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1、Private EquityOptimizing procurement for outsized returnsAs dealmaking has slowed and generating expected returns has become harder,private equity(PE)firms can no longer afford to give procurement a cursory glance and leave millions on the table.With buyout volume reduced by 15%,exits down by 16%and

2、 hold times at an average of 6.3 years,its clear that PE dealmaking has slowed.1 Firms have swiftly adjusted their strategies in response.Operational value creation is taking a more prominent role and now accounts for 79%of a PE firms targeted value creation efforts,with financial engineering taking

3、 up the remaining 21%.2Among the many potential value creation levers to consider in this environmentsupply chain optimization,sales force effectiveness,operating model redesign,digital transformationfew are as immediately measurable and impactful as procurement.In many cases,procurement can deliver

4、 an 812%cost reduction of direct and indirect spend in a matter of months,not years,while being less sensitive to portfolio company management and employees than other cost-cutting measures like headcount reduction.3However,even though getting started with procurement is relatively straightforward,g

5、enerating sustained outsized returns is not.With procurement being a low-risk play,delivering 812%spend reduction in a matter of months,how do you realize its full value potential?Optimizing procurement for outsized returns2About the authorsNathan MacCarterManaging Director,Sourcing&ProcurementMarti

6、n GlennManaging Director,Transaction Advisory,Americas go-to-market lead,Private EquityFelix HesselManaging Director,Transaction Advisory,Private EquityNeto AlexanderManaging Director,Transaction Advisory,Private EquityVirginia LantzAssociate Director,Sourcing&ProcurementSteven BrowningManaging Dire

7、ctor,Sourcing&ProcurementOptimizing procurement for outsized returns3Moving beyond the basicsProcurement optimization has been part of the PE value creation toolbox for over a decade.Yet only few firms have been able to turn it into a true differentiator.Optimizing procurement for outsized returns48

8、4%of PE leaders seek to drive operational value through procurement58%of PE leaders admit that drivingsustainable value through procurementisnt easyAlmost all PE leaders(84%)seek to drive operational value through procurement at least some of the time,our research shows.Of this group,more than half

9、use procurement as a value lever for most or all of their portfolio companies.4 While some value is being wrung,the results of these efforts are often one-time and suboptimal.Nearly six out of 10 PE leaders(58%)admit that driving value through procurement isnt easy and does not regularly yield expec

10、ted results.5 Optimizing procurement for outsized returns51.1.Theres insufficient early focus and analytical groundwork performed pre-close and during due diligence.2.2.Efforts often dont go beyond the low-hanging fruittough negotiations and requests for proposals(RFPs).3.3.Without a tailored playbo

11、ok and adequate resources,firms are unable to deliver value from procurement consistently.4.4.The hard-earned savings that are realized in year one after closing tend to slip over the course of the investment hold period.This begs the question:How can PE firms take a differentiated approach to procu

12、rement that consistently delivers outsized results?The answer lies in building and embedding better capabilities across a number of areas.Firms that fully embrace procurement value creation as a way of life and leverage supporting technologies throughout the deal cycle generate greater value faster

13、and more consistently.We outline four guiding principles that separate the leaders from the pack.The suboptimal value creation from procurement is primarily due to four reasons:Optimizing procurement for outsized returns61.Kickstart your gainsLeading firms set their procurement value creation plan i

14、n motion during the due diligence phase.Optimizing procurement for outsized returns7The best time to act is within the first 100 days,with goal setting and initiative planning beginning during due diligence or immediately post-close.In most cases,procurement initiatives have few dependencies on othe

15、r value creation initiatives and as such can be executed immediatelyin parallel with other high-priority efforts.Sizing the prize early ensures procurement is prioritized,building positive momentum for the broader value creation plan.A high-level savings range can be inferred with basic inputs from

16、financial statements and a brief management interview.Higher confidence projectionsfor underwriting require deeper dives into line-item spend data,contracts and current procurement strategies.Overall,early involvement is key to ensuring benefits are delivered throughout the deal lifecycle.Our experi

17、ence of working with more than 500 mid-sized companies shows that investments where procurement opportunities are identified earlyduring diligence or the first 100 daysare 70%more likely to capture significant procurement value.6Figure 1:While procurement spend as a percentage of revenue is lower in

