Closing the procurement function loop
New ways procurement can achieve sustainable value
Several years ago, Accenture recognized the need to reimagine our procurement function. We saw that the future was less about managing transactions and tactical spend and more about driving real value—value that impacts Accenture’s bottom line. Our procurement organization saw that value could be gained from influencing and supporting the growth of Accenture’s business, delivering on a sustainability agenda and managing risk through third-party relationships.
As a result, we decided to take the standard procurement buy-supply-and-pay process and standardize, simplify and automate it so that our procurement team could focus on strategic value-add activities. In the process, we seized the opportunity to drive innovation through closed-loop spend management (CLSM). CLSM is a new, data-driven operating model for managing the source-to-pay life cycle that targets indirect and direct costs for meaningful and sustained transformation.
"Our transformation has evolved the supply chain into a value chain, providing us opportunities to forge business relationships that drive material CLSM projects, invest in our 360 relationships and focus on sustainable and responsible buying."
Accenture’s approach to CLSM centers on how to manage third-party spend that:
The key to CLSM is its ability to bring together procurement, finance and the business to collaboratively agree, speak the same language and make insight-based decisions around the full range of potential opportunities. Doing so “closes the loop” with planning and budgeting activities. It effectively helps make everyone in the business a part of procurement, so that all value opportunities are captured and maximized. At the same time, it helps transform procurement itself to make the organization more efficient, data driven and strategic.
CLSM is a comprehensive approach that can assist in cost reduction that is unfamiliar to most companies—it covers every type of spend across the enterprise, not just certain categories. It’s extensive—it goes beyond pure dollars and cents to cover value that doesn’t show up on the profit and loss sheet (for example, cost avoidance and consumption). And it’s durable—it fosters a cultural and behavioral change so CLSM simply becomes the way a company does business, enabling benefits to continue to accrue over time.
Making our vision a reality
These types of change required our procurement team to deploy a new organizational structure, operating model, technologies and processes. We began the transformation to enable CLSM with the development of a new operating model in 2017 and 2018 and a clear vision of where we wanted to go.
We developed this model with the intent to shape the functionality along four dimensions:
Here are some of the actions that helped to make CLSM a success:
Assigning the right team
The strategic decision to create a senior team dedicated to strengthening relationships with the business and our suppliers was innovative in the marketplace. It took time to find a team with the right mix of knowing Accenture’s business coupled with knowing the power of procurement. Once the team was in place, we were able to quickly gain credibility and trust with our internal business partners. This opened the door for us to work with our business partners to implement closed-loop spend management.
Transforming the procurement strategy
We assessed and created a strategy that minimizes supply-side disruption and social and environmental risk. Our people were already well versed in minimizing disruption and embedding Supplier Inclusion and Sustainability (SI&S) into all the decisions we make. Our 360-degree partnership approach enabled procurement and teams from various Accenture business areas to build relationships and collaborate on achieving new forms of value.
Developing new ways of working
This step focused on accelerating and amplifying value by improving and/or operating the functions of sourcing and category management and procure-to-pay processes. We created the strategy to implement the digital solutions, data and analytics that streamline and automate processes, enable faster and better business decisions and improve the customer experience. With the basics taken care of, we were able to focus our time and effort on the value-add side of procurement, which not only includes CLSM but also includes things like managing Accenture’s Flexible Workforce offering.
"We created the capacity to add value through offerings like CLSM by standardizing, streamlining and automating our foundational offerings like sourcing, contracting, and buying."
Moving to Zero-Based Spend (ZBS)
A zero-based approach reimagines a company’s cost base, not from what it was or is today, but what it should be if the company were to start from scratch. It then uses the resultant savings to fund investments in innovation, distinctive capabilities and specific activities that drive growth. In our case, we focused on enabling visibility, value targeting and budgeting. We used leading-edge AI and analytics tools to establish forensic visibility into all third-party spend, identify cost optimization opportunities and lock those opportunities for reinvestment into the budget. In one effort, we delivered US$80M of working capital benefit to Accenture by optimizing payment timing, among other levers.
Establishing controls and monitoring systems
We initiated regular monitoring and accountability to confirm durability and visibility of opportunities. Specifically, we:
Across all these areas, our team embedded responsible business practices, such as carbon footprint analysis, renewable energy strategies and supplier performance on inclusion and diversity and human rights. Furthermore, additional investments in responsible-sourcing tools enable us to visualize a supplier’s current sustainability performance versus peers to illustrate how certain initiatives can improve how we influence sustainability and identify sustainability-specific interventions, such as required emissions reduction to improve their performance.
The transformation of our procurement model enabled us to deliver CLSM programs. We’ve put the right organization and technologies in place to enable spend management while also being responsible. With the fundamentals established, we could focus on where we could add value to Accenture through initiatives such as CLSM. While much of the savings we’ve identified have been reinvested by the business, procurement has also been able to invest in projects, such as contractor tenure reporting and automatic termination.
In parallel to our CLSM activities, the team has been hard at work regarding our sustainability goals. We are purchasing the renewable energy required to achieve Accenture’s net-zero emissions goal by 2025. Accenture will make actual reductions in emissions by powering offices with 100% renewable energy, engaging key suppliers to reduce their emissions and equipping Accenture’s people to make climate-smart travel decisions. And we are building a sustainable procurement hub that is a true supplier marketplace, enabling a trusted expandable, modular solution with sustainability dashboards.
Accenture’s procurement organization, now called Procurement Plus, is constantly evolving and looking for opportunities to forge relationships within the company to deliver value above and beyond what would be expected of traditional procurement. This is how Procurement Plus earns the “Plus” in its name.
Our CLSM programs have helped realized the following for Accenture:
"The execution of CLSM programs goes beyond identifying savings opportunities and putting a dollar value on them. True CLSM is about constantly challenging the status quo, collectively identifying optimization opportunities and working toward overarching business objectives—not procurement objectives."
North America contractor optimizations: US$16M controllable income improvements were achieved to help fund investments needed for growth initiatives.
An operational efficiency program targeting internal contractor spend helped product US$30M in cost reductions and a 27% reduction in contractor headcount.
Applying ZBS for North America Accenture Operations identified US$36M in savings that was reinvested for growth or released from budgets.
Procurement delivered US$80M of working capital when the pandemic set in to materially contribute to Accenture’s profitability.