Service Excellence at Dow Corning:

Transcription

1 Service Excellence at Dow Corning: Experiences in Outsourcing Source-to-Pay Dow Corning David Hirschi Global Procurement Director - Indirect Services

2 Enhancing Category Management Implementing a managed service model David Hirschi Dow Corning Corporation March 2015 SIG Summit Amelia Island, FL

3 Agenda Dow Corning Brief Introduction Managed Services Defined Services Selection Program Design Implementation Results Lessons Learned 3

4 Guided by our vision We are innovative leaders unleashing the power of silicon AV15087 to benefit everyone, everywhere. 4

5 A global leader in silicon-based technology and innovation Area Headquarters Manufacturing Sites Warehousing Sites Commercial/Service Centers Science & Technology Centers Equally owned by The Dow Chemical Company and Corning Incorporated 5

6 Dow Corning Corporation Fast Facts $5.71 billion USD in sales $376 million USD net income 7,000 products and services 25,000 customers 11,000 employees 6,000+ vendors 4-5% investment of sales in R&D 5,377 active patents 62 manufacturing and warehouse locations 6

7 Agenda Dow Corning Brief Introduction Managed Services Defined Program Objectives & Services Selection Program Design Implementation Results Lessons Learned 7

8 Type of Service Offering Procurement Service Options Technology Driven Content Driven Software Applications Content / Connectivity SaaS tools, MDM, Hosted applications, EBP Research Content & Community Supplier Networks, Integrated Templates & Tools, Syndicated Content Crowd Sourcing, Research & Advisory programs Benchmarking, Benchmarking, Consortia Knowledge Market Intelligence Process Outsourcing Business Multi-Tower, Customized, Niche Process Outsourcing Managed Services 3PLs, MSPs etc Management, IT Consulting etc Consulting Firms Contractors / Temp Labor Contingent Labor, Staff Augmentation 1099 consultants Labor Driven Continuous Service Consumption Discrete (Project Based) Source: Spend Matters Jason Bush 8

9 Type of Service Offering SaaS tools, MDM, Hosted applications, EBP Supplier Networks, Integrated Templates & Tools, Syndicated Content Crowd Sourcing, Research & Advisory programs Benchmarking, Benchmarking, Consortia Market Intelligence Multi-Tower, Customized, Niche 3PLs, MSPs etc Managed Services Defined Technology Driven Software Applications Procurement Business Process Outsourcing Shifts the responsibility, and process management over to a 3 rd party to execute on behalf of the client often includes establishment of COE, external shared service organization. Content Driven Content / Connectivity Research Content & Community Knowledge Process Outsourcing Business Process Outsourcing Managed Services BPO replaces procurement organization for outsourced processes Labor Driven Continuous Consulting Firms Service Consumption Contractors / Temp Labor Discrete (Project Based) Procurement Managed Services Provides service augmentation to stretch existing resource under the guidance and direction of the procurement professional. Providers tend to offer ala carte or customized services based on needs and can range from discrete project work to sourcing & contract desk services Managed service providers do not replace the procurement organization 9

10 Program Design Key Objectives for Managed Service Program Use existing process framework Will not outsource strategic processes Retain/build stakeholder engagement Maintain/enhance market intimacy Improve team s strategic skill sets Bring more spend under management High-Level Value Proposition by Procurement Process Strategic Process Transactional Process Category Management Sourcing Contract Management Spend Analytics Vendor Management Purchase & Returns Accounts Payable Strategic Processes Value Proposition depends upon getting more out of the market - Increasing spend under management - More competitive bidding - Bringing in specific market expertise Transactional Process Value Proposition depends upon becoming more efficient - Process Standardization - Improved Governance/Compliance - Labor Arbitrage

11 Work Load & Process Mapping Identify workload by business process For each work stream/business process get an accurate understanding of FTEs spent working the process Identify resources outside of Procurement function supporting or working on a procurement workflow Data will be used in a number of ways: Better understand your cost to deliver each process Category Mgmt Spend Analysis Contract Management To identify where FTE resources are being consumed Select which areas would lend themselves to Managed Service Support Strategic Sourcing Market Research 11

12 Types of Providers Strengths & Weaknesses by provider type Provider Type Strengths Weaknesses Full Service Providers Well developed process Experienced at transitions Very savings driven Deep bench & resources Inflexible process Loss of market intimacy Stakeholder engagement Competition for mindshare Transaction Specialists Transactional experts Brings standardization Ramp up/down quickly Cost effective Transactional experts Brings standardization Ramp up/down quickly Cost effective Boutique Sourcing Firms Adapts to your workflows Strong sourcing skill sets Engage as program or SOW based Easier to get mindshare Lacks true global scale Rely on 3 rd party for gaps Limited commercial flex Mostly Indirect experience 12

13 Agenda Dow Corning Brief Introduction Managed Services Defined Program Objectives & Services Selection Program Design Implementation Results Lessons Learned 13

14 Program Design Augmentation Services S2C Services Category Management Enablement Network of Category Coaches & Market Experts Category Management Training Category Strategy Development Support Sourcing Support Execute Sourcing Projects simple / standard / complex Augment Sourcing Projects - RFx input into Ariba, Market Research etc Special Projects e.g. EBP optimization, standardization of bid templates Contracts Support Vendor Prequalification PO Terms & Conditions Negotiations Contract Negotiation simple / standard / complex Market Research & Spend Analytics Market Research Projects simple / standard / complex Vendor Identification Spend Analytics to support category plans & sourcing projects