18、 services industries,its still a sizable amount that should not be overlooked.Manufacturing Infrastructure Industrial HealthcareTechnology&MediaFinancial ServicesBusiness ServicesEducationDistributionConsumerGoodsRetailAverage=45%58%54%52%48%46%42%38%34%31%45%42%Sizing the prize for services industr

19、iesProcurement might not seem as obvious a value driver in service companies as it is in manufacturing or retail,but it offers substantial opportunities for two reasons:Service companies rarely have robustprocurement functions.Often,spend is notcompetitively sourced,contracts with strategiccommercia

20、l terms are lacking and theres limitedspend visibility and savings tracking.This leavessignificant opportunities to address unnegotiatedand uncontracted spend.Service companies still have a substantial amountof addressable spend that can be targeted forcost takeout efforts(see Figure 1).In addition,

21、rising labor costs result in a greater need fornon-labor margin improvement in labor-heavyservice companies.The top spend areas in service companiessuch as IT,facilities and professional servicestypically see cost savings of 4%to 10%+through competitive sourcing and demand levers,a sizable amount th

22、at justifies kickstarting the procurement value creation plan early.7 Source:Insight Sourcing part of Accenture,Procurement value creation for portfolio companies,2023.Optimizing procurement for outsized returns82.Use the fullspectrum of tacticsDelivering full potential value requires more than just

23、 tough negotiations and RFPs.Optimizing procurement for outsized returns9Savvy firms know there is more to procurement than chasing lower prices;they tap into a wider set of non-price levers to drive real,sustainable value.True impact comes from including commercial levers like value-based deal cons

24、tructs,as well as non-commercial and technical levers.Leading PE firms are wary of settling for procurement value creation initiatives limited to price-focused tactics such as renegotiating with incumbent suppliers or comparing a few bids.Instead,they identify strategies that focus on total cost of

25、ownership(TCO),setting ambitious savings targets that push teams to maximize results.One example of such a non-price lever is design-to-value as a way to look at products and think about substitute specifications and materials.Another often overlooked technique is by challenging demand:beyond the pr

26、ice,these firms also look at what,how much and when they buy.Applying the full suite of advanced procurement techniques can deliver up to 3x higher savings across the investment lifecycle compared to traditional,price-focused methods(see Figure 2).8Figure 2:Advanced techniques provide speed,scale an

27、d sustained cost-reductions,achieving up to 3x higher savings than traditional procurement methods.(Illustrative)Advanced techniquesTraditional methodsGreater speed to valueIncreased scaleSavings sustained over timeValueTimeSource:Insight Sourcing,Impendi and Accenture experience working with more t

28、han 500 mid-sized companies across 18 industries.Optimizing procurement for outsized returns10Up to 3x higher savingsClient exampleCutting costs to fuel growthA North American DIY consumer goods company struggled to increase its market share and meet sales targets for its sawhorse product line.Leade

29、rship saw cost reductionswithout loss of product qualityas a path to more competitive pricing and increased sales.To support this goal,the company analyzed the competitive landscape,identifying similar products and documenting competitor retail price points.It then conducted a teardown of its own an

30、d competitor products.This was followed by a design-to-value analysis.The process generated more than 30 cost takeout ideas,including product changessuch as using alternative materials for leg caps and optimizing steel thickness and bracket geometryand process improvements including reducing packagi

31、ng complexity and optimizing the manual.A framework helped rank these opportunities according to the priorities of the company,their savings potential and implementation effort(see Figure 3).Combined,these changes are expected to drive$25+in unit cost savings and improve margins by more than 20%,del

32、ivering on leaderships mandate of more competitive pricing.Figure 3:Technical and commercial cost reduction opportunities can be prioritized based on perceived consumer impact,change complexity and total cost savings.(Illustrative)High-priority opportunitiesOpportunity 3Opportunity 7Opportunity 8Opp

33、ortunity 12Opportunity 35Opportunity 33Change complexityHigherLowerCustomer impactLowerHigherCost-reduction leverTechnical:product Technical:packaging CommercialSavingsHigherLowerOpportunity 9Opportunity 10Opportunity 15Opportunity 5Opportunity 23Opportunity 11Opportunity 4Opportunity 6Opportunity 1

