A Programmatic Approach to Sourcing: Delivering Real, Lasting Value. September 18, 2012

Transcription

1 A Programmatic Approach to Sourcing: Delivering Real, Lasting Value September 18, 2012

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3 About Denali Expanding Procurement s Value for The Global 1000 Since 1996 Managed Sourcing Execution and Procurement Outsourcing 3 year growth rate: 194% 3

4 What Is Real and Lasting Value? Chasing the Quick Buck Lasting Value Characteristics Total value, not just $ Clear and compelling Sense of permanence Eggs not in 1 basket Passionate team behind it Permeates organization Creates unstoppable inertia State of constant renewal 4

5 How Do We Deliver Real and Lasting Value? Sourcing Program Healthy Team Category Management Strategic Spend Non-Strategic Spend 5

6 Polling Question #1 Are you currently managing a comprehensive sourcing program, including processes and mechanisms to address all areas of your companies spend? Comprehensive Program A. Category Management approach addressing all strategic and non-strategic spend, and have a robust sourcing programmatic approach B. Starting to extend our category management to target the non-strategic spend C. Category management addressing all of our company s strategic spend, but no focus on non-strategic spend Narrow Sourcing Focus D. Working to develop Category Management as a capability in our sourcing organization, with initial focus on several key categories E. Just getting started with several strategic spend projects 6

7 Annual $ Spend Typical Spend Profile Strategic Spend 80% Spend 20% Suppliers (100 s suppliers) $M + average spend per supplier Strategic Suppliers, critical to supply chain 7-10% average savings 20% Spend 80% Suppliers (1,000 s to 10,000 s suppliers) $1k to $500k average spend per supplier Moderately strategic. Mix of Large/Small, and Non-strategic, low spend suppliers 15-30% average savings Non-Strategic Spend # Suppliers 7

8 Strategic Spend & Non-Strategic Spend are managed under a consistent framework Denali Category Management Framework Stakeholder Influence and Management Category Assessment & Planning Phase I Internal Category Assessment Phase II External Market Assessment Phase III Strategy Development Phase IV Category Planning Value Discovery Strategic Sourcing Contract Management Supplier Development Supplier Performance Management Phase I Plan & Prepare Phase II Analyze (Spend / Market) Phase III Set Sourcing Strategy Phase IV Execute (Source, Negotiate) Phase V Sustain (Contract, Manage) 8

9 Strategic Impact Strategic Spend Management Develop Rationalize Manage Optimize Spend Maturity Low High Strategic Supplier Strategy None Defined Strategy Compliance Low High Rate Card Strategy None Regular Stakeholder Alignment Sporadic In-Synch Focus Strategic Sourcing Value Discovery Spend on PO Low High Savings Leakage High Low Supplier Performance Management Reactive Proactive 1) Stakeholders Stakeholder Alignment Identify future needs Interlock on a regular basis 2) Supplier Development Strategic Sourcing Initiatives Identify Strategic Partners Rate Card Strategy 3) Supplier Management Strategy Compliance Supplier Performance Management Spend Governance Supplier Performance KPIs 4) Procurement Operations PO Compliance Process Rate Card Compliance Check Time to Market 9

10 CASE STUDY: Freight Management Category Strategy USD (in Millions) PROJECT BACKGROUND On behalf of our high tech manufacturing client, we managed a strategic category management initiative Spend Analytics Opportunity Assessment Market Benchmarking Strategic Sourcing Key Stakeholder: VP, Logistics and Transportation Spend Classification: STRATEGIC CHALLENGES The Freight Management was not sourced for 3 years and our client was heavily dependent on the Freight Audit company for the data management The data had many challenges including but not limited to : Unavailability, Incorrect Information Spend Analytics and Opportunity Assessment was challenging since bottoms up analysis needed to be bridged to data that was not perfect APPROACH Our sourcing project was executed thru a multi-phase approach managed by a Denali Sourcing Team Phase 1 Data collection and Spend Analytics Phase 2 Opportunity Assessment Phase 3 Market Benchmarking Phase 4 Strategic Sourcing The targeted benchmark to cover 70% of lanes and modes in the spend spanned 20 routes Opportunity Assessment through benchmark Strategic sourcing initiative to drive costs out and identify route level savings opportunities to capture supply/demand at a point of time RESULTS Formal Spend Lock that is auditable for future: $30M Savings: $1.4 M (9% of valid spend) Optimization Savings Opportunity:$5.2M (23%) Savings Opportunity Baseline Savings Benchmarked Target 10

11 Annual $ Spend Non-Strategic Spend Breakdown ~$100K to $500K Few Hundred Suppliers $200 K Average Per Supplier Moderately strategic. Mix of Large/Small Strategy Can be sourced directly <$100K 1,000 s Suppliers $5K - $10K Average Per Supplier Non-strategic, low spend suppliers Strategy Aggregation, preferred providers, Category Playbooks # Suppliers 11

12 Strategic Impact Non-Strategic Spend Management Spend Maturity Low High Strategic Supplier Strategy None Defined Strategy Compliance Low High Rate Card Strategy None Regular Stakeholder Alignment Sporadic In-Synch Focus Strategic Sourcing Value Discovery Spend on PO Low High Savings Leakage High Low Supplier Performance Management Develop Rationalize Reactive Manage Optimize Proactive 1) Strategies to find spend Sourcing Requisition Review, Contract mining Spend Analysis 2) Tail Spend Processes: Category strategies, playbooks to corral spend Quick quote process Bulk Buy Process to drive leverage for fragmented spend Individual PO negotiations 3) Sourcing Desk Approach High volume transactional execution via sourcing desk Centralized queue management Reporting, Full spend visibility Fast Time to Market 12

