Procurement Strategy 2013: Global Trends, Priorities and

Strategies

A SAP and Procurement Leaders Market Research Report

About the Research

Survey Statistics
 Approx. 500 Procurement and
Supply Chain Executives
responded
Other, 28% United States of
America, 24% 82% named Procurement as their core
responsibility (others – supply chain)
United Kingdom,
Australia, 2% 21% 71% at Senior Level
South Africa, 3%
 Global Reach
Singapore, 4%
Netherlands, 4% 47+% Europe
Germany, 4%
India, 5% Switzerland, 5% 24% USA

11+% Asia / Australia

Other, 10% CPO - Chief
Procurement
Officer, 17%  All Market Sectors Represented

Manager, 19% Strong cross-industry representation

Senior VP / VP or
Equivalent, 20%
33% Annual Revenue Exceeds $10
Senior Billion
Manager, 34%
46% Annual Procurement Spend in
Excess of $1 Billion

© 2011 SAP AG. All rights reserved. 2

Priorities, Strategies and
Trends
What is Procurement Trying to Achieve?

Rank these priorities according to how important Key Take Aways

they are to you?  Spend Visibility
100%
90% Remains a top priority (from our 2010
survey results)
80%
70%  Cost AND Quality
60%
Quality control ranked higher than direct
50% material cost reductions
40%
Reducing indirect costs still very highly
30%
ranked
20%
 Supplier Management
10%
0% Risk management and improving
relationships equally ranked

 In Two Years

Improving supplier relationships and

Not important maximizing business unit budgets rise much
higher on the list
Somewhat important
Very important
Extremely important

© 2011 SAP AG. All rights reserved. 4

Current Strategies on the CPO Agenda

In light of recent global events, what different Key Take Aways

strategies are you adopting or do you plan to adopt?  Internal Collaboration

80.00% 68% stated they are now working much

more closely with the business
70.00%
60.00% 63% said they are more involved in
strategic decisions
50.00%
40.00%  Supplier Risk Mgmt
30.00% 66% have created new approaches to
20.00% supplier risk mgmt.
10.00% 63% are proactive about commodity mgmt.
0.00%
45% formalized a supplier mgmt. program
(in addition to those who had this already)

 New Investments

Over 40% invested in technology and

intelligence.

© 2011 SAP AG. All rights reserved. 5

Key Strategies 2012 & 2013

Key initiatives ranked as extremely or very important, Key Take Aways

now and in 2 years' time  Talent/Skill Development

100.0% 41% ranked as extremely important today

90.0% 55% ranked as extremely important in 2013

80.0%  Shortened/Localized Supply Chains
70.0% 48% ranked as extremely important today
60.0%
62% ranked as extremely important in 2013
50.0%
 Supplier Collaboration and
40.0% Sustainability

Significant increase in focus expected over

coming two years

 Procurement Outsourcing
2011
Not highly important for most organizations
2013 at this time or in near future

© 2011 SAP AG. All rights reserved. 6

Technology Strategy

On which technologies are you most focused? Key Take Aways

(ranking question – chart shows ranks 1 – 3)  Strategic Sourcing Tops the List

60.00% 53% ranked this in their top 3 (of 9

choices)
50.00%
 Operational Procurement (req to
40.00%
PO) is a major focus for many
30.00%
This technology was ranked #1 by nearly
20.00% 30% of respondents – showing there are
still many organizations that are focusing
10.00% on this „entry level‟ automation
0.00%  Supplier Management software
grows in importance

Performance management, collaboration

and risk management were all ranked
Ranked 1 highly as needing automation support

Ranked 2

Ranked 3

© 2011 SAP AG. All rights reserved. 7

Structure, Reach and
Performance
Continued Migration to Center-Led Structure

How is your procurement organization structured Key Take Aways

today and in two years’ time?  Centralization Remains a Strong
Trend
60.00%
A center-led strategy (decentralized
transactions managed by a central
50.00% purchasing strategy) still more common
than a completely centralized
model
40.00%
 Decentralized Nearly Obsolete
30.00% 2011 Only 5% of respondents will support a
2013 decentralized strategy by 2013
20.00%

10.00%

0.00%
Centralized Center-Led Decentralized Matrix

© 2011 SAP AG. All rights reserved. 9

A changing Reporting Structure for Procurement

Which of the following best describes procurement's Key Take Aways

reporting structure and position in your  Board-Level Attention Growing
organization?
Only 25% reported having this level of
40.00% focus today
35.00% That number is expected to grow to over
30.00% 60% in two years

25.00%  Balance Between Finance and Supply

Chain
20.00%

15.00% Roughly equal numbers of respondents say

they report to supply chain / operations and
10.00% finance
2011
5.00%
2013  Not a Back Office Function
0.00%
Almost no respondents claimed their
organization was “back office” or didn‟t
receive board-level consideration

© 2011 SAP AG. All rights reserved. 10

 Category Reach

Which of the following statements best describe Key Take Aways

procurement's role in INDIRECT AND SERVICES  Same Old Story
spend categories in your organization?
Procurement still has strongest control over
the typical indirect categories of spend
0% 20% 40% 60% 80% 100%
 With a Twist
Office supplies
Travel Services, marketing and advertising are
MRO showing more procurement influence than
Telecom: Wired and wireless in the past, with at least “involvement”
Fleet reported by over 75% of respondents
Logistics / Warehousing
Facilities Management
Utilities
Catering
IT - Hardware
Construction and Engineering
IT - Software
IT - Temp Labor
Professional Services
Staff/Labour
Marketing services
Advertising and Media spend

