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The results of a global procurement transformation – a use case!

by | Sep 29, 2020 | Procurement Excellence, Procurement Strategy

Blog

The results of a global procurement transformation - a use case!

Introduction

Last week part 1 of the global procurement transformation was published with focus on the pre-phase and first year of the transformation.

AIE company led the transformation in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved. The whole transformation team was a colleague interim manager, a high potential of the company, strongly supported by members of the leadership team, the board and people in procurement.

Overall results, both financially and non-financially, in the first year exceeded expectations, which helped to create trust and confidence in the function and the transformation.

This week’s post is about the second year of transformation and the final results.

 

Transformation focus in the second year

Early in the second year of the program the decision was made to move to a global procurement organisation. This was part of a wider strategy and governance discussion. A business case was submitted to set up a global procurement organisation and a proposal for its geographic location. These were approved by the board and leadership team at the end of Q1 2018. A small project team with HR, management leadership and AIE company was set up to make the global procurement organisation happen in the chosen location.

Further the contracting and implementation of a procurement system infrastructure, a Contract-to-Pay system fitting to the already contracted Source-to-Contract software was decided for. This was based on the preparation (design and business case) done in 2017 and early 2018.

Meanwhile category management initiatives accelerated covering a substantial part of the international spend. The ones started in the first year started to yield and result in larger framework contracts.

All this happening on top of the initiatives running from year one: performance management on a monthly basis, executing the procurement self-assessment for the second time and to monitor overall progress of the transformation, updating roadmaps and implementing the initiatives in the country purchase plans, ongoing category initiatives in a number of selected areas.

 

System landscape: Source to Contract and Contract to Pay

Many activities were initiated in 2018 to progress the implementation and use of the Source to Contract system. The quality of the realised spend database was improved and reporting of spend data moved to a monthly frequency (from quarterly). Supplier life cycle, contract life cycle and e-sourcing were made available to all BU’s. Some already used the these actively. Vendor masterdata were defined as part of the structural implementation of the supplier life cycle module and future contract-to-pay system. Supplier and creation of supplier master data was connected to the usage of the e-sourcing module. New suppliers were onboarded to make a start with harmonisation and enriching supplier master data. Contract management and contract master data were formulated for later implementation. The new procurement organisation had master data management within the function as no centralised business services and data management was in place yet.

For the contract-to-pay system, the design of purchase channels and a plan for implementation was created. Tenders and negotiations resulted to the choice and the related integrator support, mid 2018.  This gave a 6 months preparation after contracting to realise a detailed design for a go-live in selected pilots early 2019.

 

Setting up the global team and recruitment program

Evaluation of different locations on a multitude of criteria resulted in the decision to locate Procurement in one of the larger business units. Jointly with HR and a global recruitment company a recruitment program was set up to assure diversity in all aspects. In Q2 a tender was sent out to a number of recruitment companies to support the realisation of the global procurement organisation during the summer months before the end of the year. Scope was to recruit #15 vacancies with:

  • global procurement director,
  • global category managers
  • a procurement excellence team with business intelligence, contract management, high level functional excellence managers and a master data department (decided to keep in Procurement)
  • two heads of procurement in two different countries.

Further the organisation would be strengthened locally with another 8 people in 2018 on top of the 22 already hired in 2017.

 

After approval of the plan by the Management Board a novel recruitment campaign was initiated to support the right image building for procurement in June 2018. At the core of the campaign was an employer value proposition and different recruitment channels such as linkedin, personnel networks, wechat and the channels of the recruitment company. Within 3 months 60 specialised procurement professionals were selected from a much larger number by initial screening on personal presentation in a call, resume content, renumeration wishes, diversity and mobility. All candidates were interviewed minimum 2 times after which 15 finally were appointed. The new organisation started end of 2018.

 

Transformation wisdom?

