4 Key Procurement Objectives

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4 Key Procurement Objectives for 2014
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4 Key Procurement Objectives for 2014
During the recent Webinar Real-time Procurement
Benchmarking Insights into Key Issues KPIs for
2014 beyond, held on Dec 12, 2013, in
association with ISM, The Hackett Group Zycus,
a small survey was conducted among the 861
procurement professionals who attended the
webinar. This survey was aimed at understanding
the business/procurement objectives and
challenges anticipated by the webinar attendees
in the year 2014. The survey results can be seen
in this info-graphic Driving Down The
Procurement 2014 Lane.
Procurement Objectives for 2014
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Improving Pro?ts
The top two enterprise objectives for 2014 among
procurement professionals are to achieve better
Revenue Growth (40.9) and to Improve Pro?t
Margins (44.2).
With an objective to improve pro?t margins, it is
important that procurement focus on identifying
savings opportunities by developing visibility
into the direct and indirect spend of the
organization. One of the
Improve Margins 44.2
Revenue Growth 40.9
prevalent cost factors in most businesses is
purchased goods and services. Reducing the costs
of purchased goods and services has a direct
impact on a company's pro?t margin. 60 of the
procurement professionals revealed that reduction
and avoidance of purchasing costs are the top
two procurement-related issues that need to be
addressed in 2014.
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The survey results also revealed that at present
46 of organizations have
less than 40 of their indirect spend in?uenced
formally. World-Class Companies have 97 of
their indirect spend formally in?uenced, as per
the 2013 Hackett Group study.
by World class Companies in 2013
Indirect Spend formally in?uenced

• The other critical procurement issue,
• which needs to be addressed in 2014 according to
  45 of the procurement professionals is,
  expanding awareness of the importance of
  procurement and its in?uence on the bottom line.
• These issues may be addressed by adopting the
  following process
• Investing in Skilled Professionals Investing in
  skilled professionals with strong negotiation
  skills and overall knowledge of the industry, the
  raw materials cost and suppliers' capabilities
  can enable procurement to master the negotiations
  and get best deals for the organization from
  suppliers.
• Leveraging Procurement Automation Technology can
  enable higher visibility and control over
  different facets of the procurement process, such
  as sourcing activity, supplier evaluation and
  selection, contract terms compliance, overall
  spend etc., thus enabling timely identi?cation of
  bottlenecks and savings opportunities.

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• For achieving high visibility and identifying
  greater savings opportunities, best-in-class
  procurement organizations are leveraging
  procurement automation by implementing a spend
  analysis solution. A spend analysis solution
  facilitates sourcing performance, reduces
  maverick spend, increases compliance and
  generates savings. Spend Analysis features expand
  the performance-improvement horizon by
• Embedding spend data classi?cation into real-time
  buying processes
• Automating and accelerating the identi?cation of
  savings opportunities
• Synthesizing spend data with global market
  intelligence to inform competitive sourcing and
  supply management strategies
• To learn about the Zycus' Spend Analysis
  Solution, Click Here

• OBSERVATION
• from the survey
• The top 2 enterprise objectives for 2014 are
• Revenue Growth (40.9) and
• Improved Pro?ts (44.2)

ACTION to implement
Invest in

1. Quali?ed People
2. Ef?cient Processes
3. Effective Technology

OBSERVATION from the survey
ACTION to implement
Adopt the following Practices
A critical issue to be addressed in 2014 a.
Formally in?uencing the indirect spend

1. Invest in Skilled Professionals
2. Leverage Procurement Automation

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2
Improving Visibility
According to the survey only 40 of procurement
professionals revealed that they have signi?cant
ability to view spends data by supplier on an
enterprise-wide basis. As per the Hackett Group
study, 89 of World Class Companies had
signi?cant ability to view spends data by
supplier on an enterprise-wide basis in 2013.
for World Class Companies
as per current study
Signi?cant ability to view spend by supplier
Lack of a holistic view is a major impediment to
identifying savings opportunities, spend patterns
across suppliers, utilization of contract terms
and, more importantly, tracking the performance
of key suppliers. Best-in-class organizations
are leveraging technology to provide seamless
information across the various dimensions of the
procurement function, and not just getting
visibility into supplier spend data. An
integrated Source-to-Pay solution assists
procurement professionals with a single view
across the various stages of the procurement
processes. Some of the key bene?ts of
integrating procurement processes are I. Better
Visibility An integrated view of spend analysis
with supplier management will provide better
visibility, not only in terms of spend per
supplier, but also segmented per categories and
savings realized per supplier. Information like
this can better enable procurement professionals
to sharpen their category sourcing strategies,
and reap better results from their sourcing
initiatives, leading to savings more quickly.
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ii. Monitor Maverick Spend and Realize better
Savings Opportunities With the integration of
spend analysis, supplier management and contract
management, organizations will be able to view
on-contract and off-contract spends made in each
category with each supplier. This not only helps
with tracking of maverick spending, but also
helps monitor suppliers on key contract terms.
Also, if certain spend is off-contract with a
certain supplier, the organization or the
procurement professional raising the Purchase
Order will be alerted regarding the contract (and
the discount agreed upon in the contract),
enabling realization of saving opportunities with
the ability to view enterprise-wide-data in a few
clicks.
OBSERVATION from the survey
ACTION to implement

• Integrate Procurement processes to
• Gain Better Visibility
• Monitor Maverick Spend and Realize better Savings
  Opportunities

Over 60 of respondents lack signi?cant
information visibility into spend data by
supplier on an enterprise-wide basis
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3
Addressing Strategic Sourcing as a key capability
related issue
According to the survey results, 45 of
respondents cited strategic sourcing as the top
procurement capability-related issue in 2014.
Strategic Sourcing is an approach to procurement
whereby the business needs of the organization
are matched with the supplier market.
45 Cited Strategic Sourcing as top capability
related issue in 2014

• The important Steps of Strategic Sourcing are
• Analyze the requirement for sourcing identify
  spend
• Search for Suppliers
• Request Information
• Request proposal or quotation
• Event Roll-out
• Analyze Supplier Information
• 7. Award the contract and begin to track
  suppliers
• To get a detailed understanding of the
  above-mentioned steps of Strategic Sourcing,
  refer to the e-book 7 Step Guide to Strategic
  Sourcing.

