Business alignment of Procurement

GJ Nagtegaal – May 2016 ©

Business alignment of Procurement

How to make it happen?

Page 2

Imagine….. Your daily desk is like …..

- Roles & definitons- Proces- Results

juli 2015 Page 3

Taking care of.. Being accountable for …Minimising the risks for the company Business contribution

- Stable suppliers (reliability & continuity)- Clear terms with suppliers (liability)- Alternatives for critical suppliers (availability)

Maximise the value for the company - Use knowledge & skills of suppliers (innovation)- Competition & Value Analyses / should cost (fair cost)- Low cost for administration & logistics (efficiency / TVoO)- Adequate (project) reporting (progress monitoring)- Adequate treasury reporting (cash flow & currency risks)

It is a dynamic world- Tomorrow the markets might have changed….- Everybody has access to everything…..- You never control your environment…..

The holistic view- LTC2

- Adequate contract models

Page 4

Define your procurement battery limits

Definition of procurement

All activities ending up with an invoice to be paid for by the company or an activity which might end up with an other “outgoing” liability.

[Basic data the creditors dbase]

juli 2015 Page 5

With the basic process & interfaces….

Internal risk or operational risks & opportunities: Everything has interaction

Sales / R&D Production After sales

Customers

Future purchasing

Historical purchasing

dbase

Purchasing

Policy & Strategy

Operational risk portfolio

External competition

portfolio/Kraljic

Supplier market

juli 2015 Page 6

Operational risk portfolio

Red: Execute a suitable supplier assessmentOrange: Consider an assessmentGreen: No assessment on beforehandNB: Always remain alert, tomorrow the world might have changed!

HH MH LH

HM MM LM

HL ML LL

High --- Value in EUR --- Low

Low

---

Risk

---

Hig

h

ANS = Assessment (New) Supplier, specified towards the type of works/services

Page 7

Business suitable H/M/L risk definitionsRisk Type of works / services - examples

High - Site construction works on behalf of company

[ANS] - Access to company critical/confidential products - Business relations & market imago

Medium[ANS]

- Construction works not on site/behalf company

- Supplies on critical path

Low - Supporting office works

- General business services - Supply of commodities

It is not all about the price

Page 8

Some B2B theory of Van Weele

Best suppliers Worst suppliersSubject score Subject score

Quality 4,47 Price 3,16Reliability 4,41 Personal relation 2,68Service 4,39 Quality 2,67Development 4,16 Service 2,36Personal relation 4,06 Development 2,21Price 3,94 Reliability 2,03

Bandwidth score 0,53 Bandwidth score 1,13Lowest score 3,94 Highest score 3,16

Standard monthly report / ISO9001 certified - in practise about 20% of the supplier dbase will be subject to an assessment

Page 9

Your monthly controlled supplier dbase….

2011 2012 2013 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

20

40

60

80

100

120

To be approvedWorking on approvalApprovedApproval target

With monthly deviation. Accountant approved input for the treasury & accruals

Page 10

Your 12 months ahead cash out forecast

IC jan-15 feb-15 mrt-15 apr-15 mei-15

jun-15 jul-15 aug-15 sep-15 okt-15 nov-15 dec-15 jan-16 feb-16 mrt-160

500

1000

1500

2000

2500DPO rolling forecast end of month / 12 months ahead in kEUR

Feb-15Mar-15

juli 2015 Page 11

Including exposure to currency risks

And without any doubt you have your standard monthly (or weekly!) purchase order delivery status by project, budget responsible, supplier, delivery site or whatever you prefer.

kEUR DPO month

Currency 2015-02 2015-03 2015-04 2015-05 2015-06 2015-07 2015-08Eindtotaal

EUR 2 1.058 668 1.040 2.056 525 461 5.809

GBP 0 0 0 0 0 4 0 4

INR 0 0 0 0 0 0 0 0

SGD 0 215 0 215 0 0 0 430

USD 0 92 42 168 0 0 424 725

BHD 0 0 53 19 0 66 0 139

Eindtotaal 2 1.364 762 1.442 2.056 594 885 7.106

juli 2015 Page 12

With straight product group overviews

Of course, many more views/queries are available

Aantal van 3rdPAProduct Group Approved Supplier Totaal01-PR-ACCESSOIRES 1501-PR-CONSOLES 201-PR-IT-HARDWARE 2701-PR-SENSORS-A 201-PR-SENSORS-B 701-PR-SENSORS-C 601-PR-TOWERS 202-CONSTRUCTION-WORKS 402-INSTALLATION-SERVICES 3602-LOGISTICS-HANDLING-HOR 802-RMO-PARTS 8302-SITE-CRANAGE-TRANSPORT 802-TRAVEL-LODGING 4503-HRM-SERVICES 2403-HRM-TEMP-STAFF 1703-HRM-TRAINING 3504-ADVISORY-CONSULTANCY 3004-FIN-INSUR-ACCT 1404-GOVERNMENT-IC 2405-IT-OPERATIONS 3406-OFFICES-FACILITIES 4606-PR-MKT-COMMUNI 8509-UNDEFINED 3Eindtotaal 557

juli 2015 Page 13

The truth and the sweat part of the job….

Yeah, it is the truth: It is an Excel report with the pivot table. But fabulous to play with and ready within just a few hours after each monthly closure.

The sweat part of the job was:- Cleaning up the ERP dbase- Structuring and understanding of the ERP systemWhen everybody noticed and experienced the benefits maintained and acted accordingly, it became easy.

juli 2015 Page 14

Pleased stakeholders as a result?Management Monitored (supplier) risks Finance Treasury forecast / DPO

Currency risks Project manager Who, what, when, where, .. QA manager A controlled process Customers A controlled process Suppliers Consolidated reviews

This will definitely lead to LTC2 :-Reduced Lead Time to Customers-Reduced Lead Time to Cash

Are you as a purchasing professional now pleased, too?

© Please, maintain “ProMenSys” as source when you (partly ) re-use this presentation Page 15

And you end up here….. As a busy professional

However, your manager might have a different opinion…