6 imperatives for CPOs: Intent on driving business performance improvement

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6Imperatives
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for CPOs
intent on driving business performance improvement
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Procurement

• at the heart of the high performing business
• At Zycus, we believe that well equipped
  procurement and supply management or-

ganizations have the power to drive business
performance on both the profit and
revenue lines. But procurement can only succeed
as an explicit driver of business
performance by,
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• Thoroughly understanding the spending needs of
  the business,
• Extracting the greatest possible value from
  global supply markets,
• Building collaborative relationships with
  high-performing suppliers,
• Minimizing supply risks,
• Obtaining both collaboration and correct
  behaviors from the people who spend, and
• Aligning every strategy and activity that
  procurement undertakes with such business per-
  formance measures as cost of goods sold, working
  capital, cash flow, profit, shareholder value,
  market leadership and innovation.
• Becoming that well-equipped procurement and
  supply management organization means re- cruiting
  the right talent into procurement, adopting
  proven best processes and using technol- ogy
  strategically to overcome human limitations for
  processing information remove physical obstacles
  to collaboration ensure efficiency and maximize
  return on investment in procure- ment. To get to
  this vision, CPOs must focus on the six
  imperatives outlined in this paper.

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Visibility

• While the past decade has seen many companies
  make enormous progress in

establishing spend visibility, the coming decade
will see companies taking more
holistic approaches to procurement visibility.
The most competitive procurement
organizations will become capable of connecting
information generated both
internally and externally from many sources,
systems, locations, languages and formats to
create 360 visibility that supports a full range
of strategic procurement activities (not just
spend management and strategic sourcing).
Near-term objectives for procurement executives
are to
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• Fill holes in their solution and information
  infrastructures,
• Ensure that information can always flow easily
  from one solution to the next,
• Ensure data is accurate, complete and structured
  so it can be broken down, recombined and combined
  with external information, on the fly, in
  meaningful ways,
• Adopt global standards for structuring
  proprietary information so it can be paired with
  ex- ternally generated information (market,
  supplier, legal and so forth), and
• Begin imagineering the possibilities that such
  capabilities might yield for formulating in-
  novative/competitive procurement, sourcing and
  supply-base management strategies.

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Global supplier Intelligence
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Global market Intelligence
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Performance Management

Contract Management
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Global legal Intelligence
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Spend Analysis
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Procurement/Financial Performance Management
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Global market Intelligence
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Contract
Managemen
CPO
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e-Sourcing
Financial
Spend Analysis
Performance Management
Fail!
plant
sourcing
Supplier
Performance Management
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Alignment Collaboration

• The strategic imperative for procurement is to
  become the hub the function that

can capture knowledge and information effectively
and efficiently from many sourc-
es, transform and redistribute it where needed.
So, for example,

• Supplier performance data captured from
  operations might be used to predict and mini-
  mize exposure to supply risk,
• Information extracted from contracts might be
  used by finance to improve cash flow,
• Forecasts and other qualitative input captured
  from sales might be used to generate intel-
  ligence about future demand and sourcing
  requirements, and
• Information about supplier innovation captured
  through sourcing RFIs and RFPs might be passed
  along to RD and used there to inform a companys
  long-term technology and product-development
  roadmaps.

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When procurement deploys solutions that enable
knowledge capture and collaborative deci- sion
making, the possibilities for achieving
competitive advantage and driving business per-
formance increase exponentially.
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Utilization
tracking metrics
Templates
Permission control
Presets
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Workflow
Audit trails
Version control
Collaboration support
Project
management tools and dashboards
Configurable
decision
support tools
Automated/
semiautomated processes
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Compliance

• Driving business performance from procurement
  means convincing employees to

line up with and adopt preferred procurement
processes, strategies, standards
and decisions. A recent in-depth Zycus study
covering some 600 procurement
organizations worldwide finds compliance in
general growing from a platform that
combines alignment of objectives, communication,
collaboration and consistent technology adoption.
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Well-engineered procurement solutions drive
compliance by empowering procurement execu- tives
to codify corporate objectives, standards,
workflows and strategies. So, for example, a
contract authoring tool with templates that
incorporate preferred commercial terms and legal
protections creates a powerful platform for
managing legal and financial risk exposure. Con-
figurable filters in a spend analysis tool make
it easy for procurement executives to promote
specific strategies. One year, for example, the
analytics tools may promote supply-base ra-
tionalization while the next year they promote
supply base globalization. Likewise, a decision
optimization tool for e-Sourcing might be
weighted heavily in favor of suppliers who
perform best on the product quality metric,
preventing sourcing professionals from
overemphasizing cost in a business enviroment
that values product quality more highly. Of
course, relying on solutions to promote
compliance assumes people can easily adopt and
use the solutions.
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Adoption