Controls Key influencer Involved No influence

© 2011 SAP AG. All rights reserved. 12

Collaboration
How Procurement Organizations collaborate internally
(or not)?
In which ways does procurement Key Take Aways
collaborate proactively with other business  Meetings and Phone Calls
functions?
The most common formats for collaboration
Embedded We don't as expected is meetings, followed by
resources , work project-led or ad hoc sorts of interactions
7% collaborative
Assigned  Room for Improvement
ly , 5%
staff to work Regular
with Best practices such as joint annual
meetings ,
procurement business planning, embedded resources
21%
, 7% and joint KPIs are used by some, but not
many

 Joint Supplier Ownership / Mgmt

Project This growing trend is practiced by 9% of

driven , 19% respondents but expected to be higher over
Joint KPIs , the next few years
9% Annual
Joint
business
supplier
plan for
perf mgmt Ad-hoc , 11%
sourcing ,
strategies
12%
, 9%

© 2011 SAP AG. All rights reserved. 14

 Increasing Importance of Supplier Collaboration

How does your organization collaborate Key Take Aways

with key suppliers?  Supplier Collaboration the Highest
Growing Initiative in this Survey
90.00%
22% ranked as extremely important in 2011
80.00%

70.00% 38% ranked as extremely important by

2013
60.00%
 Use of Supplier Collaboration
50.00%
Technology Growing
40.00%
60% of respondents currently use or plan to
30.00%
use technology to manage supplier
20.00% information, supplier records, supplier
2011 lifecycle or supplier performance
10.00%

0.00% 2013  Proactive, Consistent Collaboration

Proactive and Occasional Reactive Rare Still in Future
consistent proactive collaboration collaboration
Few achieve this today but most are
collaboration collaboration
planning for it

© 2011 SAP AG. All rights reserved. 16

Sustainability
Approaches to Managing Sustainability

What are your approaches to sustainability and Key Take Aways

CSR today and in two years?  Staff Focus

80.00% Already 42% of respondents claim

dedicated staff to these initiatives
70.00%
This number looks to grow to 58% by 2013
60.00%
 Measurement and Bonus
50.00%
The use of KPIs is in place at 41% of
40.00% companies today, with 59% saying they will
be in place by 2013
30.00%

2011 The biggest jump in figures reflects the

20.00%
expectation that 74% of responding
2013
10.00% companies will have bonuses tied to these
targets by 2013; only 26% have this in
0.00% place today

© 2011 SAP AG. All rights reserved. 18

Corporate Reporting on Sustainability

Does your organization produce a sustainable Key Take Aways

procurement report?  General Practice

29% say they are already producing this

report, with 14% stating it is in development

37% have no plans to do so (likely smaller

organizations)
No, we do not Yes, we
produce this already  Long Time Practice for Some
report or plan produce this
to produce Of those who do produce a report already,
report, 29% 32% said it had been in place for over 5
this report, years
37%
40% said it had been put into practice more
recently in the last 1 – 2 years
We are
We are developing
considering this report,
developing 14%
this report,
20%

© 2011 SAP AG. All rights reserved. 19

Adoption of Supplier Responsible Procurement Policy

Do you or will you require suppliers to sign up to Key Take Aways

a responsible procurement policy?  Many Organizations Require
Suppliers to Sign a Responsible
Procurement Policy

48% already have a supplier requirement in

place today, with another 31%
implementing by 2013
We have no
plans to  Compliance Measures Remain Weak
implement this,
We already Most suppliers are left to self-audit, either
24% by filling out a survey (44%) or providing
require this,
statements of compliance (39%)
46%
We plan to 25% of respondents do not audit their
suppliers, while 23% are audited by a
implement this,
globally-recognized 3rd party
31%
 An Area of Investment

60% of respondents expect to have

dedicated staff for CSR in 2 years time

75% state that a portion of their bonus

structure will be tied to CSR KPIs in 2 years
time

© 2011 SAP AG. All rights reserved. 20

Reflections on the Survey Findings

Priorities, Strategies and Trends

Adoption of strategic sourcing and spend analysis functions are not just trends.
Gaining visibility into the supply chain is a key focus area for most survey respondents.
Best-in-class organizations are leveraging predictive technology and market insights to take analytics and
visibility to a new level.

Procurement’s Structure, Reach and Performance

Today‟s economic environment requires the best possible mix of people, process and technology to sustain
the level of savings and operational efficiencies
Consider the power of an integrated procure-to-pay platform to help you achieve your procurement goals.

Collaboration
Internal and external collaboration happen at all points throughout the procurement process.
Seek solutions that integrate collaboration as a core element of your procurement infrastructure.

Sustainability
Implementing a CSR policy is only the first step in your process.
Tracking, managing and reporting on your compliance measures are key to your program‘s success.
Seek procurement solutions that automate and manage your CSR program – leveraging technology to do the
heavy lifting while your procurement experts are empowered to focus on the strategic elements of the
program.

© 2011 SAP AG. All rights reserved. 22

Thank You!
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