15. Driving Organizational Value through Procurement Transformation

Transcription

1 15. Driving Organizational Value through Procurement Transformation 13

2 Global Procurement The Transformational Journey Chris Misiorski Nagendra Bhanu Version: February 27, 2014

3 Iron Mountain at a Glance Your Largest Information Management Services Partner Records and Information Management Solutions Data Management Solutions Document Management Solutions Information Destruction - Records Management - Vital Records Protection - Specialized Vertical Solutions - Consulting - Server and Application Data Protection - Technology Escrow - Disaster Recovery - Offsite Tape Vaulting - Data Centers - Document Imaging - Hosted Imaging Archive - Specialized services for: - Human Resources - Accounts Payable - Mortgage - Insurance - Onsite and Offsite Secure Shredding - Compliant Information - Secure Media Destruction - Discovery Services Company Statistics 156,000 clients 35 countries 5 continents 17,000 employees 1026 facilities 64 million square feet 3,600 vehicles 16 million trips/year $3 billion revenue $5.9 billion market cap 712 Fortune 1000 rank

4 3 The Evolution of Procurement Organization and Team Category Planning Strategic Sourcing Vendor Management

5 Procurement Maturity Model Not all Procurement Organizations are Created Equal Value Focus Product Focus Process Focus Spend Focus Transactional Focus Value Extraction & Creation Performance Improvement & Supplier Involvement Eliminating Deficiencies Business Involvement Consolidation & Compliance Negotiation With revenue and margin pressure across all industry sectors, companies are investing in Procurement organizations to ensure that both financial and business risk is mitigated. That being said, not all Procurement organizations are created equal Procure to Pay encompasses more than pricing negotiations The degree of Procurement influence usually directly correlates with when they are involved in the process.

6 How Procurement Organizations look to add Value Increase Spend Visibility Broaden Supply Options Maximize Category Leverage and Consolidate Supply Base Influence Demand Management Reduce Overall Risk Increasing visibility into your category/subcategory spend increases the buyer s effectiveness to manage suppliers / categories either to identify opportunities for review, crossfunctional requirements, and identify non-compliance, etc. Understanding a market to potentially expand geographic range of the review, broaden to include additional products or services, or bring other considerations / options to the business. Essentially change the question. Approaching opportunities from a category view enables the aggregation of purchases of individual items that are spread in similar categories across your firm for improved leverage with suppliers Shifting focus from filling business needs to understanding the source of those business needs allows Category Managers to eliminate false demand, modify and standardize specifications, and look for other opportunities to meet those demands in different ways. Proper management of categories by experts enables you to preemptively spot any trends or developments that might create a business, financial, or legal risk.

7 How Procurement Organizations look to add Value Better Understand Supplier Capabilities Increase Supplier Collaboration Quality Supplier Development Sustained Benefits and Compliance Evaluate opportunities from a Total Cost of Ownership Understanding your core supplier capabilities, can help you manage your customer requirements better and distinguish your best of breed suppliers Collaboration with your suppliers increases opportunities such as cost savings, product substitutions, cost sharing programs, etc. Suppliers and products and services that meet our SLAs and business requirements and are easy to do business with. Maintaining a strong business relationship with key suppliers leads to customized unique solutions for your organization giving you a competitive edge in the market Working on a continuous cycle of review and realignment, Category Management goes beyond the benefits gained from ad-hoc Strategic Sourcing and making sure we are taking advantage of the deals that are in place Looking for opportunities to improve costs beyond rate.

