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
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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
