1. Sales Institute
David Coffey The Clearview Group
David Coffey – The Clearview Group
Stephen Pitcher – Provide Consultants
19TH January 2011
2011

2. Agenda
Agenda
Introduction – Who we are
1. What is Purchasing /Procurement
What is Purchasing /Procurement
1. When does it start?
2. What are the different levels of procurement maturity within clients organisations
3.
3 What challenges does procurement face
What challenges does procurement face
4. Outline ways to identify the procurement behaviours of clients
2. Procurement Practices
1.
1 What do they do
What do they do
2. How do they plan, identify strategies
3. What tools do procurement use
4.
4 What does this mean for you
What does this mean for you
5. Identify ways to engage with different levels of procurement
3. How do suppliers respond
1.
1 How to categorise procurement functions
How to categorise procurement functions
2. Category and Supplier Management
3. Tools for suppliers
4.
4 Top Tips
T Ti

3. Introduction
David Coffey – The Clearview Group – david.coffey@clearviewgroup.ie / 087.137.0798
David has extensive experience building, managing, and transforming strategic procurement functions across
both the public and private sectors.
• The Clearview Group : Co-founder (2005 to date), a procurement services company
• Supplierforce: Chief Services Officer, with responsibility for professional services delivery.
• Takeda Pharmaceuticals North America, Inc (Chicago): US Head of Procurement ($1.2B in supplier spend)
• ABN AMRO North America, Inc (Chicago): VP of Corporate Planning and Strategic Sourcing ($1.7B in supplier
spend)
• PricewaterhouseCoopers US (Chicago): Senior Strategy Consultant
Stephen Pitcher – Provide Consulting Ltd – stephen@provide.ie – 086 6235551
Stephen has worked in senior Procurement roles in the UK and Ireland for PLCs such as Allied Domecq,
First Leisure and Hibernian/Aviva . He was a founder member of the Aviva International Procurement
council. He founded Provide Consulting after leaving Hibernian and provides procurement services to a
variety of SME and Corporate clients
3

4. Traditional Purchasing
g
Characteristics
Focus on short‐term savings
Tactically oriented vs. strategically focused
Focus
Focused on Tangible Goods
Short-Term
Pre‐ Defined Specifications
Communication
Deal Driven (Adversarial) Relationships
No consistent measures to assess performance
Performance
Communications not consistent Relationship
Suppliers lack knowledge of Group OPNs.

5. Procurement Characteristics
Today
Focus on total cost of ownership
Increased Focus on Service
Short-Term Focus
Long-Term
Strategically vs. Tactically oriented
Consistent assessment of performance
Communication
Clear direction in relationship development
p p
Relationship
Improved communication Performance
Enhanced knowledge of company business
E h dk l d f b i
practices

6. Procurement Defined
Procurement is the process of creating
and sustaining value and managing
d t i i l d i
external spend and activities through:
• 40-60% of a company’s cost
base
• the acquisition of goods and/or services • significant impact on margins
• at the best possible total cost of
ownership,
ownership • Complex - thousands of
• in the right quality and quantity, suppliers with many more
• at the right time, relationships
• in the right place
g p
• and from the right source • C
Constantly changing
l h i
• for the direct benefit or use of the environments (business,
procuring organisation markets, people, regulation,
• generally via a contract
contract. compliance etc.)
6

7. The capability of your clients and target companies will vary
PROCUREMENT CAPABILITY – WHERE ARE YOUR CLIENTS & PROSPECTS?
7

8. Behaviours of Procurement Function along the Capability Curve – a look at levels 1 to 3
TRANSACTIONAL COMMERCIAL PROACTIVE
1. Tactical 1. Follow process ‐ tenders 1. Strategic – think in a business context
2. No/Limited sphere of influence 2. Not independent thinkers – follow process 2. Ear of CFO/CEO
3. Weak relationships with business 3. Limited sphere of influence 3. Commercially, analytically strong
4.
4 Focus is on execution, process
Focus is on execution process 4.
4 Suspicious 4. Subject matter experts
4 Subject matter experts
5. Not commercially savvy 5. Blinkered, somewhat narrow vision – 5. Independent, self directed
6. Limited decision making process and price 6. Influence, may in fact control
7. Distracted with day to day 6. Traditional negotiation and supplier 7. Open‐minded, progressive
management methods – challenge, 8. Broader, more holistic view
aggressive 9. Receptive to ideas
7. Short term approach 10. Relationship builders, leaders
11. Change managers
12. Thinkers ‐ innovation

9. Managing Procurement is challenging......and it has only become more so
Traditional Challenges
• Purchasing vs. Procurement –
perceptions
• Lack of executive awareness
• Deliver savings
Shift from competitive advantage to
• Budgets reside outside of purchasing / competitive survival
titi i l
procurement
• Massive pressure building on the
• Lack of procurement expertise in the purchasing function
business unit
• Look to cost base and
New Challenges
procurement for sustained
• Massive upheaval in global markets profitability
• Contracting revenues • “Doing more with less”
• Market share is under threat • Same quality / service for less
• R d
Reduced profitability and
d fit bilit d • Manage and drive value
competitiveness
• Supply chain risk – company
failures
f il