• Procurement needs technology both to standarize
  and accelerate processes and to

overcome human limitations for processing
information in a highly complex, global
economy. But simply investing in technology is
not enough. Successful procure-
ment organizations must also be capable of
driving broad adoption and consistent
use of procurement technologies at all levels of
business enterprises and supply networks. And,
while alignment and collaboration may go a long
way to supporting adoption of procure- ment
disciplines, processes and technologies, a
technologys usability seals the deal. Usable
procurement technology solutions will,
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• Be cognizant of how people prefer to work and the
  ways in which ubiquitous desktop appli- cations
  have already trained them to think,
• Mimic common user experiences (such as B2C
  e-commerce),
• Minimize time and effort required of users to
  perform tasks,
• Represent the easiest ways to perform tasks and
  obtain desirable results (such as closing deals,
  obtaining needed goods or services quickly and
  getting paid),
• Offer simple solutions to complex problems,
  enabling organizations to start from wherever
  they are without undergoing massive training or
  knowledge acquisition, and
• Be capable of growing with end users as they
  expand their abilities incrementally and seek to
  push past their own boundaries.

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User should
experience... dashboards autofills and
suggested inputs templates
...while the
business
Wow...getting this work done is so much easier
than it used to be! Finally someone is paying
atten- tion and giving us tools we can really use.
benefits
from... advanced capabilities
built-in best practices fewer
clicks presets 1-screen views easy
download/upload to/from desktop apps
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Contribution

• Procurements core performance focus - minimizing
  costs - can often feel at odds

with other business objectives. A companys
financial and senior executives may
become distracted from the cost line when
revenues are growing fast. Meantime,
the people responsible for driving innovation or
building a companys brand may
feel that too much focus on costs undermines
creativity and style. People responsible for
operations, quality and customer satisfaction can
be quick to blame procurement when prob- lems
originate in supply chains. Even when corporate
and functional leaders back procure- ment 100,
it can be still be exceedingly difficult to
transform theoretical cost savings and other
procurement achievements into facts that show on
a companys financial statement.
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Procurements imperative is to make sure the
results of its work materialize either on the top
or bottom lines of the business in highly
quantifiable ways. Until very recently, this need
had been ill met from a procurement technology
perspective, but the situation is changing
rapidly.
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Procurement/Financial Performance Management
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We want to get much faster at discovering and
bringing high performing and innovative
suppliers into our new product intro processes.
Weve got our payment terms standardized. Now,
its time to start moving some other cash
flow levers.
Our rationalization opportunity is essentially
exhausted. Time to start focusing more on demand
management.
Were going to make big changes in the way we
write contracts with our critical suppliers this
year.
There has been a huge amount of innovation and
restructuring in this market. We can exploit it,
but need to rethink the way we group our spend
categories.
Our percent of spend with high risk suppliers has
been creeping up in the past month. Wed better
do something about that and fast.
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Innovation

• Business enterprises are full of smart people
  with great ideas and its always the

unique ideas executed rapidly and well that
yield competitive market leader-
ship. That is why procurement technology
solutions, while incorporating proven
best practices, must also be engineered for
flexibility and ongoing innovation in
procurement strategies and approaches.
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When its time, for example, to shift strategy
from supply-base rationalization to globaliza-
tion, it should be easy to add a spend analysis
filter that redirects discovery of performance
improvement opportunities in favor of the new
strategy. Or, perhaps some bright sourcing
professional discovers a market opportunity that
involves bundling spend in an unusual way. It
should be easy to see what a revised
categorization of spend might look like without
wait- ing days, weeks or months for a companys
core spend classification model to be rewritten
permanently. The best procurement technology
solutions will deliver best processes and
practices without any of the constraints or
sameness that might stop a procurement team
from surpassing their competitors with the next
big idea in strategic supply management.
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About Zycus

• At Zycus we are 100 dedicated to positioning
  procurement at the heart of busi-

ness performance. For more than a decade we have
been the worlds most trusted
leader in Spend Analysis. With our spirit of
innovation and a passion to help pro-
curement create even greater business advantages,
we have evolved our portfolio
to a full suite of Procurement Performance
Solutions Spend Analysis, e-Sourcing, Contract
Management, Supplier Management, and Financial
Savings Management that is finely tuned to the
strategic procurement imperatives and activities
discussed in this paper.
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Behind every Zycus solution stands an
organization that possesses deep, detailed
procure- ment expertise and a sharp focus on
being responsive to customers. We are a large
600 and growing company with a physical
presence in virtually every major region of the
globe. We see each customer as a partner in
innovation and no client is too small to deserve
our attention. With more than 200 solution
deployments among Global 1000 clients, we search
the world continually for procurement practices
proven to drive competitive business perfor-
mance. We incorporate these practices into
easy-to-use, flexible solutions that give
procure- ment teams the power to get moving
quickly from any point of departure and to
continue innovating and pushing business and
procurement performance to new heights.
Introducing The Complete Zycus Procure
Performance Solutions Suite
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TM
PROCURE
PERFORMANCE