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ROSMA answering the procurement performance challenge

ISM Presentation May 2012

John Blascovich Joe Raudabaugh

Please Join Us!


Session Summary
In 2010 A.T. Kearney began a multi-client research and development initiative exploring procurement performance. Together with over 75 CPOs and CFOs we aligned on a framework called Return on Supply Management Assets or ROSMA. There is also a variant for firms that use EVA/EE measurement systems. We extended our classic ongoing research, Assessment of Excellence in Procurement or AEP, in 2011 to capture and benchmark the performance parameters of ROSMA. We also mapped the 500+ practices captured in the AEP research to procurement performance drivers in ROSMA that they affect. The research platform has now been enhanced with additional data sets from CIPS (Australia), Nevi (Netherlands) and scores of client specific projects. During this session we will share this research which through early 2012 has amassed performance metric benchmarks from almost 250 firms globally across all regions and industries. The analytics are powerful. The implications for the future of procurement leadership are game changing. We hope to see you there.

This document includes only a few selected slides. Please join us during the session for a presentation of the proprietary research
A.T. Kearney 7/02.2012/49902

Less enabled/transparent wheres procurement process management Business Intelligence (BI)?


We have kept our costs within benchmark tolerances
Cost of Procurement

But what do we know about our operating performance on procurement processes?


Influenced or managed spend? Sourcing velocity or cycle times? Sourcing project yields? Compliance rates? Stakeholder satisfaction with procurement? By team member? Sourcing pipeline by person?

0.0%

1.0%

2.0%

3.0%

4.0%

% of Spend1
1Influenced

spend by procurement: procurement sourced it, assisted in the sourcing process, or was involved in the contracting process, or purchases went through a procurement-designed and supported P2P system

Source: A.T. Kearney AEP Research 2011

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Together we are charting a new direction in procurement


Todays Discussion
Legacy Research Beyond Leadership Practices. We need leadership performance metrics Joint Development Multi-client study group, pilots, workshops 75+ CPOs & CFOs 2010-2011 Better Measures Better Performance Opportunity

Leadership Practices in Procurement

Framework, KPIs, Benchmark Research & Tools


2011 onward

Exploring Process Performance Driven Procurement


Tomorrows Leaders Spend Coverage

1992 to date

2010 V1.0 Supply Management Productivity Index

AEP 2011 CIPS Australia

Sourcing velocity Category yields Compliance Additional Value Added Benefits and more
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Nevi Netherlands
ROSMA Light

Much progress made. sustaining competitive leadership in procurement will become substantially more difficult
Procurement Performance
Illustrative
Followers Leaders

20XX

2011

200X

2008

Advances in Practices Employed


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Performance outcomes (KPIs) and process practices were used to evaluate the drivers of procurements financial results
Driver Tree Example Measurement Methods
Hard Financial KPI % of spend that is influenced by Procurement

Robust Benchmarks
% Spend Influenced by Procurement
Frequency

Procurement Value

Primary Drivers (7)

Spend Coverage

Process Practices (Spend Coverage examples) Track spend under procurement management?

Proprietary data will be shared during the session

% Spend Influenced by Procurement

Secondary Driver
Secondary Driver

Visibility

% of spend for which you routinely use spend visibility tools? Formalized RASIC model in place? Procurements priorities aligns with overall business strategy? Business stakeholders proactively invite procurement to discuss business plans?

Spend Coverage Process Practices Employed Frequency

Spend Governance

Proprietary data will be shared during the session

Other Drivers

# of AEP Survey Process Practices


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ROSMA provides an analytical framework to evaluate the economic performance of procurement


Return on Supply Management Assets - Primary Drivers

ROSMA

Spend Coverage

Velocity

Category Yields

Compliance

Additional Benefits

Period Costs

Structural Investment

35 additional sub-drivers 500+ driver affecting processes and practices

ROSMA enables process level and overall procurement performance management to be measured and transparent
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Chaos & variability behind, increasing performance & consistency ahead


Procurement by Chaos
Todays practices Todays variability Todays outcomes

Managed Procurement
Todays practices Achieving average or better driver outcomes

Performance Driven Procurement


Actively managing processes Reduced variability Integrated procurement performance management Continuous improvement Better in Breed or future practices

ROSMA = 4

10 11 12 13 14 15 16 17

Simulated ROSMA Distribution


Source: A.T. Kearney Assessment of Excellence in Procurement Benchmarking Study 2011 A.T. Kearney 7/02.2012/49902

Performance Driven Procurement


Capable

Spec Limits

Process Capability

Less capable
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Thank you!

John Blascovich Partner


A.T. Kearney Procurement & Analytic Solutions 7 Times Square New York, NY 10036 212 350 3287 Office John.Blascovich@atkearney.com

Joe Raudabaugh Partner


A.T. Kearney Procurement & Analytic Solutions 222 West Adams Street Chicago, IL 60606 312 223 7200 Office Joseph.Raudabaugh@atkearney.com

Learn more about the need and potential of ROSMA by reading Procurement: The Last Best Place for Results Improvement at http://www.atkearneypas.com/solutions/procurement-process.html
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10

Track 1 : Best Practices in Supply M anagement


Monday

BB
CB DB Tuesda y FB GB

9:20 10:20 Partnering With Creative Services to Manage a Packaging Supply Chain
10:40 11:40 3:00 4:15 ROSMA -- Answering the Procurement Performance Challenge Uncovering and Managing Supplier/Supply Chain Risk

3:00 4:00 4:15 5:15

Global Strategic Sourcing Enabled by Business Unit Collaboration Leading Strategic Change in Supply Management