CURRENTSTATEOFSRM INT ODUCTION
INTRODUCTION
CONTENTS
FOREWORD
PROCUREMENT’SPATHTO ENTREPRENEURIAL SRM
FOREWORD
03
ENTREPRENEURIAL SRM: EXPANDING HORIZONS IN PROCUREMENT
ARTICLE 01: WHY BE ENTREPRENEURIAL?
05 06 07 08 09
ARTICLE 02: WHAT DOES IT MEAN TO BE ENTREPRENEURIAL?
ARTICLE 03: WHAT RESOURCESWILL SUPPORT PROCUREMENT ENTREPRENEURS? ARTICLE 04: IS THIS VISION OF ENTREPRENEURIAL PROCUREMENT REALISTIC?
ARTICLE 05: IF YOU ARE NOT AN ENTREPRENEUR, WHAT ARE YOU?
ABOUT SRM, STATE OF FLUX ANDOURRESEARCH
10
SUMMARY OF KEY FINDINGS
12
SIX PILLARS OF SRM
14
Procurement is at a crossroads. Over the past two or three decades, the diligent application of tried and tested techniques has produced results, usually by reducing input prices. Although the procurement profession has talked about supplier innovation, cost has always been front and centre. It will remain so, but increasingly businesses can reduce supply costs without the help of the procurement department.
fuels company, are already benefiting from SRM by being more innovative and improving speed to market (see case studies on pages 24 and 76). But innovation in SRM does not only support growth. The financial crisis, and the 10 years since, have revealed the interdependent and complex nature of business relationships. On page 38, we see how a leading global manufacturer is using SRM to manage these risks. Procurement’s leadership in entrepreneurial collaborationwill not come automatically. For nine years, we have used the six pillars of SRM to showbusinesses how to create relationships that add value. Over that time, we have recorded huge shortfalls in investment in technology and people. Organisations need to address these shortfalls, in particular if they are to innovate and grow. The alternative is to watch the competition snatch opportunities fromyour business and see procurement’s influence wane. I knowwhich I would choose.
01 VALUE
16
CASE STUDY: KELLOGG
24
CASE STUDY: AEP
28
02 ENGAGEMENT
30
other cross business relationships the procurement function has the opportunity to expand its role and become expert in managing these vital supplier relationships. But it can domuchmore. Businesses do not want to do the same things they have always done. They see digital technologies transforming markets and relationships with customers. Companies are alert to disruption. Low capital costs mean innovators can enter markets quickly and forever change them: Uber did so without owning any taxis; Airbnb without owning any hotels. Organisations know the way to compete is through collaboration. With a strong grasp of SRM, procurement can provide the answer. It can find organisations with which to collaborate, form trusted relationships and then use those relationships to innovate at speed. This is entrepreneurial procurement, and it is the theme of our 2017 State of Flux SRM report. It is not some far-off vision. Global leaders such as the Kellogg Company in food production and Caltex, the transportation
In our SRM report last year, State of Flux pointed out the potential for technology to be a key enabler in procurement. This year, others are picking up on the trend. “Analytics, automation, cloud, mobile, social media, blockchain and cognitive and artificial intelligence technologies are being used to create a touchless procurement ecosystem,” says research firm Everest Group. At the same time, it reports that the $2.4 billion global procurement outsourcing market is growing at a solid 9% annually, while providers who invest heavily in digital technologies achieve growth of up to 15%. If procurement departments and practitioners do not wake up and see what these trends mean, their future will be decided for them. They could be commoditised, outsourced and in the end replaced by automation. But there is another road for procurement to follow. The trend that is commoditising procurement is affecting other departments too. HR and IT aremoving away from owning teams to owning outsourced service provider relationships. With these as with
CASE STUDY: INDUSTRIAL
38
03 GOVERNANCE
42
CASE STUDY: AUSTRALIANDEFENCE FORCE
50
INTERMISSION - THE SRMJOURNEY
54
04 PEOPLE
56
CASE STUDY: COOP
64
05 TECHNOLOGY
68
CASE STUDY: CALTEX
76
06 COLLABORATION
80
Alan Day Chairman, State of Flux
CASE STUDY: CARGILL
88
SUMMARY AND CALL TO ACTION
92
OUR PARTNERS
94
ABOUT STATE OF FLUX
95
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STATEOFFLUX 2017GLOBAL SRMRESEARCHREPORT
STATEOFFLUX 2017GLOBAL SRMRESEARCHREPORT
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