The document discusses how traditional purchasing organizations and roles have transformed more in the past 5 years than the previous 100 years. It notes that transformation is happening faster than initially predicted. Open standards, cloud computing, and new market entrants are disrupting traditional vendors and changing how companies purchase key categories like servers, software, office supplies and travel. It suggests traditional purchasing has reached its apex and innovative approaches from new companies are driving disruption. The roles of category experts, consultants, and measurements are changing. Everything is shifting to subscriptions, with different payment and contract terms. Logistics expectations are also evolving. Traditional purchasing must embrace these changes to remain relevant through strategies like pursuing disruptive cost savings opportunities and focusing on technical expertise over transaction processing.

1. In 2013 said “Traditional Purchasing organizations and jobs will transform
more in the next 5 years than the previous 100 years”
Transformation Moving at a faster pace than initially predicted
Bill Kohnen Initial Release V1.0
October 2014

2.  Development/Trends
◦ Open Everything
◦ Measurement
◦ Subscriptions
◦ Logistics
◦ Traditional Consultants losing relevance
◦ Value of Category Subject Expertise
 Traditional Purchasing reached its apex some time ago
◦ Changes in skills and approach
 Answers to common questions
 Sample CPO/Supply Chain Leader 3 year Road map
Bill Kohnen Initial Release V1.0
October 2014

3.  Disaggregation of proprietary hardware, software and networks is all providing companies direct
benefits:
◦ Cost
◦ Flexibility
◦ Environmental
◦ Technology
 The concept of open standards defined by users has produced fast and tangible benefits for IT
hardware buyers even if they do not actively participate in the „Open discussion and
development”
 Truth be told traditional Purchasing can not take much credit for this. Most of this was driven by
people at relatively new companies that were rapidly growing that did not have traditional
purchasing (Google, Facebook, Amazon etc.)
◦ The people there questioned why they had to accept things as is
◦ Big OEMs did not respond very well to them
◦ They went out own their own and created alternatives
 The Open Concept along with other factors suggest as cloud computing, and new market entries
are all ready resulting in traditional OEM corporate suppliers starting to lose leverage.
Bill Kohnen Initial Release V1.0
October 2014

4. Category Companies Source of Disruption
Servers/Routers HP/Dell/Cisco Open Computing
Enterprise Software Oracle/SAP Cloud Based
Software
Office Supplies Office
Depot/Staples
Entry of Amazon
and Walmart.com
Corporate Travel American Express Open booking
Web based solutions
Traditional Corporate Spend Categories That Will
Change
Bill Kohnen Initial Release V1.0
October 2014

5.  Shift in measurement enabling organization
 Avoid the trap of traditional cacophony of
kpi‟s that only Purchasing people care about:
The Important Goals are:
 Alignment with broad corporate goals
 Enablement of Strategy
 Capturing revenue
Bill Kohnen Initial Release V1.0
October 2014

6.  Everything as a service
 Payments and contract terms different and do
not match very well with most current
corporate payable and receivable processes.
Bill Kohnen Initial Release V1.0
October 2014

7.  Consumer like expectations for fulfillment
 Free 2 day Delivery
 Complete tracking transparency
 Options for same day delivery
Bill Kohnen Initial Release V1.0
October 2014

8.  Traditional consultants still plying trade but
nothing new from the lot of them in a couple
of years.
 A good CPO with small focused team can
accomplish much more than an army of
suited consulting experts
Bill Kohnen Initial Release V1.0
October 2014

9.  Expert Level Category Manager positions
continue to show signs of promise for
experienced Purchasing professionals
◦ Suggestion for Experienced Purchasing Managers and Directors
looking for position: Rebrand yourself as an experienced technical
expert in the category you are best at.
 Some reports that real high level experts
salaries approach and exceed that of
Department Managers.
◦ (this is not uncommon in other fields like Sales and Engineering)
Bill Kohnen Initial Release V1.0
October 2014

10.  Being an expert with excel, access, worksheets etc.
 Focus on cost savings.

 Purchasing centric individual quantitative measures
of how many transactions and how fast.
 Blaming other departments for inability to deliver
better results
 You must sit at your desk and process transaction.
(Better to get rid of your desk altogether)
Bill Kohnen Initial Release V1.0
October 2014

11.  Must Acquire at least some level of Category Expertise and
Stay current even if not directly responsible for the category
 Do not focus or sign up for the traditional “nibbling” minor
cost savings goals of 2% to 5%
 Identify more disruptive / disaggregation driven total cost
savings of 30% or more
 If you are involved in tactical Purchasing own, understand and
manage the process rather than just participate in it.
Bill Kohnen Initial Release V1.0
October 2014

12.  Traditional Corporate Purchasing leaders and
professionals must face up to the following:
◦ High impact ideas and action are coming from people outside the
normal purchasing structure from developing companies
◦ Even in the realm of more traditional approaches thought
leadership has become global
◦ All current traditional metrics and measure are barely relevant.
Stop chasing after these metrics yourself and certain stop paying
big money to consultants to provide you rehashed scorecards and
ay to improve.
◦ Operational Purchasing is not something most organizations will
support. It will be outsources or big organizations may do this as
a shared service
Bill Kohnen Initial Release V1.0
October 2014

