TRANSFORMING THE PROCUREMENT FUNCTION
Zurich Insurance 02
HOW PROCUREMENT IS SET UP TO DELIVER BUSINESS OBJECTIVES, TODAY AND TOMORROW Jaime Paiva, Regional Head of Sourcing and Procurement EMEA, shares how Zurich Insurance has transformed its Sourcing and Procurement function from an order taker to a recognised business partner WRITTEN BY
AMBER DONOVAN-STEVENS PRODUCED BY
JUSTIN BRAND
OCTOBER 2019
03
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ZURICH INSURANCE GROUP
I
n many large organisations, the sourcing and procurement function is often overlooked.
At Zurich Insurance, however, sourcing and procurement is becoming a driving force for innovation, customer value and sustainability, while playing a key role in enabling the business to fulfil its strategic objectives. When Jaime Paiva, Regional Head of Sourcing and Procurement EMEA, first joined Zurich in 2012, the company was 04
in the midst of outsourcing its procurement function. He explains: “The retained procurement organisation was down-sized and predominantly responsible for managing the service delivery from our BPO partner. The model with the BPO was based on the services being delivered out of hubs and so we lost the proximity to our internal stakeholders.” However, by the end of 2016, the procurement team at Zurich started a full review of the model. “Zurich was about to start a new strategic cycle and we wanted to ensure we were prepared to support our new objectives,” recalls Paiva. Zurich’s Sourcing and Procurement leadership team decided to enhance the function’s capabilities in order to provide more support to the local business OCTOBER 2019
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“ Our vision is for our procurement practices to drive positive societal, environmental and ethical outcomes” — Jaime Paiva, Regional Head of Sourcing & Procurement EMEA, Zurich
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ZURICH INSURANCE GROUP
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units as part of the new strategy. “We
internal stakeholders, with people that
did not want to give up the learnings
would understand their needs and be
and successes that the outsourcing
able to provide specialist knowledge,”
model gave us, but we knew from dis-
says Paiva. “Ultimately, we wanted to
cussions with our internal stakeholders
have our own resources focused where
that they were expecting more than
they were needed and give the business
cost-cutting; they wanted improved
the necessary agility to make decisions
capabilities,” says Paiva.
according to their needs.”
To meet these expectations and to position the function more strategically within the organisation, Zurich started to build its sourcing and contracting
THE TRANSITION TO IN-HOUSE PROCUREMENT: “As we started discussing our plans
capabilities internally. “Our goal was
with our business stakeholders,
to offer better services closer to our
we identified recurring ‘pain points’
OCTOBER 2019
regarding the outsourced model.” Paiva
measurement has evolved since early
goes on to list the most frequent ones:
2016, increasing from a score of -22
• The BPO had limited understanding
to +74 in 2019,” says Paiva. From the
of the insurance industry and business
previous operational model, Zurich
needs from Zurich.
kept the Procure-to-Pay (P2P) lifecycle
• Excessive handovers for end-to-end sourcing and contracting lifecycles.
• Lack of dedicated human resources from the BPO.
outsourced. “We contracted Genpact for operational procurement and accounts payable for a slightly-altered, cost effective Procure-to-Pay (P2P)
To measure customer satisfaction,
lifecycle. Zurich also worked on
the Sourcing and Procurement function
improving the relationship with the
also introduced the Net Promoter Score
BPO partner. “The partnership with
methodology (NPS) to gather immedi-
Genpact allows us to focus on strate-
ate and specific feedback from internal
gic or business critical topics instead
stakeholders. “It’s very rewarding to
of having resources burned with oper-
see how our customer satisfaction
ational or tactical aspects of the
E XE CU T I VE PRO FI LE
Jaime Paiva Jaime Paiva heads Sourcing and Procurement for the EMEA region at the insurance giant Zurich. Paiva is a seasoned sourcing leader with extensive experience in direct and indirect sourcing, as well as procurement operations. Before joining Zurich Insurance, Paiva held different leadership roles with multinationals such as Siemens and Nokia in Latin America, Europe or globally. Originally from Brazil, he’s been living in Germany since 2007.