8 7 The Evolution of Procurement Organization and Team Category Planning Strategic Sourcing Vendor Management

9 Analyze Strategize Source Strategic Sourcing Finance Execute Manage Business and Functional Areas Reporting & Analytics Market Intelligence RFX/ Auctioning Risk/ Compliance Legal Services The Power of Team Contract Administration Procurement Operations Accounts Payable Supplier Performance Management Communications Technology and Program Management

10 9 Business 1 Business 2 Business 3 Business 4 Business 5 IT Hardware Software Telecom Storage Services Legal Consulting Contract Labor Finance, Accounting Audit Operations Transportation/ Parcel Fuel, Maintenance Real Estate Equipment and Supplies Operational Services HR/ Benefits Payroll Services Recruitment Marketing Advertising Promotional Print Event Management Travel Management Hotel Air Car Train Organize Your Sourcing Organization by Category to Optimize and Leverage Spend Across Businesses and Geographies Strategic Sourcing Contract Management Compliance Vendor Management

11 Movement from Procurement to Sourcing Competency is enabled through definition, gap analysis, training and development 10 BUSINESS COMPETENCIES PERSONAL COMPETENCIES Ensure Credibility Drive Change Exert Influence Ensure Impact 1. Strategic Sourcing Expertise 2. Industry & Technical Expertise 3. Team & Project Management Skills 4. Change Management Skills 5. Client Relationship Skills 6. Communication Skills 7. Problem Solving & Analytical Skills 8. Motivation / Commitment 9. Integrity / Reliability / Ethics 10. Judgment / Maturity / Adaptability 11. Leadership / Initiative 12. Creativity

12 Governance & Roles BU & Category Leadership Category Leadership Shared Responsibilities Functional Business Owners Responsible for identifying, leading, and executing strategies that maximizes market and supplier opportunities and leverages IRM s cross-organizational need. Develops category and supplier strategies Facilitates cross-organizational communication and opportunity optimization Manages RFI, RFPs, Auctions and proposal reviews Provides analytical support to evaluate responses from a qualitative and quantitative perspective. Manages contracting process including: amendments, extensions, terminations, renewals and new agreements, inventory and reporting. Acts as single point of coordination for cross-organizational evaluations, negotiation strategy development and execution Monitors ongoing market dynamics and program delivery Completes peer reviews and benchmarking. Manages the score-carding process Partners to identify opportunities, coordinate project planning and recommended sourcing strategies and execution Works to define a clear scope of service and SLAs Participates in formal supplier evaluations of supplier conformance to SLAs and ongoing supplier optimization Evaluates and recommends process enhancements Assists in facilitating technology integration and optimization Develops technology standards and compliance Evaluates alternatives and presents a range of alternatives with corresponding cost-value impact statements to enable informed decisions. Monitors service delivery Manages technology standards and controls Manages category budget Maintains day to day supplier relationship Manages implementation of project recommendations Manages compliance and service inventory management Manages product strategy and deployment technology integration and optimization Manages technological capability evaluation Manages Inventory, compliance and entitlement Provides necessary Business Unit information for data collection and reporting and needs assessment to Category Leadership. Makes the final decisions on supplier selection based on the collaborative evaluations and information presented.

13 12 The Evolution of Procurement Organization and Team Category Planning Strategic Sourcing Vendor Management

14 Spend Analytics Market Research Business Requirements Past Accomplishments Expiring Contracts Contractual Gaps Risks Components of Category Plans Scope of Opportunities Identified Goals and Objectives Timeline for Execution Balance of Trade Category Planning Enables Pro-active opportunity assessments Transparency to compliance and opportunities for consideration Opportunity assessments beyond rate and supply into total cost of ownership Supply Optimization and Rate Compliance Demand/Specification Procurement Process Redesign Prioritization focusing on the right things in the right way Moves Procurement from React and Positions Strategic Sourcing in leadership position. Bring the opportunities to the business Efficient execution and resource planning Movement from relationship to category view/ leverage New category and Geographic penetration Cross-organizational / functional engagement. Vertical and horizontal communication through governance

15 14 Questions to Consider What areas of the spend have not been influenced? (Collect spend data inclusive of historic and projected volume and unit cost trends)? How fragmented is the supplier base within each category? What are the primary business drivers / Needs in the coming year(s)? What are the business dependencies on this product/service? (change concerns) What contracts are expiring within the next twelve months or require coverage? Are there shared project opportunities (New or Existing)? When was the category/commodity last competitively evaluated? What significant market changes are occurring for the various categories? What is the level of compliance with previous recommendations? Why?

