CPO Corner – Is Procurement Getting Better, Or Just Older???

by | May 10, 2023 | Procurement Operations, Strategic Sourcing, Uncategorized

By Steve Miller – https://www.linkedin.com/in/stevemiller-coo/ Mike Nolan of SourceSuite.com noted that “the first traces of procurement can be seen throughout ancient history, including the Egyptians in 3,000 BC.”1 Jose Ignacio Lopez de Arriortua made a company’s lead procurement role both famous and infamous over 30 years ago by first helping GM to “save billions of dollars” and then being “charged [by GM] that he had absconded with 20 boxes of top-secret documents.”2 Is it surprising, then, that after thousands of years of practice and 30+ years of high visibility that most CEOs and CFOs up until 2020 believed their procurement functions were either world class, or at least adequate, for the business challenges they might face? These executives learned from 2020 to 2023 what many top procurement experts already knew: you can find stars and strategic executives in procurement, but overall, it is a function very early in its transformation toward functional excellence. Most business executives don’t understand what excellent procurement looks like. As an example, a Fortune 100 CEO in 2019 said this about the value of having a head of procurement: “if we can buy things like pencils for a cheaper price, then why not?” It probably is not a surprise that in 2020 this company saw its direct operating and SG&A costs increase over $400 million, almost all of which dropped to the bottom line in terms of reduced operating income. Kearney’s 2022 Assessment of Excellence in Procurement study found that leaders, compared with their industry peers, generate nearly 2x more total shareholder return, rebounded 3x stronger through COVID, and contributed 200 basis points more to...

Digitize Source-To-Pay For Improved Efficiency, Visibility and Accuracy

by | Feb 8, 2023 | Procurement Operations

Digitization of strategic procurement processes and capabilities has been the biggest advance in the world of procurement over the past 10 years. This enablement allows companies and their suppliers to be more efficient, effective and accurate and hence significantly adds to increasing value across the extended enterprise. Read how a global oil services company went about improving the digitization of the source-to-pay process after a merger. SITUATION OVERVIEW When the CFO heard the procurement team explain the importance of a software portal for suppliers to register and manage their banking and payment information, he had an “ah-ha” moment.  Realizing a similar need for the company to register and use their customers supplier portals to ensure proper payment through the order-to-cash process, he understood the efficiency of the same process for a supplier portal to manage the company’s suppliers.  This “ah-ha” moment provided the procurement team with a way to align with the CFO and other executives to continue developing their source-to-pay digital strategy.  As a result of a recently merged global oil services company with over $3 billion in annual revenue, the procurement team needed to implement a digital system to support the purchasing requirements across multiple business units and ERP systems.  This need was driven by two factors.  Frist, because of the merger, prior procurement software licenses expired and second, the newly merged entity started to experience significant operational problems processing supplier payments.  These factors had a cascading impact on the central procurement’s team capability to manage supplier relationships necessary to meet delivery and cost reduction goals.  Given these factors, executives including the CFO, COO, CIO and VP...

Pandemic Spurs P2P Improvements For Greater Efficiency and Effectiveness

by | Feb 2, 2022 | Procurement Operations

A global Cruise Line company with multiple brands faced with limited resources post-pandemic was looking to improve the efficiency and effectiveness of their P2P processes in preparation for a full return to service.   They hired OnDemand Professional Network member Alvin Wong to help them with two challenges:  1) to analyze, assess root-causes, and help address a backlog of unpaid supplier invoices, and 2) to develop a P2P roadmap to improve the process. SITUATION OVERVIEW During the pandemic, an unintentional backlog of past-due invoices, changes in leadership, and the reduction of resources resulted in an urgent need for help to address issues and establish a “roadmap” to improve the organization’s P2P processes. Although the predominant number of invoices were paid on time, there were hundreds of invoices past due over 60 days, with many over 120 days, the company was at risk of being cut-off by suppliers.  The invoices were not past-due for a lack of company funds, but rather for validation and confirmation by purchasers before payment.  Something was failing in their P2P process and any findings were to be incorporated into a “roadmap” for a recommended P2P modernization plan. APPROACH Working with Finance, Sourcing, Technical Operations, and Supply Chain Procurement, we conducted a series of past-due invoice reviews, stakeholder interviews, and process and system mappings.  Using the findings, we analyzed root-causes of the past-due invoice problems, implemented changes, and identified various opportunities to incorporate into a “roadmap” to improve P2P processes and systems. CRITICAL SUCCESS FACTORS Fact-Based Data-Driven Analysis and Findings:  Commit the time to smartly collect and analyze data first to avoid wasted efforts solutioning the wrong...