34、Opportunity 14Opportunity 20Opportunity 2Opportunity 18Opportunity 31Opportunity 25Opportunity 13Opportunity 32Opportunity 28Opportunity 29Opportunity 30Opportunity 26Opportunity 17Opportunity 21 Opportunity 39Opportunity 27Opportunity 22Opportunity 24Opportunity 19Opportunity 37Opportunity 38Optimi

35、zing procurement for outsized returns113.Craft a winningplaybookDont simply wait for procurement opportunities to reveal themselves within your portfoliocreate them.Optimizing procurement for outsized returns1233%of the value potential is lost by not having a proven,repeatable procurement playbook.A

36、 proven,repeatable playbook is a huge differentiator as many PE firms lack a pre-established approach.Without an institutionalized procurement value creation playbook,firms lose out on 33%of the value potential,on average,and the gains they do achieve are realized more slowly and less consistently.9

37、A robust procurement value creation playbook should cover the full investment cycleeverything from diligence and the first 100 days to the further hold period and exit readiness.This structure enables PE firms to consistently capture procurement value creation early in the investment cycle and susta

38、in it over time.While playbooks should take a holistic approach addressing all key levers,they should also be customized to the specific needs of the industry the portfolio company operates in and the situation at hand,like available in-house resources and the PE management teams intervention postur

39、e.Preparing a few application archetypes from a longer menu of options can enable teams to deploy a tailored approach at speed.Optimizing procurement for outsized returns13Whether in resources,transportation or digital infrastructure,strategic procurement should cover both CapEx and non-CapEx catego

40、ries across the entire business.A PE-backed global data center provider achieved average savings of 11%across key equipment categories in its home market.They then expanded this approach both functionally and geographically to include demand forecasting and capacity analyses,pipeline management,supp

41、lier due diligence,capital budgeting and reporting.Client exampleStrategic procurement in infrastructureOptimizing procurement for outsized returns14Beyond generating approximately$300 million in savings,this strategy enhanced supply chain managementensuring on-time delivery,improving spend visibili

42、ty,proactively managing supplier resilience and driving continuous improvement and value engineering opportunities.Stakeholders now meet strategic objectives more effectively,optimize supply partnerships,maintain continuity and ensure ongoing supplier engagement.Beyond generating$300 million in savi

43、ngs,the company enhanced its supply chain management.Client exampleDriving value and reducing risk with a structured approach A PE-backed automotive company,formed through a roll-up of more than 20 add-on investments,grappled with a highly fragmented procurement structure and underdeveloped supply c

44、hain risk practices.The portfolio company management established a clear vision for its procurement organization,coupled with multi-year category strategies aimed at balancing cost savings with supply continuity.The strategy leveraged a full spectrum of procurement levers,including make-or-buy decis

45、ions,volume consolidation,best-cost country sourcing,spec optimization and incumbent negotiations.By selecting the best-cost suppliers across the Americas and Asia,the company secured formal agreements that provided pricing protection from commodity volatility.Through this structured approach,the co

46、mpany addressed more than$350 million in annual spend across 18 Cost of Goods Sold(COGS)categories.This resulted in an EBITDA impact of more than$24 million,a stronger collaboration between engineering and procurement and reduced supply chain risk.Documented as a playbook,this approach now serves as

47、 a guide for future add-on deals.Optimizing procurement for outsized returns15The company addressed$350 million in annual spend,resulting in a$24 million EBITDA impact.4.Solve thetalent puzzlePortfolio companies often lack the resources,expertise,technology and confidence to pursue procurement oppor

48、tunities on their own.Optimizing procurement for outsized returns16Source:S&P CapIQ analysis of 80,163 unique roles at 7,939 companies with revenues below$5bn,2024.A procurement talent shortage,especially in the mid-market,is posing a challenge.Our analysis of over 80,000 unique C-suite roles at nea

49、rly 8,000 companies with revenues below$5 billion revealed that only 10%had a senior executive in a procurement role.Even when including broader supply chain responsibility,less than one in four companies(23%)had a dedicated,senior leader over a centralized,strategic procurement function.10Thinking

50、about the right way to resource these value creation opportunities is critical.PE firms can augment their portfolio company teams by engaging external procurement specialists who bring relevant category and industry experience,can accelerate the most impactful value levers and even deliver procureme

