High Impact Procurement
Operating Models –Operating Models –
A Survey of Global CPOs
Agenda
Today’s Agenda: Define what an operating model is and explore its impact on an
organization’s performance and struc...
What is an operating model?
An operating model defines how the procurement organization interacts with other
business grou...
How are operating models used in the real world?
Operating models are characterized by their governance, commercial, and g...
How does the choice of a target operating model impact results
delivered?
In our survey, savings remain relatively constan...
How are operating models changing over time?
Our survey found organizations are at varying stages of progress along a simi...
What does the data say about the ongoing wave of centralization?
We identified mature organizations where procurement acts...
Where do we go from here?
Our analysis predicts most organizations will likely move towards one of two final
destinations:...
How do organizations build these new models?
Organizations tended to launch a wide range of projects to transform their op...
What are the benefits and lessons learned?
Four key lessons learned:
1) Procurement operating model evolution is tightly a...
KPMG can help
 KPMG h l li d i i bl i k f l d KPMG helps clients drive sustainable improvements to make procurement a so...
Research Download
Read the complete findings:
High Impact Procurement Operating Models: A Survey of Global CPOs
www.kpmg.c...
Appendix:Appendix:
Survey
RespondentRespondent
Profile
Respondents by geography
6%
13%
28%
Brazil
United Kingdom of Great Britain and Ireland
United States of America
4%
4%
5%
6...
Respondents by position level
The survey featured a group of 405 procurement professionals
CPO (Chief Procurement Officer)...
Participants by industry
9%
14%
14%
Food & Beverage
Banking & Financial Services
Manufacturing & Engineering
5%
6%
7%
8%
T...
© 2014 KPMG LLP, a Delaware limited liability
partnership and the U.S. member firm of the KPMG
network of independent memb...
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High Impact Procurement Operating Models -- A Survey of Global CPOs

Define what an operating model is and explore its impact on an organization's performance and structure Key Topics: • What is an operating model? • How are operating models deployed in the "real world" • How does the choice of operating model impact results delivered? • What are the trends in the selection of a targeted operating model? • What are key lessons learned for every organization? About our approach: KPMG and procurement leaders conducted a survey of 400+ procurement professionals in 2013. This effort sought a data-driven, empirical understanding of how organizations define and execute their target operating model.
Published on: Mar 4, 2016
Published in: Business      
Source: www.slideshare.net


Transcripts - High Impact Procurement Operating Models -- A Survey of Global CPOs