10. Procurement
What do they do?

11. The Sourcing Cycle
Value Creation Value Capture
Define User Profile the Sourcing Tender & Implement Performance
Requirements Category Strategy Award Contract Manage
3-5 months 3-5 years
• Best practices
• Order to chaos – categories, segmentation
• Prioritise – categories, suppliers, resources – to deliver value
• Cycle, not an event
y
• From tactical/short term to the strategic/long term
• Information rich – business solutions
• Plans solutions
Plans,
• Process + Management
• Collaborate and engage – stakeholders and suppliers
11

12. Cost Drivers Review
Cost Drivers Review
Supplier Customer
C t
Tariff Usage
Specification
(Unit Cost) Costs
Costs
Infrastructure Costs/ Transaction Costs

13. Procurement Strategy
Procurement Strategy
Information
Poor Service
Reduced Cost vs Higher Margin
ntification of Issues
High Cost
Specification
o
s. r
Performance
Iden Measurement
Poor Service
Low Cost
Sustainable
Cost Savings
Procurement Best Practice

14. How do Procurement Functions create
Procurement Strategy…
Business Strategy Dept. Strategy Identify Suppliers Internal Tactics Communications
• Focus on Core • Correct • Assess current • Review Specifications • Improve internally and
Business product/service supplier base externally
• Provide Management
• Improve Quality of • Improve Quality of • Set Out Performance Information • Better information flow
Information
I f ti Information
I f ti Criteria
C it i
• Identify Appropriate • Better access to global
• Reduce Cost Year on •Reduce Number • Allocate Resources Budget Allocation information
Year of Suppliers
• Streamline Decision •Reduce
Making Processing Time
•Identify Cost at
Source
• Continuous quality
improvement

15. The Light at the End of the Tunnel!
The Light at the End of the Tunnel!
• Structure and Objectivity
– Category Management
Category Management
– Supplier Management
• Global Requirements
• Non Core Requirements
Non Core Requirements
– CSR Agendas
• Risk, Auditability, Stability, Sustainability
k d bl bl bl

16. What can Suppliers do
1. Categorise procurement functions
2. Embrace Category and Supplier Management
3. Contribute to the process
4. Tools for suppliers
5. Dos and Don’ts

17. Categorise the procurement
functions
• Review Procurement in light of maturity chart
• Who’s at the meeting
• Who reads the proposals
• Are they looking at reducing invoices, CSR Report
y g g p
• Who will manage the contract
• What issues do they discuss ; cost, volume,
y ; , ,
specification
• How will value be measured
• What language do they use about Risk, Contingency,
Added Value

18. Opportunities
• Category Management
– Visibility
Visibility
– Structure
• Supplier Management
– Platform for measurement
– Platform for stakeholder management

19. Contribute to the process
Contribute to the process
• Identify ways to help move the procurement function across
the maturity chart
• Sh
Show an understanding of procurement challenges
d t di f t h ll
• Need for short term savings
– Deliver short term benefits
Deliver short term benefits
• Corporate unwillingness to partner with suppliers
– Build trust with stakeholders
• Lack of understanding of procurement in client organisations
– Demonstrate value of ongoing engagement in supplier management
process. Develop communications
process Develop communications
• Risk in Supply Chain
– Demonstrate risk avoidance

20. Dos and Don ts
Dos and Don’ts
Do Don’t
Listen to Client
Li t t Cli t Tell him what you have
T ll hi h t h
Use an Executive Summary Abuse an Executive Summary
Provide Solutions
Provide Solutions Sell your product
Sell your product
Account Manager to attend Sales people attend
Show Trust Start Tender with Confidentiality Clause
Show relevant CSR evidence Engage in Corporate Boasting
Identify stakeholders Pigeon hole stakeholders
Know why you are there Just Tell them you value the business

21. Tips for Sales Professionals when Engaging with Procurement
Your goals are to win new clients, sell more to existing clients, be retained or increase ‘stickiness’,
protect margin. These objectives may not necessarily conflict with the buyer’s objectives
t t i Th bj ti t il fli t ith th b ’ bj ti
1. Gauge the capability of the procurement function
2. Identify the key stakeholders, don’t circumvent procurement
3. Understand how the procurement function organises spend, categories
4.
4 See your business through the client’s eyes - understand your category spend
client s
relative to other categories, complexity, importance to the business
5. Engage procurement – understand sourcing strategy for your category.
6.
6 Heighten your profile by providing objective, strategic guidance such as market
objective
intelligence, product developments.
7. Help to shape the prospect’s category strategy. They often need your help!
8.
8 Listen and understand the problem they are trying to address
9. Provide value - understand the prospect’s total cost structure for the model. Make
those improvements if necessary
10.
10 In tenders, engage and answer the questions be creative and do not provide
tenders questions,
marketing fluff
11. Implementation is key – do not let the wheels fall off at the first hurdle
12.
12 Management - do not forget the client after the contract is signed – expect
improvements, value, risk mitigation over the life of the contract.
21

22. Tool: Procurement Capability Framework
Client 1 Client 2 Prospect 1 Prospect 2
1. Procurement Strategy
2. Total Cost Focus
3. Category & Supplier Mgmt
4. Stakeholders
5. Organisation (Skills, Structure)
6. Policy & Governance
7. Processes & System
22

23. Questions
Questions