13 CASE STUDY: IT Hardware & Services Sourcing Desk (Low Spend Program) SD (in Millions) PROJECT BACKGROUND On behalf of our high technology client we are executing a tactical IT hardware and software services procurement desk. Overall spend in scope for Technology Category is $17 MM annually for products such as Computers, Peripherals, Servers, Displays & Software License purchase (<50K spend / PO) Client has workforce distributed across 6 different site locations & each location has different legal entity status requiring purchase policy adherence. APPROACH Put together a team comprising of a mix of experienced resources having knowledge of sourcing Technology products. Developed a tracking tool and process for enabling spend analysis by business group, by entity, by product category,etc. Tool enables tracking of delivery of approved purchase orders. Developed bulk buy process for products and implemented across 6 legal entities Conducted 40 hours classroom training for each Buyer followed by pilot case evaluation. HIGHLIGHTS & CHALLENGES Lack of process documentation. Transition time ~ 3 weeks. Rate cards provided the guidance and PO level negotiation yielded additional savings. Local suppliers require continuous follow-ups for delivery of products. Process has been streamlined requiring minimal supervisory support from client procurement team members. RESULTS Spend Touched (7 months) : $6.7 M No of Transactions: 1769 Average Spend / Transaction: $3.8K Savings: $1.4M (21%) Savings Opportunity Baseline Savings Generated Final PO Amount 13

14 Building A Sustainable Sourcing Program REF: April 2012 Webinar Program Building, Governance Strong Executive Sponsorship Aggressive, Achievable Goals and Measurement Align Resources and Skills with Work Strong Enabling Processes Program Execution Solid Technology Platform A Culture of Continuous Improvement Program Adoption, Change Management Customer-Centric Approach to Stakeholders Internal Communications & Marketing Strategy 14

15 Building A Sustainable Sourcing Program REF: April 2012 Webinar Program Building, Governance Program Execution Program Adoption, Change Management Strong Executive Sponsorship Aggressive, Achievable Goals and Measurement Align Resources and Skills with Work Have you established a Healthy Environment that allows your Team members to do their best work? Strong Enabling Processes Solid Technology Platform A Culture of Continuous Improvement Customer-Centric Approach to Stakeholders Internal Communications & Marketing Strategy 15

16 Polling Question #2 How Healthy is Your Team? Less Healthy Group of Individuals Misaligned or Confusion Close to vest, Little sharing Argumentative or No conflict Out for myself No Accountability Focus on tasks Fun at work, are you crazy? Team Clarity of Objectives Trust Conflict Commitment Accountability Attention to Results Fun More Healthy Cohesive team, Minimal Politics Clear and attainable Vulnerable trust Respectful conflict Committed to Team Hold each other accountable Attention to results We have fun 16

17 4 Suggestions to Improve Your Team Health 1) Build a Cohesive Team 2) Establish Clarity 3) Communicate & Reinforce Clarity 4) Have Fun Source: Patrick Lencioni, The Advantage, The Five Dysfunctions of a Team 17

18 4 Suggestions to Improve Your Team Health 1) Build a Cohesive Team 2) Establish Clarity 3) Communicate & Reinforce Clarity 4) Have Fun Establish vulnerable trust Learn what makes each other tick Must start with the leaders, genuinely Encourage open and constructive conflict Good conflict is critical Establishes buy-in for resulting decisions Hold each other accountable 18

19 4 Steps to Improve Your Team Health 1) Build a Cohesive Team 2) Establish Clarity 3) Communicate & Reinforce Clarity 4) Have Fun Build a process foundation to enable clarity -need to have clarity on what you do and ability to measure it Establish clarity of purpose - clarity on what we do and more importantly, what we DON T do Set aggressive but achievable goals 19

20 4 Suggestions to Improve Your Team Health 1) Build a Cohesive Team 2) Establish Clarity 3) Communicate & Reinforce Clarity 4) Have Fun Culture of continuous improvement Team kaizen events Create a learning organizational culture Formal training Lunch n learns and other low cost approaches Relentless attention to results: measure, monitor, adjust, 20

21 4 Suggestions to Improve Your Team Health 1) Build a Cohesive Team 2) Establish Clarity 3) Communicate & Reinforce Clarity 4) Have Fun Do you consider this fun? Solving tough problems Knowing Team and leaders have your back Having success with your team Getting rewarded for good work Spend Time Together Carpet time Team volunteer activities, etc. 21

22 A Final Word Sourcing Program Healthy Team Category Management 1) Establish Category Management and get your Strategic Spend under control 2) Extend category focus to tap into the fragmented Non-Strategic Spend Strategic Spend Non-Strategic Spend 3) Design, develop and continuously improve a Sourcing Program that delivers real, lasting value 4) Build a cohesive and Healthy Team to deliver market leading results 22

23 Thank you! Chris Eyerman Director Denali Sourcing Services (412) Darshan Deshmukh Vice President Denali Sourcing Services Mobile: (854)