  • Top management commitment and them having a professional stake in the transformation is essential
  • Reaching out and connecting to other functions, building internal alliances with mutual benefits is key
  • Baselining and creating a roadmap will help to validate the ‘need’ and ‘direction’

  • Make sure the transformation delivers business results (financial and non-financial) for BU leaders
  • The function as ‘change agent’ is okay, with strong support of the people in the function,  but be aware not run miles ahead of the pact
  • Working on results and securing enablers need to go hand in hand to sustain the change
  • People make the difference.
  • System development, digitization is key
  • Emphasize communication and a clear value proposition, formal and especially informal.
  • Make the function attractive. Ability to attract diversity mirrors the attractiveness of the function.

 

 

Procurement Interim, transformation and advisoryOffering - procurement assessment

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....

Transforming global procurement – a use case!

by | Sep 15, 2020 | Procurement Strategy

Blog

Transforming global Procurement - a use case!

Introduction

This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved. The whole transformation team was a colleague interim manager, a high potential of the company strongly supported by members of the leadership team, the board and people in procurement.

This post will give insight on the approach and the interventions within the first year. Next week’s post will describe the second year of the transformation and its results.

 

Intake and startup

At the intake the simple questions in the board conversation were ‘can we get more out of our supply base and procurement?’ and ‘can you recognize a good procurement professional?’.

Simultaneously with these questions there were also expectations for more cost savings, establishing a professional procurement organisation, implementation of category management and strategic sourcing, certain system implementations, more focus on sustainability and implementation of business ethical codes as well as compliant processes.

We discussed a fully decentralized business with 15 significant business units and at that time an unknown level of indirect spend, estimated to be close to 1 bln Euro.

Procurement position in the business units ranged for some close to being business partner, most as very operational, and for some even with no presence of procurement as a function. Most purchase managers reported to the CFO or the Operations MT member, only a few were part of the local MT.

 

The answers to the board’s simple questions were ‘two times yes’. The transformation scope was defined in four stages as finding, delivering, enabling and sustaining value via:

  • people and talent management, standardized functions, function house, competences and recruitment
  • developing and uplifting the procurement capabilities via training
  • strategic sourcing and category management
  • performance measurement
  • working collaborative in a more x-functional manner in the wider organisation
  • digitizing procurement with focus on spend, master data and implementing a new procurement system for Sourcing to Contract and for Contract to Pay

Supplier relationship management, professionalization of contract management and supplier enabled innovation were not part of the  transformation scope for the first two years.

 

Already an initiative had started to roll out a global spend database (finding the value) and external support was used for the first category initiatives, demonstrating the leverage opportunities and costs savings available (delivering the value).

The governance of the program was kept simple with a steering committee consisting of a board member, strategy director and the transformation team members (#3) that met on a monthly basis.

 

PRE-PHASE of the transformation

In the pre-phase of the transformation, many CEO’s and procurement colleagues of business units were visited and connected to. This resulted in an array of ‘procurement concerns and ambitions’ that in a later phase were integrated in the overall roadmap for the transformation.

Colleagues from internal audit, finance, HR, legal were immediately involved to discuss how the procurement transformation could align to their functional programs and how they could support some of the transformation initiatives. This led in some cases immediately to opportunities for supporting the transformation.

Implementation of spend transparency got full attention as it also gave the basis for a first estimate of attainable savings and category initiatives.

In the first months in each business unit a procurement maturity assessment  was held to define a baseline. This was completed by MT members and the procurement managers in each unit.

 

Based on the results of the baseline assessment the leadership team was given feedback and got insight in the ambitions for procurement. The leadership approved that a roadmap with milestones had to be created by all business units within the first half year of the transformation. These roadmaps linked to the initiatives of the overall transformation.

The model used for capturing the results of the baseline assessment over de different years had 8 modules for three strategic areas as displayed in figure below.

 

 

This post describes a selection of initiatives in the first year.

 

FIRST YEAR transformation elements

Support and commitment Management Board and leadership business units.