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Everyone has a different view of success – whether that’s increased efficiency or improved customer experience. It’s important to have a common vision of the business outcomes that are wanted.
2. Flex to political and business change
Procurement is becoming more complex – thanks to greater regulation, political change, and rising consumer expectations. The temptation is to avoid change and simply cut costs. That misses a big opportunity to modernize procurement and use that change to drive business value.
Imagine if your organization could deliver...
99
%
60
%
of invoices received electronically – within two months of go live1
reduction in invoice processing from 20 days to 82
US risk management and insurance services company saw the following results.3
x3 45 57
%
%
tripled spend under management in first two months
of manual invoicing moved to e-invoicing
of users adopted in first month
© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
3. Make the most of the cloud
You’re on the cloud, but that is only a first step. You need to get more from this new platform. So, decide what systems you can migrate to the cloud and how to use them to spin up new services and procedures, rapidly.
4. Bridge the digital talent deficit
Without the necessary digital skill sets it might be difficult for procurement to take advantage of new systems and technologies. Specialists are required. As they are in short supply, consider encouraging existing staff to retrain.
5. Love your data
How good is your data? Unfortunately, problems are often only discovered when it’s too late to do anything. Given the myriad of data sources within a complex supply chain, it’s critical to clean your data before any major change.
Think like your CEO
71
%
95
%
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of CEOs see technological disruption as an opportunity not a threat4
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> 50
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…like Zurich. Global insurer Zurich worked with KPMG member firms to transform its procurement processes. Central to the success of our collaborative approach was a three-day, interactive ‘U-Collaborate’ project launch event. This meeting established core design principles and challenges, so everybody involved was up to speed with the key aims of the program that still steer it today.
1
KPMG Powered Procurement Advisory – Case Study, 2018
2
KPMG unlock-potential-of-procurement.pdf
3
KPMG Point of View Paper ‘Stop holding back. Start tackling five common obstacles.’
4
Global CEO Outlook Survey, KPMG International 2018
5
Harvey Nash/KPMG CIO Survey, KPMG International 2018
80%
of CIOs say their digital strategy is not yet effective enough to manage this5
Discover how you can benefit from KPMG Powered Procurement. kpmg.com/poweredenterprise
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“ U-Collaborate was a tremendous success. It quickly brought everybody involved up to speed and aligned on some principles that still steer the programme today” — Jaime Paiva, Regional Head of Sourcing & Procurement EMEA, Zurich
hindered getting accurate MI on some very basic levels and spend analysis for our category strategies,” says Paiva. Zurich analysed the marketplace and selected Coupa, predominantly for its user-friendly interface. To compliment this new P2P platform, Zurich also partnered with KPMG to assist with the design and implementation of Coupa in 2017. “It was important for us to have access to best practices from other organisations as well as the technical expertise to help during the multi-year transition to Coupa, and they offered that through KPMG’s Powered Procurement assets and tools,” says Paiva.
Source-to-Pay (S2P) lifecycle in a costefficient way.”
Zurich initially focused on deploying the sourcing and contracting modules, phasing out the P2P and employee
TRANSITION TO A NEW IT PLATFORM:
expenses modules in early 2018.
Zurich were using an outdated P2P
“Moving from an on-premise system
platform. This platform was implemented
to a cloud-based solution required
in eight different countries more than
alignment on some fundamental
a decade previously and was custom-
principles,” recalls Paiva.
ised locally. “In 2017, we ran a bench-
In January 2018, KPMG hosted
mark and the conclusion was the
a 3-day event in London called
maintenance of our P2P platform was
‘U-Collaborate’ designed to increase
very complex and expensive. The
understanding of the platform, share
customisations went so far that they
and agree on core design principles, e uro pe .busi ne ssc hief. com
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ZURICH INSURANCE GROUP
and to address design and programme
The UK was the first country to
challenges. “U-Collaborate was a tre-
implement Coupa, which went live in
mendous success. It quickly brought
November 2018, followed by Switzerland
everybody involved up to speed and
in May 2019. Spain and Italy are
aligned us on some principles that still
scheduled to migrate to Coupa in
steer the programme today.”
