The rapidly changingenvironment forIndirect Procurement

22nd June 2016

www.pwc.com

PwC

Welcome and Introductions

2June 2016

David Hodge

Procurement &Supply Chain

PwC

PwC

Today’s objectives

3June 2016

1 Provide a view of what’s happening in the market.

4 Can procurement help fund the cost of the National Living Wage?

The impact of digital and what this means for the future of strategicprocurement.

3

2 How the environment for Procurement is changing and why is itimportant?

5 Allow the opportunity to ask questions of the presenters and the panel.

PwC

Agenda

4June 2016

Time Session Led by

18:30 – 18:35 Welcome and introductions David Hodge

18:35 – 19:00 Strategic Procurement in 2016 Tom Woodham

19:00 – 19:10 Procurement 2020 Jon Gibbs

19:10 – 19:25 National Living Wage – Survey André Langlois

19:25 – 19:45 Panel Discussion

Claire Lawrence (Wilko)Peter Garnett (UCL)

Jon GibbsAndré LangloisTom Woodham

Close Drinks reception

PwC

Strategic Procurement in 2016

5June 2016

Tom WoodhamFCIPS

Procurement &Supply Chain

PwC

PwC

Six key issues driving business change

Digitaltransformation

• Digital continues to be the great disruptor• Operating models need overhaul to bring profitably• Digital evolving beyond e-commerce back through the

value chain

Internationalgrowth

• Emerging market growth engine is slowing• Challenges for traditionally domestically focused businesses

Pressure onmargins

• New channels bringing competition and lower cost• Price deflation now normal in some sub sectors• Increased visibility exposes inefficiency

Managingcomplexity

• Inherent complexity increasing• Companies ill-equipped for new, more complex, environment• SKU reduction no longer enough

June 201614

Licence tooperate

• Demand for resources rising rapidly• Reputation risk in a global model• Measuring and reporting total environmental impact and footprint

Consumerbehaviour

• Move from materialism to experiences• Bifurcation –Selectionists and the Value Conscious• Digitization changing consumers’ shopping behaviour

Procurement 4.0 Framework

June 2016

DigitalProcurementRevolution

DigitalProcurement

Evolution

Base forsuccessful Digital

Procurement

New ProcurementValue Proposition

enabled through 4.0, e.g.

• Procurement as serviceprovider to key suppliersand customers

• Monetization of fieldapplication data withsuppliers

Digital Category &Service

Procurement

Digital Supplierand Supply Chain

Management

InnovativeProcurement Data

Utilization• New categories (e.g.

software, hardware,new services)

• Innovative contractingof services

• Technologies,markets, suppliers

• Supplier RiskManagement & KPIs

• Integrated SC Tower

• Supplier co-creation

• Differentiated supplychains

• Big data analytics

• Predictive market &supplier analysis

• Provide suppliers withfield application dataanalysis to improvedesign & performance

Digital Processes and Tools• Digitization of P-2-P process• BPO and SSC

• Digital Tools & Interfaces• Procurement IT architecture strategy

Procurement 4.0 Organization & Capabilities

1

2 3 4

5

6

• Digital skills and talents• Experts for new categories

• Digital culture and transparency• New media partners in hiring

Trends /Drivers

• Technology

• Competition

• Suppliers

• Changingcompetitivelandscape

• Globalization

• Shareholderexpectations

• Otherfunctions

• Megatrends

• …

Opportu-nities

Threats

PwC

Procurement 2020

8June 2016

Jon Gibbs

Digital Practice

PwC

Tom Woodham

Procurement &Supply Chain

PwC

PwC

Notes

919June 2016

PwC

The Procurement Professional of the Future

10

1 Supply chain collaboration

2 Quantitative risk managers

3 The innovation pipeline for the business

4 A rounded individual who’s more difficult to recruit

5 Intrinsically linked with finance

6 Take decisions based on value rather than cost

7 Deal with Big Data and be trained in advanced analytics

8 Manage the fact that information transparency will make procurement morevisible

9 Work on a global basis, beyond boundaries

June 2016

PwC

National Living Wage

André Langlois

Pay, Performanceand Risk

PwC

@andrerlanglois

June 201611

PwCparticipating companiesJune 2016

12

PwC

Costs

Operations

Risks

June 201613

PwC

Costs

June 201614

PwC

Possible phasing of the National Living Wage

June 201615

PwC

Workforce currently paid below the NLW

Costs

June 201616

PwC

Average cumulative annual cost increase

Costs

June 201617

PwC

Average cumulative annual cost increase

Retail

Healthcare

Hospitality& Leisure

£2m

£2m

£4m

£13m

20202016

£14m

£26m

x 6.5

2020vs

2016

x 7

x 6.5

June 201618

PwC

Average cumulative annual cost increaseLarge employers

Costs

June 201619

PwC

Average cumulative annual cost increaseLarge employers

Retail

Transport &Logistics

Hospitality& Leisure

£10m

£1m

£8m

£60m

20202016

£18m

£53m

x 6.0

2020vs

2016

x 15.4

x 6.7

June 201620

PwC

Payroll cost increase

Average total cost increase compared with 2016 (pre-NLW)

Estimated wage cost increases as a proportion of 2015-16 wage costs

1.1%

2.5%

4.5%

6.9%

9.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2016 2017 2018 2019 2020

June 201621

PwC

Risks

June 201622

PwC

Risks

0%

5%

10%

15%

20%

25%

24% 21% 19% 14%

HolidayPay

Equal payclaims /

gender paygap

Unionnegotiations

Penalties /reputation

damageJune 2016

23

PwC

Operations

June 201624

PwC

Operations

0% 20% 40% 60% 80% 100%

Consolidating pay elements

Increasing prices

Restructuring

Performance management

Assessing equal pay

Benchmarking

Changing pay/grading

Implemented Agreed Considering Not considering

June 201625

PwC

BudgetersDeniers Adapters

Responses

June 201626

PwC

Panel Discussion

27June 2016

PwC

Our Panel

28

André Langlois

Pay, Performance& Risk

PwC

Jon Gibbs

Digital Practice

PwC

Gavin Johnston

OperationalPerformanceImprovement

PwC

Peter GarnettFCIPS

TransformationDirector

UCL

Claire Lawrence

Change Director

Wilko

Tom WoodhamFCIPS

Procurement &Supply Chain

PwCJune 2016

PwC

Thank you !

For further information please contact:

29June 2016

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. Youshould not act upon the information contained in this publication without obtaining specific professional advice. No representation orwarranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to theextent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability,responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the informationcontained in this publication or for any decision based on it.

© 2016 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers to the UK member firm, and may sometimesrefer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Tom Woodham

Director, Consulting

+44 (0)7709 441851

tom.woodham@uk.pwc.com