Procurement entrepreneurship pays. High-performing procurement teams can deliver huge value to their companies—regardless of industry. The best companies are advancing talent-management strategies into the heart of their procurement organizations with huge success. In addition to an estimated $84 billion in yearly cost savings, companies who give procurement leaders prominence deliver superior returns from their operations as well as lower their costs of goods sold.

This book, written by a group of purchasing and supply management practice experts, shares the hard-earned insights of more than ten years of dedicated procurement research conducted with leading academic institutions and practical experience with marquee clients in the field of procurement. It is also a natural successor to the many articles McKinsey & Company has published on the topic. This reliable resource skillfully explains and codifies the best practices that leading companies have pioneered in procurement as well as frames how procurement must evolve to grapple with new global, social, and economic issues affecting business over the next decade.

• Details the four key dimensions of procurement excellence
• Showcases the five megatrends that will change the way business is done in the next decade
• Provides strategies that business leaders can adopt in the face of these megatrends, together with practical advice about next steps and case examples

The road ahead will require you to redefine your vision for procurement and implement the required changes. Procurement 20/20 will show you how.

PETER SPILLER is a Principal in McKinsey's Frankfurt office and leader of the firm's EMEA purchasing and supply management practice, serving clients in the automotive, telecommunications, and high-tech sectors on operations transformations and strategy.

NICOLAS REINECKE is a Tenured Expert Principal in McKinsey's Hamburg office. He is part of the EMEA operations leadership team, focusing on supply management and operations topics across industries and geographies.

DREW UNGERMAN is a Director in McKinsey's Dallas office and leads the firm's Americas purchasing and supply management practice. He advises clients across the health care value chain on strategy and operations.

HENRIQUE TEIXEIRA is a Principal in McKinsey's S???o Paulo office. He is the leader of the firm's Latin America purchasing and supply management practice and sourcing center.

Preface ix

Introduction: The Procurement Advantage xiii

Part 1 From Good to Great Procurement 1

Chapter 1 The Drivers of Sustainable Procurement Performance 3

Chapter 2 The Megatrends That Impact Competitive Advantage 15

Part 2 Responding to the Megatrends of the Next Decade 29

Chapter 3 The Great Global Rebalancing: Building a Dynamic Sourcing Footprint 31

Chapter 4 The Productivity Imperative: Orchestrating the End-to-End Value Chain 49

Chapter 5 Big Data and the Global Grid: Procurement’s New Role in Data-Driven Decision Making 73

Chapter 6 Volatility as the New Normal: Translating Sourcing Risk into Competitive Advantage 91

Chapter 7 The New Economic Drivers: Capturing the Total Impact of Environmental, Social, and Regulatory Factors 117

Part 3 T he Road Map to Procurement 20/20 137

Chapter 8 Getting Ready for Real Change: Steps for Starting the Journey toward Procurement 20/20 139

Chapter 9 Your Agenda Now 157

About the Authors 159

Acknowledgments 161

Index 163