16 KEY LEVERS Supplier Optimization Consolidating and introducing new suppliers Renegotiating prices Managing payment timing Total Cost of Ownership Demand Management Compliance Management Eliminating unnecessary purchases Redefining specifications Redefine policies Rethinking "make" vs. "buy" decisions Establishing approved suppliers and eliminating leakage Defining and ensuring adherence to new specifications, programs, and policies Purchasing Process Redesign Aligning implementation through Vendor Management accountabilities Leveraging e-tools to drive process and market efficiencies Developing category-specific processes 15

17 Estimated Savings MM) $1.60 Wave 2 $1.40 MEDIA & ADVERTISING Wave 1 PROMOTION $1.20 ILLUSTRATIVE $1.00 $0.80 HUMAN RESOURCES FINANCIAL SERVICES PRINT AND FULFILLMENT $0.60 $0.40 PACKAGING SUPPLIES HUMAN RESOURCES IT SERVICES IT SOFTWARE & SUPPORT ENERGY CONSULTING MRO SERVICES IT HARDWARE POINT OF SALE DISPLAY LEGAL SERVICES $0.20 MRO SUPPLIES BUSINESS TRAVEL FACILITIES AND MARKET RESEARCH MAINTENANCE CAPITAL SERVICES OFFICE EQUIPMENT, SUPPLIES CAPITAL EQUIPMENT & SERVICES $ Ease of Sourcing 16

18 1 Wave 1 ~4-6 months Spend: $ XXX Incremental savings Est. $XXX Sourcing waves Travel Print/ Postage Parcel Service Wave 3 ~4-6 months Spend: $ XXX Incremental savings Est. =$XXX Benefits Legal IT Professional Services Real Estate Office Supplies ILLUSTRATIVE Wave 4 ~4-6 months Spend: $ XXX Incremental savings $XXX Capabilitybuilding Standardize roles and responsibilities, and increase the 2 centralization of sourcing Build a world-class organization and capabilities by creating a central-led structure, clearly defining roles and 3 responsibilities, and investing in Resources and Increase centralization of sourcing of 80% to 90% of its spend Market Data Media, Creative, Events Talent Acquisition IT Transformation Training Prof Services, IT Consulting Wave 5 ~4-6 months Spend: $ XXX Incremental savings $XXX Relocation Audit (Bus. Advisory) General Consulting Management Consulting Financial Services Wave 6 ~4-6 months Spend: $ XXX Incremental savings $ XXX; Library Food services Records Management Governance & execution Form a small governing body to make critical decisions related to supply management strategies 4 (demand tradeoffs, strategic vendor selection, policy) and enforces compliance across businesses Adjust business unit and functional budgets to sustain gains and create shared targets and a tracking 5 system for savings identified in the sourcing waves with joint accountability 17

19 18 The Evolution of Procurement Organization and Team Category Planning Strategic Sourcing Vendor Management