early 2020, along with North America,
Some of the key principles agreed upon at U-Collaborate included:
• The internal customer and employee
Germany and Austria later in that year. “Coupa is the Group’s standard platform for S2P and employee expenses and
experience is paramount to the design.
we’re expecting the work to continue
• The entirety of the company would
for some time after the original coun-
function under one standardised design.
tries in this rollout are completed.”
• No customisation of technology: 12
‘Adopt not Adapt’.
• The platform must be fit for purpose across all business units. “The success of U-Collaborate con-
THE CONTINUATION OF THE JOURNEY: “We’ve set the building blocks for the function to play a much more important role in enabling the business to fulfil its
firmed the need for excellent change
strategic objectives, evolving to a place
management and communication
where procurement is recognised
strategies,” says Paiva, “Changing an
internally as a driver of the company
IT platform for indirect spend impacts
agenda.” Evidence of this materialising
the full organisation and our supply
is the role that the procurement team
base. To add to this challenge, our end
plays in relation to Zurich’s sustainabil-
users have been using the same pro-
ity agenda. In April 2019, the company
cesses and tools for over 10 years,
announced its aspiration to be known
and were accustomed to a high degree
as one of the most sustainable busi-
of customisation and functionality. We
nesses in the world. It followed this
appreciate how difficult it is for end users
up in June by becoming the first insurer
to migrate to a SaaS application and the
to sign up to the United Nations’
need to adopt new ways of working.”
business pledge to limit the global
OCTOBER 2019
“ We did not want to give up the learnings and successes that the outsourcing model gave us, but we knew from discussions with our internal stakeholders that they were expecting more than cost-cutting; they wanted improved capabilities”
temperature’s rise to 1.5°C above preindustrial levels. Then, it set a new Operational Sustainability target to drastically reduce paper and plastic consumption, while also committing to use 100% renewable power in its global operations by the end of 2022. In early 2016, Zurich UK became the first insurance company to sign
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— Jaime Paiva, Regional Head of Sourcing & Procurement EMEA, Zurich
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ZURICH INSURANCE GROUP
$51.6bn Approximate revenue
1872
Year founded
54,000+ number of employees
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OCTOBER 2019
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ZURICH INSURANCE GROUP
up to Social Enterprise UK’s ‘Buy Social Corporate Challenge’, which committed 10 large UK companies from diverse industries to increase their spend with social enterprise firms. The ‘Buy Social’ ethos is completely aligned with Zurich’s Purpose and Values. Since then, Zurich has been working directly with organisations like Wildhearts, a stationary producer which uses its profits to fund microloans in the developing world and entrepreneurial training in UK schools; 16
Ninety, an innovation consultancy that gives 90% of its distributable profits back to charity; and From Babies with Love, a promotional items provider that gives 100% of its profit to orphaned and abandoned children around the world. “It’s important to clarify that social enterprises are not charities, but companies with primarily social objectives whose surpluses are principally reinvested in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners,” says Paiva. “Most of the companies we work with are providing career development OCTOBER 2019
opportunities to people who otherwise have limited prospects for formal employment or reinvesting a substantial part of their profits into social initiatives or charity.” Zurich’s goal is to embed this practice in the way it does business with its supply base and its supplier’s suppliers. “We have a commitment to ensure fair business opportunities and, in our experience, this is what these companies are asking us for. They don’t want special treatment, just the chance to prove their value, quality and ability to compete on equal terms with profit-oriented companies,” adds Paiva. “Our vision is for our procurement practices to drive positive societal, environmental and ethical outcomes, while playing a key role as an enabler of Zurich’s objectives. It will do this by making sustainability one of the key criteria in our sourcing decision making process.”
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www.zurich.com