Charting your path to delivering world class procurement
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Far from looking back over 10 years of achievement, PfH has had its sights fixed firmly on the future over the last 12 months. Following our sector wide research about commercial procurement we have been working with you to develop the services that will enable social housing providers to deliver and evidence world class procurement. This presentation shows PfH’s vision for the next 10 years. Presented by: Steve Malone (Procurement For Housing) at PfH Live 2014
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Charting your path to delivering world class procurement
- 1. 1 © CEL Procurement Limited 2014 Confidential Procurement 10 years on…..and on….. Steven Malone, Managing Director, CEL Procurement Sources – Deloitte, PwC, Cap Gemini, CIPS, Ariba, Liverpool University, IBM, CEL Procurement
- 2. © CEL Procurement Limited 2014 Confidential 2 Todays procurement challenge Shaping the opportunity for housing Where are we aiming for?
- 3. © CEL Procurement Limited 2014 Confidential 3
- 4. © CEL Procurement Limited 2014 Confidential 4 Mergers & Acquisitions Regulation Customers Outsourcing (Delivery Models) Organisational Strategy Metrics Global Impact
- 5. © CEL Procurement Limited 2014 Confidential 5 Cost Savings Increase Value for Money Reduce Non-Compliant Spend Improve Spend Visibility Minimise Procurement Risk Technology Data Process Talent
- 6. © CEL Procurement Limited 2014 Confidential 6 70% Believe that procurement’s importance is increasing in the sector 1/3 Only 1/3 feel they are sufficiently resourced 80% Don’t think their procurement team will increase in size over the next three years 42% Have no Chartered Institute of Purchasing and Supply qualified team members 57% Of large and 41% of small housing organisations don’t carry out benchmarking despite thinking it’s important 14% Have total spend visibility. Nearly 25% believe their spend visibility is poor
- 7. © CEL Procurement Limited 2014 Confidential 7 Aggregation Regulation Social Value Insight Value Creators Social Housing Industry Leaders
- 8. © CEL Procurement Limited 2014 Confidential 8
- 9. © CEL Procurement Limited 2014 Confidential 9 HCA Global Accounts 2013 £millions Decreasing external spend by 10% Increasing revenues by 10% Decreasing labour by 10% Revenues £14,860 £14,860 £16,346 £14,860 Non addressable costs £3,994 £3,994 £4,397 £3,682 External costs £7,017 £6,315 £7,683 £7,017 Operating surplus £3,850 £4,551 £4,266 £4,161 Change in net surplus (£) £701 £416 £311 Change in net surplus (%) 18.2% 10% 8%
- 10. © CEL Procurement Limited 2014 Confidential 10
- 11. © CEL Procurement Limited 2014 Confidential 11 “The standard procurement tactics of aggregating volume and negotiating prices with big suppliers just is not enough if you have to ensure security of supply and drive competitive edge for the company.” What more is needed? For a start, dynamic relationships with suppliers and more synergistic relationships across their organizations. (CPO, Toyota) 40% Sourcing & Category Management 30% Compliance 20% Aggregation 10% Other Efficiencies 10 – 15% average indirect spend savings
- 12. © CEL Procurement Limited 2014 Confidential 12 Leading procurement organisations achieve 1.7 times the profit growth Leaders have 30% additional savings compared to lowest performers Leaders procurement function costs 50% less compared to lowest performers The average additional cost for non compliant spend is 22%
- 13. © CEL Procurement Limited 2014 Confidential 13
- 14. © CEL Procurement Limited 2014 Confidential 14 Technology & data Talent Collaboration Value & Purpose Structural Measures
- 15. © CEL Procurement Limited 2014 Confidential 15 IndustryHousing Leaders Stand alone; low to no integration; no data; finance orientated, reliant on suppliers Basic integration; compliance, analytics, catalogues, workflows; big data or teenage sex; risk management, trackers Intraoperative applications; information & knowledge nexus; smart data; predictive; on-demand source to pay - SaS
- 16. © CEL Procurement Limited 2014 Confidential 16 Administrator; process expert; price orientated; limited commercial awareness Procurement experts; EU experts; Policy & process; Basic analytics; Basic category management Financial, commercial & category acumen; innovation focused – ideas not products & services; customer, supplier & business centric; Collaboration skills; consultant, networker, analyst LeadersIndustryHousing