Extremely important during the whole period was the support of the board and the leadership team and not to forget many other colleagues in the organisation. The transformation was one of the leadership initiatives (besides IT, Innovation and HR) to create more value resulting cross BU collaboration. Even when the procurement transformation was shifted to different board members during first two years, the crucial support was always there.

Another important success factor was to include in the personal targets of the BU CEO’s a quantitative (savings related over a 3-year period) and two qualitative targets (roadmap and purchase plan 2018) for Procurement fitting the transformation roadmap.

 

Functional leadership team

Part of a larger communication plan a ‘procurement leadership team’ with monthly remote meetings and one f2f meeting per year was established. In this team the updates of the category initiatives and the overall procurement transformation were shared and decided upon. The procurement leadership team for the larger part strongly supported the initiatives of the transformation. They saw the uplift of their function as a major opportunity. One of the main challenges was to manage the increased workload, as new things were expected and ‘old things’ did not disappear.

 

People and professionalizing the function

The incumbent population showed a large diversity in terms of professional levels where functions related to transactional activities dominated the numbers. Early days in the transformation core procurement processes and the related functions were defined jointly with HR. This included describing standardized functions profiles with relevant competences, a function house and first set of trainings to create a common language, to bring newcomers up to speed and to adjust the level in core procurement practices.

It was decided and supported by the board and the MT leadership team to recruit new and future procurement leadership (#22 people) in the different countries in 2017. Which was done. This allowed to strengthen the organisation and to bring in knowledge from external and young talents. The recruitment which was done locally was supported centrally and based on the newly agreed function profiles and the competence framework.

Further to strengthen the organisation, category management trainings started for all commercial procurement people. All procurement leaders in the countries were requested to participate in this training as well. It was important to establish a common sourcing methodology and a way of working in procurement,

 

Spend analysis and digitization of the function

Transparency of spend was realized mid 2017 over most countries and resulted in an estimated savings potential. Some countries started at the same period with e-sourcing. With the same software supplier a global framework agreement was concluded for spend, e-sourcing, supplier life cycle management, contract life cycle manager in 2017 to support the Sourcing to Contract process. This enabled financially a lower threshold for the business units to start with these modules. In 2017 and 2018 the focus was on spend cleansing, creation of better spend data, moving to monthly spend reporting, e-sourcing and onboarding suppliers with the defined master data and compliance checks.

 

Performance management and functional KPI dashboard

Together with finance a performance management system was developed with a number of simple rules around savings calculations, approval of those and reporting by the finance organisation. In different remote meetings both the procurement teams and the finance teams were trained in the usage of the performance management systems. In the second half of the year some improvement and simplifications were applied jointly with a workgroup from finance.

The monthly reporting of savings and some other KPI’s was shared with all business unit MT’s. This report tremendously supported the interest and awareness of the transformation from mid 2017.

 

Legal documents

Together with the legal council a number of legal documents were prepared to support the outcomes of category management initiatives. There was a need to have cross-bu documents under international law with signing rules that replaced the local BU documents. Most important were documents like framework agreements for services and goods, NDA’s and general terms and conditions of purchase. At that time already taking into account GDPR and Data security aspects for relevant supplier categories.

 

Internal control and process compliance

In the first year, a number of internal controls were defined for the internal control framework that related to the most important risk areas for the company. Initially this was mainly in the Contract-to-Pay process and related to order authorization and processing as well as invoice checks and payments. This supported in a later instance to work together with the business units to define the right processes, functions and controls in procurement and as such uplift the maturity of procurement in the self-assessment.

 

NEXT PHASE – second year of the transformation

Next week the second part of this transformation journey will be published.

You can read then more about the resulting organisation structure, the focus areas and results in year two of the transformation.

 

Procurement Interim, transformation and advisoryOffering - procurement assessment

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....

