CHECK-UP
O P E R AT I O N A L P R O C U R E M E N T
AC T I VAT I N G
REMAINING
EFFICIENCY
RESERVES
“Santiago Operational Procurement Check-up – programming your organization for success”
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Step by step to success
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Significant operational improvements remain untouched Initial situation Procurement challenges: Selected statements
How to approach the challenges
“Our strategic buyers are caught up 30% of their time in operational tasks instead of pursuing suppliers” Strategic
Re-distribution of responsibilities in procurement - more focus Increase of savings by 10-15% of managed spend
“It is essential to challenge the current % of spend managed. Our organization spends too much time on low value transactions”
“We have initiated several projects to push e-procurement. However, our implementation rate of 25% of automated buying channels leaves significant room for improvement”
Operational
Professionalization and reorganization of operational procurement Potential reduction of 30% of operational FTE
“Limited harmonization of procurement processes impedes the complete realization of procurement bundling potentials”
?
Only limited attention has so far been paid to potential improvements in operational procurement
Source: Santiago benchmark database
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Proven approach focuses on core questions
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Comprehensive approach targets core operational questions Overview on relevant dimensions for improvement 1
Standardization of processes and procedures
As-is analysis
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Benchmarking & Evaluation
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Identification of improvement levers
Where does further standardization lead to higher efficiency and effectiveness?
Automation of operational procurement
To what degree can we increase process automation?
Separation of procurement tasks
Where does further task separation (incl. transparent roles & responsibilities) increase efficiency?
Bundling of procurement resources
What is the optimal level of resource bundling?
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Clear definition provides foundation for benchmarking
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1
An aligned definition is basis for analysis & improvements
Clear definition of scope and focus Definition of process scope
Strategic procurement Plan-toStrategy Demand analysis Market and supplier analysis Strategy formulation …
Source-toContract Demand and market analysis Solutions and specification management Request for proposal Negotiation Contracting …
Focus of analysis
Operational procurement Purchase-toPay Maintain contract repository Contract data maintenance (SAP) Creation of purchase order (PO) Transmission to supplier Purchase order monitoring …
Functional focus Master data Data change request for material master Maintenance of material master data Catalog content maintenance …
Examples for category classes: Raw Materials, Logistics, Technical Material, Technical Services
Regional focus
Examples: Site, Country, Hub, Regional, Global
Organizational focus
Examples: Procurement, Supply Chain, Business Unit
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Real transparency is the first step towards improvement
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1
Transparency provides data for benchmarking
Project examples Exemplary data/KPIs along the defined structure Standardization
Automation
Different procurement processes in use
% of spend per preferred buying channel
Separation
Bundling
# of separated and mixed operational FTE
♯ of operational FTE bundled in each location
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Benchmarking – Learn from the best
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Benchmarking brings the performance into context
Schematic view of results
Separation
Automation
Standardization
Exemplary KPIs
WIC*
BIC*
OP Performance Profile
Bundling
♯ of different procurement processes in use
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35 36
1
2
3
Standardization 4 5
32
6
31
7
30
29
% of spend per preferred buying channel
8
28
9
88
27
10
26
11
12
25
% of separated operational FTE
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13 14
23 22
Separation Bundling
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♯ of operational FTE bundled
Individual Perf. Profile
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20 19 18 17
16
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Automation
Total Perf. score
Procurement Excellence requires continuous learning from the best in class *WIC: Worst in class: Lowest 5% of benchmark respondents *BIC: Best in class: Highest 5% of benchmark respondents
= Company results
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Sound analysis leads the way
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Improvement levers derived from analysis
Project example Typical improvement levers
Recommendations (Exemplary)
Increase the use of automated buying channels
Introduce real automation (no manual handling) and define target values to reduce workload
Adjust the threshold for low-value sourcing/ ordering
Shift of tasks from strategic procurement to operational procurement for low value transactions to free strategic time
Bundle operational procurement processes
Bundle resources (where applicable) to access bundling synergies
Increase the use of standardized processes
Reduce purchase order errors and combined workload
Increase task separation
Focus resources on core tasks and free-up strategic resources
Each recommendation results typically in a separate initiative 13
Objective outside-in-view gives you an unbiased assessment
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Operational Procurement check-up delivers improvements within 4 weeks Approach Santiago Operational Procurement check-up As-is analysis
Set-up
Definition of scope of analysis Operational Procurement 1 Standardization
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3
4
Automation
Separation
Clarification of stakeholder ‘s expectations Identification of available data Clarification of data and contact person for each hub/region
Analysis of procurement process Analysis of FTE distribution Collection of base line data Calculation and validation of KPIs …
Benchmarking & Evaluation
Identification of improvem. levers
Internal benchmarking: Comparison of performance data from different hubs, countries or regions
Interpretation of benchmarking
External1) benchmarking: Comparison of performance data with industry peers
Estimation of improvement potential
Validation of results and evaluation
Identification of improvement levers
Alignment of results with stakeholders …
…
Bundling
Kick-off OP check-up
~2 weeks
~2 weeks
Final Report
1) Santiago benchmark database
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Santiago: The Strategy and Structure Advisors
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Santiago: Competent partner in Procurement Contact to Santiago Santiago supports midsize companies and multinational corporations with the development and implementation of tailor-made solutions for procurement organizations. Please do not hesitate to contact us for more information. We are interested in (please tick boxes):
A personal presentation A preparatory phone conversation A workshop with my team A customized project proposal ______________________ Contact Santiago:
Your Data (please fax to +49 211 5666 2113)
Santiago GmbH & Co. KG
Company: ___________________________
Buchenweg 13
Name:
___________________________
D - 47866 Willich
Street:
___________________________
Phone +49 211 5666 2268 / +49 151 2033 3221
City:
___________________________
Fax +49 211 5666 2113
Phone:
___________________________
www.santiago-advisors.com
Mail:
___________________________
Dr. Georg Wolters
Christian Prinz zu Salm Horstmar
Managing Director
Managing Partner
georg.wolters@santiago-advisors.com
christian.salm@santiago-advisors.com
Mobile +49 151 2033 53 26
Mobile +49 151 2033 53 23
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