20 Analyze Strategic Sourcing Methodology 5 Phased Approach Strategize Source Execute Manage Build understanding & align stakeholders Formulate strategies & techniques Create competition & select the best Manage the transaction Measure constantly & seek improvement SPEND ANALYSIS Collect, normalize, raw data Analyze for historical, current and future trends ((supplier, business unit, geographic, pricing, contracts, etc.) Interview stakeholders and finance to forecast / understand future service requirements and projected expense and volumes Inventory any information, or costing gaps Determine best method for filling data gap, RFI, survey, etc. Develop total cost baseline SUPPLIER/ CATEGORY/CONTRACT Collect current legal or business concerns with existing / future agreements Determine contractual coverage and gaps Inventory current supplier performance and category compliance MARKET RESEARCH Analyze market and supplier data Develop market and supplier profiles Conduct vulnerability and risk assessment Review findings with stakeholders DEFINE STRATEGY Inventory sourcing objectives Assess supplier perspective Analyze buying power and levers to drive a competitive outcome Identify standardization opportunities and consolidate requirements Introduce creative alternatives and scenarios for review and consideration Consider Insource Outsource opportunities Develop sourcing strategy and tactics Document and validate the strategy Gain stakeholder support Business Finance Review / signoff Required SOURCE Document business requirements Develop supplier list Pre-screen and pre-qualify sources of supply Develop and issue RFP Determine and rank buying decision characteristics Evaluate responses Complete qualitative evaluation weighted Summarize pricing responses Further short-list suppliers for negotiations Estimate suppliers strategy and gap Develop process and tactics / techniques to improve suppliers bid EXECUTE CONTRACT MANAGEMENT Form negotiation team Develop negotiating strategy, including legal, business and cost areas Submit legal entity request to corporate legal services. Negotiate terms and prepare agreements Review with management Select suppliers Attain Supplier signature Complete contract summary Route for internal business, legal, tax approval as necessary IMPLEMENTATION Identify implementation team, timeframe, and responsible parties Work with Procurement operations to complete supplier, catalog set up, and update Sourcing Feed Database (SFD) Implement communication plan Notify suppliers and internal customers MANAGE Establish method of tracking savings, compliance, and benefits Execution of implementation post deal on boarding Identify responsibilities for ongoing supplier management Establish performance management accountability Coordination of supplier and buying activity Compliance tracking and quality assurance Supports supplier performance management and development activities

21 Sourcing Commodity Manager Sourcing Research Analyst Core Team Members Functional Business Owner Category Leadership Sourcing Leader Category Leadership or Finance Any stakeholder group that may be impacted by the outcome of the project Assigned based on the project Roles & Responsibilities Manages all components - drive adherence to scope, schedule, and results Investigates and validates spend and size/scope of opportunity Recommends and manages the utilization of sourcing tools. Leads sourcing project meetings and motivate team members to build consensus Provide category expertise and knowledge Manage/escalate project constraints, issues and risks Coordinates analysis and facilitates development of options and recommendations Leads the development and execution of negotiation and sourcing strategies Assists in the development of implementation plans Roles & Responsibilities Collects internal and external data in support of spend baselines, benchmarks, costs, savings projections Supports market research and supply market assessment Supports and develops project documentation Develops and populates analytical models to review qualitative and quantitative evaluations and costing scenarios Assists in analyzing and mapping of current processes Documents output from relevant team and supplier discussions Assists in the recommendation of compliance reporting needs Roles & Responsibilities Provides support to category management and completes day-to-day activities necessary for project success Provides additional business unit and functional perspectives and requirements that allow the team to maximize crossorganizational opportunities and benefits Completes assigned analysis and input on a timely basis Acquires data and other input from business units as required Ensures recommendations appropriately reflect the requirements of the business unit Implements the agreed sourcing solution within their business unit Roles & Responsibilities Provides day-to-day input into the sourcing initiative for category on operational requirements in support of business needs Drives adherence to budget Provide category expertise and knowledge of the business requirements. Responsible for providing input into and shaping the sourcing strategy or plan Validates spend/size/scope of opportunity Provides input into the integrated project plan Responsible for implementation and management of ongoing dayto-day vendor management activities

22 21 How Cross-Organizational Governance is Organized to facilitate vertical and horizontal communication Who are the ultimate decision makers? Supply Management Governance Council Business Unit Senior Leadership Who provides oversight and direction? Strategic Sourcing Leadership Strategic Sourcing Initiative Champion Key Business Executive with Primary Functional Business Owner Who is the Dayto-Day Working Team? Core Team Representatives from each Business Unit and Functional Areas

23 22 The Evolution of Procurement Organization and Team Category Planning Strategic Sourcing Vendor Management

24 23 Not all Categories are Created Equal Item complexity/ criticality to operations Natural Owners Framework User led; supported by Procurement Led by Procurement Low High De-centralized (10%) Centralized (90%) Critical categories (9%) Market Data Research, Financial Services Low value categories (<1%) Small, local purchases Strategic categories (70%) HR Benefits, Real Estate, IT Leverage categories (20%) Travel, HR - relocation, Office Supplies Users and Procurement define needs and specs with equal ownership Procurement leads strategy and sourcing Procurement leads, takes input from user to understand needs No Yes Value from consolidated purchase

