Check-up operational procurement

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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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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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

33

35 36

1

2

3

Standardization 4 5

32

6

31

7

30

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% 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

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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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