CPO Agenda for 2nd half 2013

Bill KohnenDiscussion notes for Informal CPO Roundtable Hyatt Hotel San Francisco CA June 2013

Agenda

•Emerging Key Measures▫Self reported cost savings not trusted

anymore•Success factors of top performing

organizations▫People and how categories are defined

•Redefining Categories▫Need to add forward looking view

•CSR remains Important▫Becoming business practice and strong

area for professional development

Emerging Key Measurements are:Cost of Goods SoldEBITDA

2010 2011 2012 20130

20

40

60

80

100

120

COGSEBITDA

~ 70% of Purchasing Success Based on•People

▫Who you have ▫Development▫Skills▫Support

•How Categories are Defined and Managed▫How you define what to focus on▫What you do with categories

People• Organizations not doing a good job getting and keeping people with skills

needed or training them internal

▫ Core Procurement Skills▫ Analytic Skills▫ Business Acumen▫ Managerial Skills

Why?Salary part of issuePoor understanding of needs by HR staff and HeadhuntersNot investing in tools and training to support top peopleFor Example: Hiring a top person to identify million dollar total cost savings opportunities but expecting her to fly to Asia coach, stay in a discount hotel while using a hand me down computer and expecting her to expense trips with personal credit cards.

How Categories are Defined and Managed•This does not require any particular technology•Recent evidence suggests rethinking setting

categories based on 4 quadrant review.•Refining Definition of Strategic sourcing

▫Strategic Sourcing Methodology does deliver results▫However, as practiced this really covers operationally

and financially important suppliers in the short term▫Using 80/20 Rule and Single/Sole Source as criteria do

not identify areas that are really strategic

Emerging View of CategoriesOperationalImportance

StrategicImportance

Action Where Goal

Not Not Automate Consolidate Leverage Basic core Purchasing Skills

Operations in LCC

Outsource or create Shared Service Organization

Operational efficiency

Cost

Yes Not Current Strategic Sourcing Tools

Based on historical data and near term forecast

Regional Reporting into CPO.

Cost

Manage Risk

Quality

No Yes Forward looking

Identification of opportunities for mutual alignment with suppliers

With CTO, Bus Development Design Centers

Enabling technology

Product Development

New revenue

Corporate Social Responsibility

•Remains important to companies with and without brand image.

•Leaders are integrating into practice of:▫ Supplier Management▫ Supplier Audit▫Supplier Recognition

•An area where there are opportunities to develop staff internal with rotational assignments or teams to conduct reviews.

Upcoming Events

PASIA World is a high level event that worth attending if you can coordinate with other travel to Asia or can send your staff in Asia there. Semicon – July 8 to 10 San Francisco

▫ As industry picks up and 450mm becomes more clear may be some excitement this year.