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Procurement Overview

Procurement Overview. The Value of Strategic Procurement. Overview . What? Procurement Vs. Purchasing an enhanced understanding of strategic procurement functions Why? The benefits of implementing the process. How? Processes , tools and supply chain strategies Next Steps –

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Procurement Overview

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  1. Procurement Overview The Value of Strategic Procurement

  2. Overview • What? Procurement Vs. Purchasing an enhanced understanding of strategic procurement functions • Why? The benefits of implementing the process. • How? Processes, tools and supply chain strategies • Next Steps – • Building a robust long-term supply chain Strategy • Identify Quick Wins

  3. Strategic Sourcing - A Definition • An approach to supply chain management  - • formalizes the way information is gathered and used. Enables consolidated purchasing power to find the best possible values in the marketplace.  • Requires analysis of what an organization buys, from whom, at what price and at what volume. • Differs from conventional purchasing because it places emphasis on the entire life-cycle of a product, not just its initial purchase price.  Year on Year Benefits – • Bottom Line Savings • Best Practice • Process Improvement • Rationalisation • Creates Unified Local, Regional and Global Platform to leverage opportunity and support growth

  4. What IS STRATEGIC SOURCING? It Is Not • Focused ONLY on cost • Getting the cheapest product/service • Ad-hoc activities involving only purchasing • Focused on ‘beating up suppliers’ • Self Made Decisions based on opinion or convenience • A one-time project or decision It Is • Focused on the Total Cost of Ownership (TOC) incorporating customer needs, organizational goals and market conditions • Getting the best product/service at the best value • Driven by a rigorous and collaborative approach • Addresses all levers for savings • Collaborative Decisions based on fact based analysis and market intelligence • A continuous approach

  5. Four Methods to Increase Pretax Income by 25% * Reducing total costs through more effective procurement may … +24%** 20% Reduce Procurement Costs Reduce Labor Costs Reduce Other Costs 10% *Require less effort and expense than increasing sales through traditional methods *Be more sustainable due to new contract agreements *Be less disruptive than reducing headcount 0% Increase Sales -9% -27% -65% -10% -20% % Change Required -30% -40% -50% -60% -70% Sourcing & Procurement Value Proposition Procurement improvements may offer a less disruptive, more effective opportunity to impact the bottom line. * Based on the following estimate of costs, as a percentage of revenue: 55% manufacturing materials & services; 18% labor; 7.5% other costs ** Assumes a 20% gross contribution margin

  6. BENEFITS OF STRATEGIC SOURCING

  7. Strategic Sourcing – addresses the “Total Cost” of products and services that a company procures

  8. What is Spend Analysis? • There's a common saying, "you don't know what you don't know." In the absence of a Spend Analysis project, companies won't know what they don't know. Not knowing what and where you're spending means not knowing where you can save, especially the more disparate and geographically spread-out you are. To find the real savings opportunities, organizations must paint a true picture of the spending landscape by utilizing Spend Analysis tools to look at more detail, look at spend of international sites, and break down spend into more refined categories. • The improved availability of data yielded by a Spend Visibility & Analysis tool allows businesses to employ evidence-based decision making at all levels of their organization. Data-driven Spend Analysis means more capabilities and savings opportunities at lesser cost. Sometimes, uncovering opportunities in just a few commodities can save millions of dollars. Statistics taken from 100 customer engagements show a minimum savings of 10x's the ROI on the Spend Analysis project.

  9. Defining Spend Analysis Who is buying? What are they buying? From whom? When? Where? At what price? Spend analysis solutions is a type of business intelligence (BI) tool. The primary purpose of a specialized spend analysis solution, however, is to enrich and cleanse transaction data. In other words, spend analysis is the process of aggregating, classifying, and leveraging spend data for the purpose of gaining visibility into – • cost reduction, • performance improvement • contract compliance opportunities

  10. Low Hanging Fruit The data collected can lead to the identification of “Quick Hits” • Quick Hits are the “Low hanging fruit”and can provide: • Instant savings to the company (i.e. Payment Terms) • Credibility to the procurement function • Building Support/Rapport with Stakeholders

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