- 17. © CEL Procurement Limited 2014 Confidential 17 Un-committed aggregation; Standardisation; Best practice Synergy; competencies; committed aggregation; partnerships, JV models, alliances; partial outsourcing Value creation; competitive advantage; viral; exclusivity; outsourcing – procurement on demand LeadersIndustryHousing
- 18. © CEL Procurement Limited 2014 Confidential 18 Policing, audit, compliance, regulation; Tendering; Internal benchmarking; cost, price, savings measurement; CSR Evidence based analytics; Life time costing; Knowledge broker; risk management; social output – triple bottom line Focus on top & bottom line; Predictive forecasting; Growth focussed not cost focussed; Social outcome LeadersIndustryHousing
- 19. © CEL Procurement Limited 2014 Confidential 19 Low resource investment; Functional; Limited influence; In-house; Implement Finance focussed; Project related; Partnerships; Growing voice; Involved at the end of the planning process CPO level; Horizontal working; Outsourcing; Involved in strategy development; Key to product & service innovation LeadersIndustryHousing
- 20. © CEL Procurement Limited 2014 Confidential 20 Price saving; compliance; supplier data reliance; In- sector benchmarking; Cost reduction not avoidance; Budget adherence Total cost savings; Social value; Analytics KPI’s; Risk analysis; Corporate goals; Deliver on budget not do we need the budget Working cap requirements – liquidity; Social return; Top & bottom line impact – value add; Financial & balance sheet measures; Risk mitigation; Predictive measures
- 21. © CEL Procurement Limited 2014 Confidential 21
- 22. © CEL Procurement Limited 2014 Confidential 22 Consortia Provider Community Supplier Supplier Supplier Supplier Provider Community Provider Provider ConsortiaSupplier Supplier Supplier Supplier Supplier CEO CFO Finance Team Procurement Team Centralised or decentralised CEO CFO CPO Centre led + outsourcing ERP Housing Management System Finance System P2P System Provider Systems Supplier Systems
- 23. • Don’t allow the present to dictate the future • The opportunities are massively important • It makes the most commercial sense • Make the transformation © CEL Procurement Limited 2014 Confidential 23
Hinweis der Redaktion
- Typically in housing the procurement function deals with the overhead spend areas which represent low strategic importance and value. What will Procurement’s role be in that future? Will Procurement get the current recognition that 61% of the respondents to the 2010 CPO survey state - ‘as a winner of delivering sustained value and strategic cost reductions’ - or will Procurement still be seen as a tactical, undervalued entity of the business? despite the propensity to be impactful, purchasing organizations remain unable to realize or deliver the full value from their operations. This can be largely attributed to the inability to drive greater synergies through aggregation on a geographical level or across business units, the lack of exploitation of cost savings and sourcing decision through low cost countries, poor leverage of supplier innovation, a burdened interface with business users, and the slow adaptation and exploration of a new business environment. Move from either central or decentralised to a central led strategy – This is what industry is doing.
- Inside housing – margin on top RP’s “The Procurement organization measures the amount of new business ideas that they develop jointly with the business.” Head of Corporate Procurement Major Logistics Provider Percentage of innovations driven by Procurement coming from the supply chain • the contribution of Procurement in the sustainable objectives of the entire organization • Involvement in initiatives; internal collaboration with the business or functions • Total Cost of Ownership approach • Or, as the Head of Corporate Procurement for a major Logistics Provider noted, his Procurement organization measures the amount of new business ideas that they develop jointly with the business.
- Cost is important but value is king! Nissan & Sunderland concept of supply chain re-locating to the local area & driving up the skills, jobs and local economy in the area.