25 Procurement Process Overview The Procurement Process is a set of common expectations for how Iron Mountain Global Procurement plans, executes and manages its acquisition of third party goods and services. Procurement Guidelines have been developed for key activities to provide structure to the process for consistency and efficiency for Business Units. 24 Analyze Strategiz e Source Execute Manage Need for goods / services identified; Procurement engaged, if needed Preferred providers considered and/or vendors evaluated and selected G G Contracts G negotiated and executed if needed * legal engaged as necessary Purchase requisition entered G and approved in ipro if necessary ** see approved methods of purchase Purchase Orders Issued G Ongoing vendor management by BU and Procurement (on need basis) G Invoices Created Goods / Services delivered Invoices Created Goods / Services delivered and received G Indicates that one or more Procurement Guidelines exist for the associated process step.

26 Objectives Supplier Management Roles 25 Category Manager BU Supplier Manager Contact Connect with managerial or executive levels of suppliers organization during negotiations or in resolving issues Act as ambassador for Iron Mountain needs when managing the relationship or negotiating Closely interact with BU and Procurement contacts to understand business needs and issues Analyze bid results and provide insights into opportunities for greater cost-efficiency and quality Act as single point of contact for internal stakeholders and external suppliers (for chosen suppliers) Provide continuous visibility into Business Unit needs (i.e. new services needed, termination of suppliers, new internal users) Provide structure and insights, and actively participate in, negotiations, workshops, and contracting Share role and responsibility for supplier workshops, negotiations, and reviews with Procurement counterpart Ongoing Sourcing Conduct Sourcing/RFP event Draft RFP questions in consultation with BU Supplier Management and BU stakeholders Be informed of the business needs and statements of work Align on negotiation strategy in advance (i.e. desired outcomes, walk-away positions, etc) Actively participate in supplier negotiations Participate in supplier workshops when available or when business importance is significant Be informed of on-going quality of relationship (issues, praises, etc) Act as escalation point-of-contact for unresolved issues, breaches of SLA/contract Ensure that supplier understands the importance that Iron Mountain places on continuous communication and improvement efforts Gather information on scope of work and business needs from BU Department users Summarize scope and needs, provide updates and discuss with Procurement counterpart Draft statements-of-work (SOW) for upcoming business needs Socialize and refine SOW with BU stakeholders Align on negotiation strategy in advance (i.e. desired outcomes, walk-away positions, etc), and actively participate in supplier workshops and negotiations Draft, socialize and refine service level agreements (SLA) Periodically (3, 6, or 12 months) survey stakeholders for qualitative information about supplier relationships, new or terminating needs, supplier changes (i.e. bankruptcy, acquisitions, etc) Share qualitative feedback and issues with Procurement counterpart Analyze Accounts Payable information for periodic reviews Schedule and conduct quarterly business check-ins with BU counterparts to collect qualitative feedback and market trends Termination and transition management

27 Supplier Management Activities Supplier Selection Supplier Selection Onboard Supplier Supplier Profile Supplier Risk Assessment Supplier PO Process 3. Supplier Termination Non Disclosure Agreements Financial Analysis Physical Access Review* HIPAA Business Continuity Insurance Certificates *Applicable if Supplier personnel work onsite 2. Supplier Management (ongoing) Ongoing Risk Monitoring Supplier Performance Reviews Supplier Relationship Invoice Reconciliation /Approval Yearly Contract Renewals Non Disclosure Agreements Financial Analysis Physical Access Review* HIPAA Business Continuity Insurance Certificates Develop and track KPIs Supplier Scorecard/Surveys Conduct post project evaluations Perform and review SLAs Provide Supplier Feedback Invoice Management, annual reconciliation with Finance SLA credits, discounts Support strategic dialog with suppliers Document & Notify Termination Document Transition Process Collect Confidential Data Remove Access Close Out PO/Invoice Collaborate with Procurement, Finance and Legal to document the termination event Document transition plan Collect physical and/or electronic data in supplier possessions (laptop etc.) Collect data destruction certificate from Supplier Notify Security and remove access Process final invoice.

