The Power of Procurement - assets.kpmg

1 The Power of Procurement A global survey of Procurement functions 2012 KPMG International Cooperative ( KPMG International ). KPMG International provides no client services and is a Swiss entity with which the independent member rms of the KPMG network are af liated. All rights reserved. foreword Ask any business And as the world continues to wade through its nancial morass, the Procurement function will also nd itself leader what their top challenge is today and under increasing pressure in areas currently considered to be low priority. Supply Chain sustainability will more than likely the answer will be cost.

2 Indeed, once again become a key challenge for business, and KPMG's 2011 European Business Leader Survey more focus will be placed on leveraging systems and demonstrated that realising cost ef ciencies is now technology to drive greater value, innovation and market the top priority for business leaders across all industry differentiation from suppliers. sectors1. Ever since the rst rumblings of the global nancial crisis, businesses have been feverishly We believe that this report provides an unprecedented stripping out costs; headcount reductions have been insight into the key challenges currently facing the most typical immediate reaction to cost reductions, Procurement functions.

3 What is more, the research but organisations have also become acutely aware of represents the state of the function from the the potential sustainable cost savings to be had across perspective of Chief Procurement Of cers and Supply the supply chain. Chain Directors themselves, and should therefore more accurately re ect the actual challenges and Clearly, it is time for Procurement functions to shine. opportunities facing the function today. However the reality is that most Procurement functions And while the ndings may not paint the most have not moved as quickly to address supply chain positive picture of the maturity of Procurement ef ciency as some organisations have demanded.

4 Functions overall, the accompanying analysis and In fact, according to our research, many Procurement insight offers a clear roadmap by which Procurement functions have struggled to raise their game beyond can raise its game to meet and even exceed the simple tactical activity and (re)negotiating low cost expectations of the business. contracts, to a broader and more strategic role within the wider business. This report is the rst of an annual series that will continue to compile data from Procurement The expectations of Procurement are shifting. organisations around the world and across sectors Not so long ago, Procurement was considered to to provide an ongoing and consistent benchmark for be an add-on service; it was the business that decided Procurement functions to measure their progress which suppliers were core to the organisation and little against that of their peers.

5 More was expected of Procurement than to battle some cost out of the contract and then hand the relationship I encourage you to contact any of the authors of this back to the business to manage. report or your local KPMG member rm to explore the implications of these ndings for your business or Today however, many executives are increasingly to participate in this ongoing research study. looking to Procurement to engage the business in strategic conversations about how the supply chain Richard Nixon can be optimised to deliver the greatest returns. Partner, KPMG in the UK. But, overwhelmingly, Procurement has been slow to evolve.

6 Our research shows that across the board there is not enough focus on ongoing supplier relationship management, precious little involvement in demand management, even less participation in the make versus buy' decision process and an often dangerous lack of preparation, mitigation and action around supply chain risk. 1. Business Leaders' Survey, KPMG, June 2011. 2012 KPMG International Cooperative ( KPMG International ). KPMG International provides no client services and is a Swiss entity with which the independent member rms of the KPMG network are af liated. All rights reserved. contents 02 Executive summary Deconstructing the 1.

7 Key functional 01 survey framework 04 ndings A place at the table? 05. Stretching beyond savings 11. Centring on Value 15. Running the Risk 20. Taking Advantage of Technology 25. 2012 KPMG International Cooperative ( KPMG International ). KPMG International provides no client services and is a Swiss entity with which the independent member rms of the KPMG network are af liated. All rights reserved. 29 2. Regional comparators 54 Conclusion The View from Asia Paci c 30 Our ve key recommendations 56. The View from North America 34 10 Questions to ask yourself to assess your Procurement maturity 57. 3. Key ndings 36 by sector 58 Appendices Financial Services 37 How to participate in Transportation the survey 58.

8 And Logistics 39. Glossary Public Sector, Health of Terms 59. and Not-for-Pro t 41. Retail 44. Manufacturing and Consumer Packaged Goods (CPG) 46. Energy & Natural Resources, Chemicals & Pharmaceuticals and Infrastructure 48. Technology, Media, Telecommunications and Business Services 51. 2012 KPMG International Cooperative ( KPMG International ). KPMG International provides no client services and is a Swiss entity with which the independent member rms of the KPMG network are af liated. All rights reserved. 1 | The Power of Procurement deconstructing the survey framework In 2011. Key elements of the framework KPMG, in association with CPO Agenda, VALUE AND STRATEGY conducted an online global survey of 585 Procurement PERFORMANCE AND BUSINESS leaders from across all industry groups and sectors.

9 PLANNING. The survey was designed in two parts, each intended to deliver a dynamic yet realistic view of the level of maturity and in uence of Procurement functions within businesses around the world. The methodology itself is based on KPMG member rms' work with a broad range of leading organisations over many years, and has been designed to accurately re ect the Procurement maturity journey. OPERATIONAL OPERATING Respondents were initially asked to provide a series EXCELLENCE MODEL. of data points related to their direct and indirect spend across a series of key measures: Value and Performance, Purchase to Pay, Supply Base Management, Category Management and Operating Model.

10 From this data, a robust set of ratios and measures were calculated to provide an objective comparison between organisations on core Procurement disciplines. Four-level maturity model Participants were then asked to map their behaviours and attributes in four key elements of Procurement : Strategy EXCELLENCE 4 and Business Planning, Operating Models, Operational Excellence, and Value and Performance. To facilitate this, respondents were presented with a series of attributes from which they selected the 3 LEADING. statements that best re ected the current state within their organisation. From these responses, KPMG and CPO Agenda determined where the function sat on a four-level maturity model.