51、nt value creation“as-a-service.”Buy vs.build,through value-based deals,often leads to better,faster and more sustainable returns.But its not just about hands on keyboards.Emerging technologies are enabling leading PE firms to fundamentally rethink procurement within their portfolio companies.Leverag

52、ing procurement technologyincluding(generative)AIcan accelerate Figure 4:Most portfolio companies lack the leadership needed to capture the full value potential of procurement.value realization,address portions of the spend stack previously deemed too labor-intensive to optimize manually and ensure

53、savings reach the bottom line.C-suite leaders of companies with annual revenues under$5 billion report that workforce extension isthe top driver of technology investment within their organizations as they grapple with shortages of key skills and employee retention.Moreover,they cite new technologies

54、 like AI and other tech advancements as the number one driver of innovation within their organizations.11 Our research suggests that generative AI has high potential for automating and augmenting tasks across procurement roles,including those of procurement clerks,buyers and purchasing agentsopening

55、 up significant new efficiencies.12A common issue many portfolio companies face is a lack of spend visibility,with data not properly cleaned and classified,and dispersed across different source systems.A digital backbonesuch as a performance platform that creates a data and AI layer across existing

56、systems as an alternative for an ERP transformation programlays the groundwork for sustainable value creation.Companies that invest in their digital core and procurement technologies can gain visibility into more spend,optimize more spend,mitigate risk exposure and supply disruptions,drive complianc

57、e to negotiated deals and efficiently scale procurement.All of this combines to increase speed-to-value and savings capture.Supply chain sourcing and procurement experienceProcurement experience23%10%Optimizing procurement for outsized returns17Source:Accenture Research based on US BLS and O*Net dat

58、a,2023,Estimates are based on human+machine identification of work tasks exposure to impact of generative AI.Figure 5:AI can help address procurement skills shortages through its potential to automate and augment tasks for key roles.(%of tasks impacted by AI)Sourcing and negotiation tools are rapidl

59、y evolving,enabling procurement teams to manage more spend with a limited pool of talent(see Figure 5).This includes advanced sourcing and optimization,democratizing big data analytics and automating negotiations.Advanced analytics and AI form the foundation for developing predictive pricing capabil

60、ities for commodities,enabling data-driven decisions that reduce costs.Advanced analytics and machine learning help identify savings by reducing part complexity.For a PE-backed manufacturer,this approach revealed ways to cut costs and accelerate time-to-market for a key product.By codifying technica

61、l attributes and analyzing attribute importance,clusters of parts with similar critical features were identifiedleading to a 20%reduction in unique parts and a 10%decrease in costs.Shifting more volume to preferred suppliers further improved time-to-market and forecast accuracy while reducing invent

62、ory obsolescence.Buyers and purchasing agentsPurchasing managersProcurement clerksLogisticiansTransportation,storage,and distribution managersCargo and freight agentsIndustrial production managersFirst-line supervisors of production and operating workersFirst-line supervisors of transportation and m

63、aterial moving workers,except aircraftcargo handling supervisorsShipping,receiving and inventory clerksDriver/sales workersHeavy and tractor-trailer truck driversWeighers,measurers,checkers and samplers,recordkeepingInspectors,testers,sorters,samplers and weighersHigher potential for automationProdu

64、ction,planning and expediting clerksHigher potential for augmentationLower potential for automation or augmentationNon-language tasks57%18%10%15%41%13%10%34%32%32%12%24%36%17%38%10%30%20%26%24%30%22%29%19%25%29%35%10%29%37%25%9%35%39%8%19%37%48%9%6%26%51%8%14%19%58%5%18%9%78%6%7%31%47%22%32%47%21%Op

65、timizing procurement for outsized returns18Client exampleDeploying a fit-for-purpose procurement performance platformA PE-backed building materials company set an ambitious agenda to achieve 60%growth through acquisitions over the next three years.However,the company recognized that it lacked the op

66、erating model needed to effectively support this goal.Procurement faced limited spend visibility,a wide variety of decentralized data sources across 14 ERPs and insufficient insight into contracts.The company teamed up with specialists to develop a comprehensive solution for spend,contracts and reba