Supplier Enabled Innovation – where Business, Supplier and Procurement leadership contribute to open innovation!

by | Aug 26, 2020 | Procurement Excellence, Supplier Innovation

Blog

Supplier Enabled Innovation: where Business, Supplier and Procurement Leadership contribute to open innovation!

 

This is the third article this month on Supplier Enabled Innovation.

The other two you can find by clicking on these links: Supplier Enabled Innovation: early involvement not always! and Supplier Enabled Innovation Key Success Factors.

 

Next month the topic will be on changing a procurement organisation.

 

Open Innovation Programs struggle to deliver

Open innovation programs struggle to meet CEO’s expectations. According to a McKinsey publication, 84% of the executives say innovation is important to their growth & strategy, however only 6% is satisfied with their innovation performance. What has 20 years of open innovation programs delivered to the companies running these programs? And what has been the contribution of the supply base to these results?

 

Suppliers’ companies are running similar open innovation programs like your company. Depending the industry, they invest 2-13% of annual revenue in their R&T and Innovation efforts. For sure most of this goes into improving the current portfolio, expanding markets and applications, usually >75% of budgets. However, if they can adapt, transform their businesses, they will also be looking at trends and developments that might disrupt their business. And it will be in these areas that they will be embarking on more ‘uncomfortable’ innovations which are normally described as adjacent (product + service) or transformational innovations (customer experiences).

How good is your company with an open innovation programs accessing these resources and funds of suppliers? In general we can conclude that the bulk of the companies is still not successful. Of course, there are several well-known and often quoted cases. However, most companies struggle. Why is this? Here I would like to discuss a few reasons.

 

Supply base and partnership opportunities need a larger piece on the  business agenda (albeit only resulting the COVID-19 crisis)

First, most CEO’s are customer focused and focus on top- and bottom line, M&A, asset utilization and their own core (technological) capabilities. Simultaneously this often coincides with a blind spot for what they could expect as a customer from their supply base, apart from cost reductions/increases and risks. In an increasing complexing world, the need to source capabilities, technologies, new developments from trusted business partners is increasing. The COVID-19 crisis has shown this. Business leaders need to commit themselves structurally for a mere part of their time to get involved in the relations of strategic supply partners and prospective suppliers as this would help to access the funds and resources for innovation. Value chain and network thinking also requires business managers and CEO’s to reshuffle their agenda to make sure that they also know their top 10 trusted and value generating suppliers as well as their strategies and related R&D programs. 

  

Open Innovation Programs could leverage existing partnerships more  

The second reason is that open innovation programs tend to focus on venturing, startups, scalers, universities, incubators, new business areas, licensing and of course building an open innovation culture and excellence program.  Relations with outside partners, start-ups (different stages of seed funding) are having their own challenges. Although technologies are often promising, hurdles like scaling up to regional or global roll out, IP agreements, non-matching cultures and large corporates too often engaging with a m&a mindset make these relationships in the least particularly challenging. Arguing that speed is needed, efforts to circumvent procurement are common. Engaging outside partners, jointly with procurement, including an increased focus on current strategic suppliers with focus on developing new and more strategic supply relations as an outcome might be for many open innovation programs an addition to the journey to increase success.

Procurement needs dedicated resources 

The third reason is where I address the Procurement leaders and professionals. Results of open innovation programs require strong support from procurement. Setting up a supplier enabled innovation program in any organisation and any industry is giving the speed of change an absolute necessity. Happily, we see already for years the importance of supplier enabled innovation reflected in the annual reported CPO’s top priority lists and a growing number of successful companies that embarked on this journey. Granted, not easy to do this successfully given the agenda where digitisation, talent management, complexing supply chain, daily operational issues, sustainability, driving supplier relationship management and continuing realisation of efficiency and cost reduction are already taking up so much of the headspace. Today I simply emphasis that supplier enabled innovation deserves dedicated resources, extra efforts, and x-functional resources to work with your strategic suppliers. At the same time, it needs rethinking of governance and operating models in which category management and the transactional process (even when located in business services) very often still dominate. Procurement leadership team needs to make it part of their agenda to work structurally with business leaders and the leadership of their key suppliers. Only then we shall see progress and value created from supplier enabled innovation.