13. Traditional Corporate Purchasing clearly reached its apex some time ago and is in free fall.
Alternative approach's driven by people and companies outside of the traditional corporate
purchasing environment are leading disruptive innovation in the total Supply Chain.
Highest level Executives see these new approach's as adding real value.
Where does that leave corporate purchasing people now:
◦ At some point innovative approaches need structure and a process for operational
execution. Potential value added there
◦ Category Technical Expertise will be important
◦ Try to become embedded in the leading disruptive technology projects in your
organziation
◦ In some more conservative organizations probably can „ride things out” as is for several
years.
Bill Kohnen Initial Release V1.0
October 2014

14.  Where will the jobs be?
◦ Fewer opportunities for traditional Purchasing jobs. Technology companies doing lots of
Purchasing are looking for people with non traditional skills. There will be pockets of
traditional purchasing but little growth expected.
 Surely there is still a need for todays basic Purchasing skills?
◦ Sure at smaller companies but even they will have easy access to advanced tools. More
knowledge will need to be incorporated into systems.
◦ Also cloud based companies need input on what customers need
◦ BPO‟s and Shared Service center will be the focus for core basic purchasing knowledge.
 What is the impact of Cloud?
◦ Enterprise software companies continue to struggle in the space and have not been
tremendously successful with cloud acquisitions. The cloud based companies that have
been successful see opportunity to add on services to what the offer. Expect better
Purchasing modules from them soon.
 What about Mobile?
◦ Across the board mobile computing is changing things. The purchasing process included.
You will be using an AP to issue orders, check status, update info, manage negotiations.
Bill Kohnen Initial Release V1.0
October 2014

15.  When it comes to automating tactical P2P process does that
really mean outsourcing to a BPO or Corporate Services Center?
The pace of outsourcing purchasing is moving even faster than expected for established organizations.
◦ Growing companies simply are not creating big traditional Purchasing Departments
◦ Process automation is important
◦ I would predict that in 5 years 50% of the worlds tactical purchasing transactions will take place at
outsourced BPO and Shared service centers in the Philippines
 If I am a Purchasing person now what else could I do?
◦ Customer Service and support
◦ Interestingly sales analytics and operations is an area where someone with
background in some traditional purchasing analytic skills can do well
◦ Technology program management
 Cost savings must still be important
◦ Tolerance and belief in the 5% per year savings is gone
◦ Finding and leading disruptive approach's to 30% or more savings is important and
generally does not follow a schedule based on the calendar.
Bill Kohnen Initial Release V1.0
October 2014

16.  How can we have customer service be important when we have to
enforce rules?
◦ The process we create must build in compliance requirements however, Purchasing should be more active in
challenging artificially set compliance barriers. (For instance signature levels that are to low)
 I am confused is the future organization centralized or decentralized?
◦ Probably distributed is better term. Overall control of system design and content rules central but
activities distributed outside of Purchasing.
 What really is a Global view or Globalization
◦ Someone that has experience to go to a different region and set a new supplier. People from Bay Area have
an advantage here also because of dealing with multi cultures everyday just like people in Hong Kong or
Singapore. Compared to people from Korea, Japan, India etc.
 Will the title CPO still be around?
◦ The position will continue o be around but probably the use of the title has peaked
out. Some organizations have a Director of Supply Chain that in practice has more
power and control than a CPO.
Bill Kohnen Initial Release V1.0
October 2014

17.  Where is Purchasing thought being developed and by who?
◦ Most innovative ideas are being driven outside of traditional Purchasing
◦ Traditional Purchasing thought leadership now truly globalized..
 What organizations will remain relevant?
◦ I think ISM is still the worldwide standard. A CPM is still valued around the
world. Still I think there will be challenges from others especially based on UN
standards that are established. There are training consultants in Asia making
lots of money teaching these classes.
 How portable are Purchasing skills today?
◦ Purchasing skills remain transferable across industry if on learns
the specific industry jargon. It could be as process becomes more
standardized and all things a commodity it can really making
Purchasing as transferable as Finance or IT.
Bill Kohnen Initial Release V1.0
October 2014

18. 2014
Flattened Organization
with more Category
Expertise
Wean from Consultants
Process tools cloud
based easy to put in
place and adjust
AP based tools emerge
Despite down play of
cost metric huge total
cost savings potential
with “Open‟ concept
Global Organizational
Alignment around
productivity and
resource cost
2015
Global recruiting and
development including
retraining of current
staff
Subscription Models
take hold across more
Categories
AP Driven Purchasing in
Place
Holistic Corporate
measurement. Specific
project happen faster
but not tied to calendar
year
Sun Never Sets
Operational Capability
Strategic and Expert
Level Knowledge More
Dispersed
2016
Direct Staff primarily
professional, Strategic.
Self directed and
aligned directly to
revenue
Syndicated Commerce
tools generating
revenue in addition to
savings
Integrated Data fully
enables organizational
best Total cost decision
making
Seamless Global
Structure with
differences in technical
capabilities at locations
by design and need
People
Technology and
Metrics Global
Bill Kohnen Initial Release V1.0
October 2014