67、tescombining AI,functional expertise and leading vendor solutions to deliver actionable analytical insights.This“ready-to-connect”solution prioritizes value over tooling,enables data harmonization,facilitates collaboration across sourcing and procurement and allows platform expansion to other busine

68、ss functions.Beyond optimizing spend,purchase price and payment terms,the platform also supports a reduction in warehouse costs.The AI-enabled procurement platform helped this PE portfolio company achieve over 100 million in EBITDA improvement during the holding period,breaking even within the first

69、 year and delivering an ROI well above 10:1,with sustained bottom-line impact that could be monetized at the end of the period.Optimizing procurement for outsized returns19Client exampleAmplifying portfolio company initiativesIn addition to the four guiding principles described earlier,some PE firms

70、 augment their portfolio company-specific value creation with cross-portfolio,leveraged purchasing.One such firm with more than$500 billion in assets under management uses an embedded pre-and post-transaction value creation playbook to consistently assess opportunity and deliver value.Key initiative

71、s included:Managing cross-portfolio spendvisibility for dozens of portfoliocompanies,covering more than$55billion in annual spend.Leading cross-portfolio sourcing effortsto leverage total spend across IT,professional services and targeteddirect areas.Managing 35+leveraged purchasingprograms and 50+v

72、endors,drivingover$7 million in incremental savingsto the portfolio annually.Delivering$150 million in run-rateEBITDA impact annually.Hosting an annual operationalexcellence conference to share bestpractices between portfolio companyprocurement leaders.Optimizing procurement for outsized returns20Th

73、e strategic power of procurementAs PE firms evolve their approaches to reshape their portfolio companies more profoundly than ever before,procurement is a fundamental yet underutilized value lever.Leading firms know that optimizing their procurement approaches for speed,scale and effectiveness not o

74、nly boosts margins but also frees up capital for reinvestment in other value leversdriving further returns and profitable growth.Optimizing procurement for outsized returns21ContributorsReferencesHimanshu PatneyPrincipal Director,Accenture ResearchBen LiwniczSenior Manager,Private EquityRanjan Ramda

75、sManager,Accenture Research1 Accenture analysis of S&P Capital IQ data,2024.2 Accenture,Its time to rethink private equity due diligence,2024.3 Source:Insight Sourcing,Impendi and Accenture experience working with more than 500 mid-sized companies across 18 industries.4 Accenture Private Equity Lead

76、ers survey,2024.Between March and April of 2024,Accenture conducted a global survey of 251 senior PE professionals from North America(46%),Europe(34%)and Asia Pacific(20%),all from firms managing at least$5 billion in assets,who engage in dealmaking and investment decisions for buyouts.5 Ibid.6 Sour

77、ce:Insight Sourcing,Impendi and Accenture experience working with more than 500 mid-sized companies across 18 industries.7 Ibid.8 Ibid.9 Ibid.10 Accenture Research analysis of S&P Capital IQ data of 80,163 unique roles at 7,939 companies with revenues below$5 billion,2024.11 Accenture CXO pulse surv

78、ey,n=1,252 companies with under$5B revenue,2024.12 Accenture Research based on US BLS May 2023 and O*NetOptimizing procurement for outsized returns22How we can helpAccenture Private Equity partners globally with PE clients across their investment life cycle.We provide end-to-end services that span d

79、ue diligence and deal support,transition and transformation planning,as well as portfolio company value creation,using proven solutions underpinned by digital and technology.In addition to supporting the investment life cycle,we help PE firms reinvent the ways they create value through scaled portfo

80、lio capabilities,shared services and access to leading ecosystem partners.With the acquisitions of Insight Sourcing and Impendi,Accenture now has 400+sourcing&procurement specialists and 28 category centers of excellence across CapEx,direct and indirect spend.We drive measurable EBITDA impact and wo

81、rking capital improvement for 50+PE firms through deep expertise and specific approaches for sectors including industrial,consumer goods&services,retail,health,high tech and financial services.Our methodology includes advanced leverssuch as design-to-value,should-costing and stop spendthat,collectiv

82、ely,drive up to 3x higher savings than focusing on price alone.Visit us at material in this document reflects information available at the point in time at which this document was prepared as indicated by the date provided on the front page,however the global situation is rapidly evolving and the po

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