 

If you are interested to discuss in detail, get support in starting up, improving  or designing your supplier enabled innovation or partnership activities, feel free to contact.

Next article will zoom in on transforming a global procurement organisation. 

 

Supplier Enabled Innovation and PartnershipsProcurement Transformation

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....

Key Success Factors for Supplier Enabled Innovation and …….

by | Aug 13, 2020 | Supplier Innovation

Blog

Key Success factors for supplier enabled Innovation and ......

Without attention for key Success factors SEI stalls

Following the post of 3rd August on ‘Early Involvement- Not Always‘, this one will zoom in and list Key Success Factors for Supplier Enabled Innovation. Why are they key?

Most likely not taking these factors in consideration and embedding them in your program and organisational governance could stall or even fail a procurement function to embark on the journey of contribution to company innovation and creation more value. Check it out for yourself, I listed the following:

Checks and balances

Are all these factors equally important in every phase from starting up a program or being in the phase ‘business as usual’? No probably not.

Is this list complete? Probably not either and let me know what you miss.

 

What is valid for SEI, also applies for Sustainability and Partnership programs

Further I would argue that these critical success factors are not only valid for a supplier enabled innovation program but also for a supply chain sustainability program and for a partnership or supplier collaboration program. Albeit all of these should be built on a strong foundation of methodological and cultural aspects of supplier relationship management.

If you are interested which methodological and cultural aspects, you can always contact me.

AIE company

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....

Promore and AIE Company sign agreement to join forces for digitization in Procurement

by | Aug 10, 2020 | Digital, Startups

Blog

PROMORE and AIE company sign agreement to join forces for digitization in Procurement.

 

Both companies share the ambition and vision to accelerate digitisation of procurement activities with smart technology and algorithms.

 

Together we bring:

  • COMPETENCES in procurement, smart algorithms, automation, transformation, digitisation journeys and process knowledge.
  • CAPACITY, RESOURCES and energy to collaborate and deliver you a Proof of Concept.
  • PARTNERSHIP and hands-on mentality to co-develop the right solution for you in your digitisation journey.

Many years I have supported and led procurement transformations to improve ROI, professionalization and digitization of activities.

I have been advising, training leadership teams, giving key-note speeches on supplier enabled innovation, sustainability, strategic sourcing and target operating models.

The undercurrent was always a spirit of outside in, connecting to suppliers, stakeholders and people in procurement to work together on meaningful and rewarding activities.

Many times it appeared difficult for organisations to dedicate resources and create budgetary space to enable fast progress on value creation and next generation initiatives.

Startups and young new companies are changing the supply markets for procurement as well as they are changing the profession.

 

Among these, I am convinced PROMORE is definitely addressing areas that are always troubling buyers and category managers in procurement and demanding resources that are not available: eg, Last minute urgent, repetitive negotiations where escalation makes them important and resources heavy. With a too big spend for company cards and yet too complex for catalogues.

 

For me the agreement and collaboration with PROMORE means hands-on working on the vision and ambition to further digitize procurement and simultaneously to enable procurement to deliver more value and more agile.

 

Are you as CPO, Head of Procurement, Procurement Excellence or Procurement IT interested to discuss how we could collaborate to digitize part of your spend, delegate activities  non-strategic routine more to suppliers and stakeholders and realise compliance and connection to P2P process, please contact us for a demo ( https://promoresolution.com/demo/).

 

Galina Gorshkova  – Promore

Harm Veerkamp – AIE Company

Transforming global procurement – a use case!

Sep 15, 2020 |

Introduction This is about a global procurement transformation executed in the period 2017 until end 2018. AIE company led the transformation with interim management in a hands-on, shoulder to shoulder manner with the business units and functional leaders involved....