KPMG Content

Integrating Operations and Tax Planning Into a Procurement Operating Model

Spend Matters welcomes this guest article by Stefan Kramer, manager in the Operations Advisory Practice at KPMG.

As procurement organizations evolve, they commonly adopt different procurement operating models (POMs) at different stages of their development. A global KPMG survey of chief procurement officers (CPOs) found that 83% of organizations changed their POM within the last 5 years and just over half of them over the previous year. In this context, the paths that procurement organizations follow appear to be similar: moving from a decentralized to a center-led model.

Working Capital Optimization and Cash Management

Spend Matters welcomes this guest article by Kunal Shah, manager in the operations advisory practice at KPMG.

As we emerge from the recession, companies are holding a record amount of cash. This has resulted in an increase in cash deployment through investments and acquisition made by corporations to improve and expand their business. In the continued effort to increase cash available and provide liquidity to make strategic decisions, a company must properly manage its working capital.

Supplier Relationship Management – It’s Not Just Managing the Supplier

Spend Matters welcomes this guest article by Chris McClory, manager of operations advisory at KPMG. When organizations think about supplier relationship management (SRM) they often zero in on management of supplier performance and the enforcement of service-level agreements. This focus stems from a common assumption that SRM is primarily about direct interaction with the supplier. However, KPMG’s experience, reinforced by our findings from a recent study conducted with Professor Robert Handfield at North Carolina State University, indicates that internally-focused activities require at least as much focus.

Tilling a Field With a Teaspoon: A Cautionary Tale of Category Management

Spend Matters welcomes this guest article by Mark Dell’Olio, a manager in the KPMG Operations Advisory Practice. The role procurement plays in the broader business context has changed significantly in the past decade as cost-effectiveness, supply assurance and social responsibility place a greater emphasis on strategic spending. As a result, today’s chief purchasing officer is far more likely to be taking an elevator to the C-suite, rather than be roaming the halls of the back office. The 2014 CAPS study entitled “Chief Purchasing Officers' Mobility and Compensation: A 2014 Study of Fortune 500 Firms” reported that 82% of CPOs have direct access to their CEO, this is compared to 60% in 1999. These statistics confirm procurement’s increasing importance to delivering sustainable stakeholder value.

The Deals Are Coming! Key Considerations For the Transaction Boom

Spend Matters welcomes this guest article by Chris McCarney, director of Operations Advisory at KPMG. Traditional indicators point to a significant increase in M&A activity for 2015. Continuing last year’s trend, companies and private equity firms are looking to put their historically high levels of cash to work. Armed with this “dry powder,” healthy credit markets and improving employment numbers, dealmakers are poised for an active year ahead.

KPMG: Exploring Procurement Operating Models- The Symbiotic Relationship of Changing Structures and Savings

Drawing from the KPMG and Procurement Leaders research study: High Impact Procurement Operating Models – A Survey of Global CPOs, we examine the relationship between the two key takeaways: Retaining the benefit of past models of procurement in the current model and discovering how changing the model delivers savings.

KPMG: Operating Models, Savings and Performance – On Centralization and Journeys vs. Destinations

What happens as procurement organizations transition from decentralized operating models to greater centralization? As KPMG observes in the above-linked analysis, “we have seen the evolution of most organizations follow the same course: one of increasing
 control by procurement through centralized operating structures. Centralization brings obvious benefits, but once centralization has occurred, the benefits are known to fall off quite rapidly, so what is next?”

Exploring Procurement Operating Models: Governance, Measurement, and Reporting Structure

Pierre Mitchell and I have spent a good bit of time dissecting a 2013 study KPMG published that is based on a survey conducted with Procurement Leaders. Titled High Impact Procurement Operating Models – A Survey of Global CPOs, the research explores the impact of different procurement operating models on overall structure and performance. It considers decentralized, center-led, centralized, and hybrid operating models for the function. But regardless of structure, underlying each operating model are key attributes and measurements designed that come together as part of each structuring and approach.

KPMG on Future Procurement Skills: Purchasing as Internal Consultant

KPMG’s white paper, titled FUTUREBUY: The Future of Procurement – 25 in 25, provides a forward-looking capability/maturity model that considers the skills that practitioners will need in the profession in 2025. One of these, KPMG suggests, will be an increasing focus on procurement as “internal consultant” to the business. We observe that many larger organizations today have internal consulting organizations (sometimes part of, sometimes separate from, a corporate development or strategy function). These small teams often feature former strategy and operations consultants deployed internally as if they were external consultants – but ideally with deeper knowledge of the business to offer more than just an analytical perspective on opportunities.

Future Procurement Skills: Purchasing as Legal and Contracting Expert

One of the useful elements of KPMG’s white paper, FUTUREBUY: The Future of Procurement – 25 in 25, is a broad yet simplistic (in a positive sense) five-step capability maturity model exploring a range of different skill areas that procurement will require in the coming years. One of these covers procurement as legal expert. This is a concept that would turn the typical relationship between procurement and legal on its head. All too often, we see that procurement organizations have an arm’s length relationship with legal, seeing the function as a potential roadblock (e.g., to contract signing and implementation) rather than an ally or partner.

KPMG on Future Procurement Skills: Market Intelligence and Cost Modeling

In KPMG’s white paper, FUTUREBUY: The Future of Procurement – 25 in 25, the authors offer up a five-step capability maturity model exploring a range of different skill areas that procurement (as a profession and a function) will require in the coming years. One of these is market intelligence & cost modeling. In regards to maturity in this area, KPMG suggests that organizations first start with a “low level of common tools, processes, and methodologies.” As they move to the next level of maturity, companies begin to use “financial information to create high-level product models.”

Exploring the Intersection of Procurement, Contracting, and Legal: A Future Look Courtesy of KPMG

In recent weeks, we’ve been highlighting some astute observations from a KPMG paper exploring the future of procurement in 2025: FUTUREBUY: The Future of Procurement – 25 in 25: Delivering procurement value in a complex world. One section that has not received enough attention is the intersection of procurement with contract negotiation, implementation, management, and legal. This is a topic that IACCM, the organization Tim Cummins has led for years, does a marvelous job exploring – but unfortunately has not attracted enough procurement folks into the fold as it should. But we think this will change, especially if you read KPMG’s and IACCM’s thoughts on the subject.