Procurement Organization Redesign – Setting Up For Strategic Cost Savings Drive

by | Oct 22, 2020 | Procurement Operations, Strategic Sourcing

A major industrial gas company’s North American Procurement Organization transformation journey highlights the importance of proper alignment to achieve significant and sustainable results. A major industrial gas company’s North American business aimed to significantly increase savings from their strategic procurement activities.  The company understood that in order to achieve their goals, they needed to re-align and optimize the Procurement Organization to fully harness its capabilities.  They hired a small team of consultants led by OnDemand Professional Network member Steve Strickman to significantly upgrade the function. Situation Overview: The company had a centralized transactional procurement team but lacked spend transparency and strategic sourcing skills.   Procurement was not seen as a value-added leader that could bring critical Sourcing and Cost Management expertise, which caused fragmented and localized execution of procurement activities across the company.  Driven by the new cost reduction mandate Senior Management’s goal was to upgrade Strategic Procurement across-the-board by building out a new organizational structure and strengthening its capabilities.  Approach: The Consulting Team first performed an assessment of the Procurement function, and the company graded poorly along seven high-level Procurement “success dimensions”:  Change readiness/willingnessStaff motivation and empowermentStructural alignmentSpend transparencyMeasurement and reportingBusiness process managementProcurement data capture and tools Understanding the current state was important in the successful re-design of the organization.  Among other things, the Team uncovered significant “Shadow Procurement” activity – procurement being executed by non-Procurement staff – that was causing significant downgrade in opportunity to save money and increased cost by excessive use of personnel resources (several dozen FTEs). The approach followed a proven concept – Current State Analysis/Gap Analysis/Future State Design across People, Process and Technology in...

Building Strategic Procurement Function – National Sporting Goods Retailer

by | Jun 29, 2020 | Procurement Operations, Strategic Sourcing, Uncategorized

SITUATION OVERVIEW National Sporting Goods Retailer desired to build a highly functioning Strategic Procurement organization. They hired Kas Chupa, a member of the OnDemand Professional Network as the new Chief Procurement Officer to drive this effort. Kas was tasked to build a procurement organization with the capability of sourcing $550M of Indirect Goods & Services, Capital Equipment and some Direct Goods for resale and implement year over year savings programs. DISCOVERY & EVALUATION As the new CPO, Kas interviewed all business unit leaders to introduce himself and to get their perspective on what they expected from Strategic Procurement, to understand their business goals and objectives for the coming year(s) and discover how their respective procurement activities were being executed currently. Part of the evaluation phase was to uncover quick win opportunities, prepare the business for the upcoming organizational changes and the timeline for those changes, as well as the Mission and Vision for Procurement within the company. The interviews and data collection revealed the following: All buying was being executed within the various business units by non-procurement individuals.All contracts we being negotiated and signed by the business units with limited to no legal review.There were multiple payment channels, and close to 100 different payment terms. EXECUTION & BENEFITS The CPO quickly engaged external consulting support while he was building internal procurement capabilities. The key focus of the consultants was to work with the business and build strawman sourcing plans and pipeline of quick wins. While focusing on quick wins to demonstrate the value of strategic sourcing and procurement, the CPO built the procurement team with internal resources, with a...