The survey results also show that only 29 of
respondents, have 80 - 100 of annual RFX's done
electronically. This low ?gure indicates that
many organizations still need to make better use
of technology and adopt an e- Sourcing solution
for sourcing automation. As per The Hackett
Group, World-Class Companies handled 85 of their
RFXs electronically last year.
for World Class Companies in 2013
eRFXs
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Bene?ts of e-Sourcing I. Reduces cycle time A
well-de?ned and automated sourcing process is
easy to manage and provides output in a shorter
time frame. According to a recent study by the
Aberdeen Group, a structured process reduces the
sourcing cycle time by 25 - 40. ii. Avoid
bottlenecks With higher visibility and control
over the sourcing projects, the organization can
easily identify the bottlenecks and take prompt
measures to resolve them. This helps in cutting
costs and realizing savings opportunities. To
learn about the Zycus' e-Sourcing Solution, Click
Here

• ACTION
• to implement
• The important Steps of Strategic Sourcing are
• Analyze the requirement for sourcing identify
  spend
• Search Suppliers
• Request Information
• Request proposal or quotation
• Event Roll-out
• Analyze Supplier Information
• Award the contract and begin to track suppliers

OBSERVATION from the survey
Top Procurement capability- related issue for
2014 is Strategic Sourcing, as mentioned by 45
of respondents during the current study
OBSERVATION from the survey
ACTION to implement

• Adopt an e-Sourcing solution for sourcing
  automation and reap the following bene?ts
• Reduce cycle time
• Avoid bottlenecks

Over 70 of respondents handle less than 80 of
their annual RFX's electronically at their
organization
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4
Value realization through non-sourcing activities
43 of respondents cited that 10 - 50 of
procurement value arises from non-sourcing
activities. These activities largely consist of
Supplier Relationship Management, Contract
Management and Spend Analysis. Supplier
Management can help companies have better
visibility into supplier deliverables and offers
the following bene?ts removal of hidden cost
drivers, increase in competitive advantage by
reducing cycle times, inducing charge-backs for
non-conforming material, gaining insight into how
to best leverage the supply base, and
Lack Formal Scoring
streamline processes.
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Methodology
The survey results also revealed that 60.2 of
procurement professionals either totally lack a
formal scoring methodology or have it only for a
select few strategic suppliers.
6 0

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A formal scoring methodology for suppliers helps
the organization understand the strengths and
weaknesses of their suppliers. Supplier
performance management can help companies have
better visibility into supplier deliverables.
Scorecards can also help companies develop their
suppliers and help them overcome their weaknesses
which is bene?cial to both the companies and the
suppliers. Organizations can leverage supplier
management programs which help in setting up key
performance indicators, capture data inputs, set
stakeholder surveys and manage supplier
scorecards. Bene?t of using a Scoring
Methodology for Supplier Performance
Management Develops Strategic Relationships
Based on the scorecards, organizations may choose
to benchmark suppliers with their peers in the
industry, execute supplier development programs
which can help the organization improve supplier
performance, product/service quality, reduce cost
and attain higher value from the suppliers.
Procurement can thus leverage and enhance
strategic supplier relationships and also help
reduce business risks.
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To learn more about Supplier Management, read
'What, Why and How of Supplier Management To
learn about Zycus' Supplier Management Solution,
please Click Here
OBSERVATION from the survey Over 60 of
procurement professionals have disclosed that a
formal scoring methodology either does not exist
or is extended and maintained only for a select
few strategic suppliers.

• ACTION
• to implement
• A formal scoring methodology for suppliers helps
  the organization to
• Understand the strengths and weaknesses of their
  suppliers
• Develop Strategic Relationships

Conclusion The increasingly complex business
environment, coupled with evolving procurement
needs and objectives, requires procurement to
focus on the right people, processes and
technology. The procurement technology landscape
has evolved to provide cutting-edge technology
for meeting the requirements at different point
in the procurement cycle. The year 2014 requires
the procurement function to move towards process
standardization, automation and integration for
enterprise-wide information availability and to
overcome various capability-related
issues. Read AMDs case study to understand how
AMD leveraged the Zycus Suite
Know More To know more about Procurement
Automation Solutions and the value that the
Procurement Automation Suite can deliver to your
organization, or for any other advice on
procurement- related issues Feel free to
Contact Zycus for help and clari?cations.
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About Zycus
Zycus is dedicated to positioning procurement at
the heart of business performance. With our
spirit of innovation and a passion to help
procurement create even greater business
advantages, we have evolved our portfolio to a
complete Source-to-Pay suite of procurement
performance solutions which includes - Spend
Analysis, eSourcing, Contract Management,
Supplier Management, Financial Savings
Management, and Procure-to-Pay.
Behind every Zycus solution stands an
organization that possesses deep, detailed
procurement 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
FINANCIAL SAVINGS MANAGEMENT
SPEND ANALYSIS
PROCURE- TO-PAY
attention.
With more than 200 solution deployments among
Global 1000 clients, we search the world
continually for procurement practices proven to
drive competitive business performance. We
incorporate these practices into easy-to- use
solutions that give procurement 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.
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