28 Appendix D- Supplier Score Card Questions Vendor Business Processes Products/services are easy to order Is proactive in preventing or minimizing slippages in project implementations Accurately invoices IRM Meets delivery commitments Products/services are competitively priced worldwide Demonstrates continuous improvement Coordinates effectively with other vendors Vendor Services/Support Service and support capabilities meet or exceed IRM s requirements Technical support staff are considered experts in their field Is flexible in their support model and can respond quickly to IRM s changing priorities Consistently provides reports of the information needed by IRM (i.e., proactive technical updates) Support staff is responsive, professional, and service oriented Proactively reevaluates IRM s service needs and costs Consistently meets stated service level agreements and commitments Provides suitable schedule and status reports during installations Support for Production Systems Timeliness of issue response Quality of information received Diligence of support personnel working in partnership Adherence to stated support hours Vendor Relationship Management Management of subcontractors meets or exceeds IRM s requirements Escalation procedures are well defined and actionable Clearly and efficiently communicates within its organization worldwide Is team oriented in providing solutions to open issues Information exchanged at nondisclosure and tech teams meetings with the supplier are valuable Understands and works well with IRM s culture Recommends innovative solutions that meet IRM s business needs Total Score 0 0

29 Appendix D- Supplier Score Card Questions Net Promotor Score Question On a scale of 1 to 10, how do you rate the overall relationship with the vendor? (1= unsatisfactory; 10= exceeds expectation) Do you recommend vendor? (Y/N) Pricing and Competition Is vendor fee competitive in the market? (Y/N) Do you anticipate price increases in the market? (Y/N) Are there alternate providers available in the market? (no, limited, plenty) Do you recommend renewing contract with the vendor? (Y/N)

30 29 Corresponding Results Increased Savings Improved Cash Management Improved Supplier Quality Procurement Efficiency Improved Business Relationship

31 30 Global Procurement Results The results can more than double the areas under sourcing management in two years with reductions in overall budget $100 Cumulative Savings Goal - $80 $8.6 IME Total $14.1 $60 $40 US Total $20 $0 $ TOTAL $8.6 Procurement Operating Budget US /12 Projects US Projects US Projects IME 2012/13 IME New Yr US Target

32 Key Metrics and Trends 2000% 1800% 1600% 1400% 1200% 1000% 800% 600% 400% 200% 0% 0% New Activities - % Growth etool Usage, 1892% Governance 1600% Preferred Vendors, 1540% Projects - Devonshire, 1100% Scorecards, 980% Data Projects 1,123 1,632 1,943 2,516 3,042 Actively Engaged (%) 38% 67% 75% 80% 80% Spend Contracts ,171 2,266 2,050 HCount Savings etool Usage ,573 Scorecards Projects - Devonshire Governance Committees Preferred Provider % 5% 53% 67% 80% 82% 200% 150% 100% 50% 0% Existing Activities - Percentage Growth Projects, 298% Actively Engaged (%), 111% Savings, 74% Spend, 48% HCount, 23% Contracts, 6% % Change (04-08) Projects 0% 45% 73% 124% 171% Actively Engaged (%) 0% 76% 97% 111% 111% Spend 0% 14% 39% 74% 53% Contracts 0% 2% 11% 15% 4% HCount 0% 23% 25% 23% 35% Savings 0% 25% 48% 35% 77% etool Usage 0% 100% 661% 648% 1892% Scorecards 0% 150% 380% 580% 970% Projects - Devonshire 0% 900% 960% 1388% 1100% Governance Committees 0% 1600% 1600% 1600% 1600% Preferred Provider % 0% 960% 1240% 1500% 1540%