  • 1. High Impact Procurement Operating Models –Operating Models – A Survey of Global CPOs
  • 2. Agenda Today’s Agenda: Define what an operating model is and explore its impact on an organization’s performance and structure Key topics:Key topics: ■ What is an operating model? ■ How are operating models deployed ‘in the real world’? ■ How does the choice of a target operating model impact results delivered? ■ What are the trends in the selection of a target operating model? ■ What are the key lessons learned for every organization?■ What are the key lessons learned for every organization? About our approach: KPMG and procurement leaders conducted a survey of 400+ procurement professionals in 2013. This effort sought a data driven empirical understanding of how organizations define andThis effort sought a data-driven, empirical understanding of how organizations define and execute their target operating model. © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 1
  • 3. What is an operating model? An operating model defines how the procurement organization interacts with other business groups and where decision-making authority rests between procurement and the business. Potential operating models fall along a spectrum: Decentralized Center-led Centralized1 2 3 Completely decentralized with i ti it i Category managers responsible for centralized category t t d Centralized leads coordinate h i dmain activity in one particular location strategy and implementation purchasing and advise local buyers © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 2 4 Hybrid
  • 4. How are operating models used in the real world? Operating models are characterized by their governance, commercial, and geographic structure: Governance Commercial model Geographical structure  Spend under management by procurement  Spend under category management  Procurement staff reporting line  Structure of direct  Structures for setting  Geographic location or Structure of direct spend  Structures for setting strategies  Geographic location or procurement staff  Structure of indirect spend  Structures of category spending The results of our survey showed that organizations’ declared operating models usually match their actual implementations, but virtually no organization had a ‘pure’ implementation. Thi t f t f i di t d i d i t l t i d t li d d l  CPO reporting line  Thirty-four percent of indirect spend is managed via a central team in decentralized models, versus 57 percent for centralized models.  Thirty-seven percent of spend is under central category management in decentralized models, versus 57 percent in centralized models. © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 3  Twenty-six percent of staff report to BU leaders in decentralized models, versus 11 percent for centralized models.
  • 5. How does the choice of a target operating model impact results delivered? In our survey, savings remain relatively constant across the spectrum… Savings generated by different operating models D t li d C t l d C t li d H b id …However, the operating model change process can be a lever for CPOs Decentralized Center-led Centralized Hybrid 6% 6% 5% 6% Centralized Stakeholder Alignment Standardization Tax Efficiencies Stakeholder Satisfaction Decentralized Operational Efficiencies Operational Requirements © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 4
  • 6. How are operating models changing over time? Our survey found organizations are at varying stages of progress along a similar pathway, ultimately leading to center-led procurement: P i d f P i d f Centralized Period of Centralization Period of Decentralization Key Insight: 43 percent of the most mature companies have a center-led target Most O i tiCentralized g operating model Organizations Currently Center-led Time Decentralized © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 5
  • 7. What does the data say about the ongoing wave of centralization? We identified mature organizations where procurement acts as budget-holder for more than 60 percent of total global spend and compared their model selection against the general population: General Population Mature Organizations 0% 25% 50% 75% 100% 0% 25% 50% 75% 100% 31% 21% 27% 21% Target Legacy 30% 18% 23% 30% Target Legacy 5% 35% 33% 27% Target Operating Model Decentralized 5% 43% 30% 23% Target Operating Model Decentralized Mature organizations show a dramatic ongoing shift to Center-led Centralized Hybrid Center-led Centralized Hybrid © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 6 dramatic ongoing shift to center-led procurement models
  • 8. Where do we go from here? Our analysis predicts most organizations will likely move towards one of two final destinations: 1) Super-Centralization Period of Centralization 1) Super Centralization Many are exploring the opportunity go beyond centralization into an outsourced model, enabling even further Future Development Centralized model, enabling even further scale benefits.Most Organizations Currently Center-led 2) Decentralizing Since there are few truly global supply markets, some decentralization may allow Decentralized y better alignment to regional supply markets and dispersed business stakeholders. © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 7 Time
  • 9. How do organizations build these new models? Organizations tended to launch a wide range of projects to transform their operating models, but many focused on supplier relationships and the requisition-to-pay cycle. Projects Launched Numberj SRM/Supplier collaboration 19 Enhance R2P 18 Introduce/upgrade e-procurement 18 Introduce category management 17Introduce category management 17 Category-specific project 16 Globalize procurement operations/staff 14 Creating an alternative/more efficient procurement process 9 Developing a shared service 9 Organizational alignment 9 Company-wide transition 8 Spend analysis 7p y Improve contract management 5 Enhance demand forecasting and planning 4 Other 53 Total 206 © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 8 Total 206
  • 10. What are the benefits and lessons learned? Four key lessons learned: 1) Procurement operating model evolution is tightly aligned to the general evolution of the procurement function. From a past where the function was very much dispersed andthe procurement function. From a past where the function was very much dispersed and unconnected, purchasing now emerges as an influencer at the heart of the business. 2) We have seen in this survey that the most mature companies are looking to decentralize more and forge a more center-led structure. As achievable savings dry up, buyers begin to other avenues where they can deliver sustained value to the business via new operating models. 3) Global category management in the right categories yielded the highest levels of satisfaction across procurement business and supplier stakeholders Note thatsatisfaction across procurement, business, and supplier stakeholders. Note that procurement must have the authority to successfully execute this role. 4) By setting the strategy at a global level, with input from business units, the procurement function can continue providing the business with value long into thep p g g future. © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 9
  • 11. KPMG can help  KPMG h l li d i i bl i k f l d KPMG helps clients drive sustainable improvements to make procurement a source of value and innovation across the enterprise.  Our approach supports both full-scale procurement transformation as well as targeted improvements to address key client issues and deliver tangible benefits.address key client issues and deliver tangible benefits. Samir Khushalani Principal, Practice Leader Americas Procurement Advisory Services 713-319-3570 skhushalani@kpmg.com@ p g Femi Obi Director U.S. Procurement Advisory Servicesy 617-988-1035 femiobi@kpmg.com © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. NDPPS 248113 10
  • 12. Research Download Read the complete findings: High Impact Procurement Operating Models: A Survey of Global CPOs www.kpmg.com/us/procurement © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. NDPPS 248113 11
  • 13. Appendix:Appendix: Survey RespondentRespondent Profile
  • 14. Respondents by geography 6% 13% 28% Brazil United Kingdom of Great Britain and Ireland United States of America 4% 4% 5% 6% Germany Canada Switzerland Brazil 2% 2% 3% 3% Finland France India Australia 2% 2% 2% 2% Sweden Netherlands Italy Denmark 9% 2% 2% 2% Other Belgium China Sweden © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 13 0% 5% 10% 15% 20% 25% 30%
  • 15. Respondents by position level The survey featured a group of 405 procurement professionals CPO (Chief Procurement Officer) 19% 14% 5% Head of Procurement SCPSCP VP 23% 25% Director Category/Commodity 2% 11% g y y Manager/Head of Category/Category Lead Buyer © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 14 Numbers have been rounded and may not equal 100%
  • 16. Participants by industry 9% 14% 14% Food & Beverage Banking & Financial Services Manufacturing & Engineering 5% 6% 7% 8% Telecoms Oil & Chemicals Consumer goods, Retail & Leisure Pharmaceuticals & Healthcare g 3% 5% 5% 5% Government & Public Sector Construction & Mining Energy & Utilities Technology (Software & Hardware) 1% 2% 2% 2% Media & Entertainment Automotive Business Services Logistics & Transportation 10% 1% 1% 1% Other Agriculture Aviation Defense © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 15 0% 5% 10% 15% 20% 25%
  • 17. © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG I t ti l C ti (“KPMGKPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 256568 The KPMG name, logo and “cutting through complexity” are registered trademarks orco p e ty a e eg ste ed t ade a s o trademarks of KPMG International.

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