%

73%

38%

43%

35%

27%

4%

4%

8%

12%

14%

15%

23%

Develop or improve capability to analyze different structured and unstructured data types

Develop AI/cognitive computing based predictive analytics capability

Acquire or develop new analytical talent and skills (e.g., data scientists, analysts, data management)

Upgrade or adopt advanced new analytical toolsets to support procurement analytics

Establish or improve data stewardship, data governance and Master Data Management (MDM)

Redesign and implement modern data architecture (e.g. data lakes, data warehousing)

Develop or improve data visualization capability level

Consolidate and/or rationalize existing analytical tools used in procurement function

Establish procurement analytics center of excellence

No imminent plans Exploring Ongoing initiative Completed initiative


Key takeaways

▪ Procurement FTEs and budgets continue to grow at a much slower pace than most company’s

revenue and growth targets. This is creating an efficiency and productivity gap.

▪ In response to this growing disconnect, procurement continues to indicate a new sense of urgency

around digital transformation initiatives. How can procurement transform its operations to do more

with less -- at a higher level of quality and responsiveness?

▪ The first order of business is to create a digital transformation strategy… and from there a

framework.

▪Hackett’s recommends organizing the framework around these key themes: accelerating digital

transformation, building stakeholder value, establishing a supplier ecosystem, and delivering

business intelligence as a core competency.


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others. As a result, the information contained herein, including, information relating to

The Hackett Group’s data, equipment, apparatus, programs, software, security keys, specifications, drawings, business informa tion, pricing, tools, taxonomy, questionnaires, deliverables,

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