15 Program Design Operating Model Managed Service Provider Dow Corning Management Activities - SLA Development /Tracking Program Leadership Program Manager Regional Operations Mgrs Global Sourcing Mgr - Resource Planning / Budget - Contract Management - Scorecard & Reporting S2C Services Category Management Enablement Service Line Lead Director - Category Plan Review - Template / Tool Development - Training Sourcing Support Service Line Lead Global Sourcing Mgr Regional Sourcing Mgrs - Capacity / Demand Mgmt - Operating Guide Development - Quality control Service Line Lead Global Contracts Mgr - Capacity / Demand Mgmt - Operating Guide Development Contracts Support - Quality control Research Mgr - Capacity / Demand Mgmt - Operating Guide Development Market Research & Spend Analytics - Quality control Dow Corning governance/management investment ~ 4 FTE

16 Program Design: SLA / Scorecard Philosophy Financial Perspective Customer Perspective Performance & Effectiveness Customer Satisfaction Quality & Continuous Improvement High Level Program Dashboard Backed up with detail KPI s Operational Efficiency Learning & Growth Internal Perspective 16

17 Program Design: Example Monthly Dashboard Performance Metric PERFORMANCE & EFFECTIVENESS Target Current Month YTD G / A / R Comments Total Annual Savings ($M) * $XM - - EOY Total Procurement Target (Prevention + Reduction) 1-Year Portfolio Value (1.5X vs. Savings Target) * $1.5xM - - Based on 2015 savings target 3-Year Portfolio Value (1.75X vs. Savings Target) * $1.75xM - - Based on 2015 savings target Category Plans Completed * X - - Plans = Full Strategies, Category Briefs; defined by Roadmaps Spot Buy Prevention Cost Savings * X% - - Total spot buys -Low volume Retention - Staff Turnover Percent * <x% - - % of total service staff; Quarterly measure not Monthly CUSTOMER SATISFACTION Post-Project Satisfaction Surveys - NPS * X% - - % of "Yes" responses; Simple Sourcing projects Post-Project Satisfaction Surveys - 3/5 Question * X - - Average score (1-5) across Std/Complex Sourcing and Contracts OPERATIONAL EFFICIENCY Total Project Throughput Volume X - - Contract project throughput improving Total Project Addressed Spend ($M) $XM - - Total Spend addressed from Providers Completed Projects % Sourcing Projects < Target Cycle Time * 90% - - % of Sourcing Projects under target Turn around Time (TAT) % Contract Projects < Target Cycle Time * 90% - - % of Contract Projects under target Turn around Time Spot Buy Cycle Time * 90% - - % of Spot Buys under 2 day TAT target - Low volume Managed Service Resource Capacity Utilization 80% - - Actions in process to better utilize off shore -sourcing team QUALITY & CONTINUOUS IMPROVEMENT Issue Log Non-Compliances - Level 1 0 Severity 1 issues that require RCA and Preventive Measures Issue Log Non-Compliances - Level 2 0 Severity 2 issues that require RCA and Preventive Measures Issue Log Non-Compliances - Level 3 0 Severity 3 Issues logged for tracking * SLA Activity progress as planned Activity needs to be monitored, else can go to red. Not to be concerned but aware Behind schedule / immediate intervention required 17

18 Agenda Dow Corning Brief Introduction Managed Services Defined Program Objectives & Services Selection Program Design Implementation Results Lessons Learned 18

19 Implementation - Knowledge Transfer The four key deliverables for the Knowledge Transfer process: 1. Operating Guide Development 2. Knowledge Transfer Projects 3. Define Templates 4. CM Signoff Create operating guide for each Service Line Regional addendums Opportunity Assessment Complete Joint Project Complete Independent Project Ariba RFx templates Contract Templates Deliverables Complete Projects executed CM confident in service provider Build & Sign-off on managed service provider s internal on-boarding, quality Control, & governance processes. Establish an audit routine for these! 19

20 General Knowledge Transfer Approach (each country) Week 1 Week 2 Week 3 Week TBD Kickoff Meeting KT Workshops (3 Hrs each Category) Scope & Kick-off KT Projects Execute KT Projects Complete Operating Guide Country Addendums & Templates Category Manager Sign-off Country Guide Addendums Completed Ariba templates completed Completed KT sourcing projects 20

21 Implementation: Total Program Timelines Internal Analysis & preliminary business case development RFP time lines Due Diligence & Contracting time lines Execution & Ramp-up Total Time (4 6 months) (2 4 months) (5 7 months) (12 18 months) (24 36 months) Board review Contract (SA) signed Initial wave of StC projects kicked-off US KT for Managed Services US Go Live EMEA KT Knowledge Transfer EMEA Go Live APAC Knowledge Transfer APAC Go Live Aug 15 Sep 16 Oct 7 Jan 6 Feb 10 June July Sep Oct 21

22 Agenda Dow Corning Brief Introduction Managed Services Defined Program Objectives & Services Selection Program Design Implementation Results Lessons Learned 22

23 Results 2014 Results Implemented across NA, EMEA, Asia in ramp up year Exceeded total savings expectations by 20% Gross ROI = Incremental Savings / Managed Svc Cost = 3.5x 2015 Portfolio - Built proactive portfolio valued at 1.2x in Improvements Increase ROI to > 7x in 2015 Significantly increase support for Direct Procurement projects Improve cycle times on projects to increase capacity

24 Lessons learned 01 Implementation / change management VERY HARD Shared Goals between Category Managers & Service Provider ESSENTIAL Assess the providers internal governance & training in due diligence 04 SLA development critical to drive proper behavior LESS is MORE 05 Don t underestimate IT and system access issues Spend a lot of time defining roles & responsibilities Own your future team stronger & more independent

25 David Hirschi Global Procurement Director Dow Corning Corporation Work:

26 Evaluation How-to: Why? Your feedback drives SIG Event content By signing and submitting your evaluation, you are automatically entered into a prize drawing How? Option 1: App 1. Select Schedule 2. Select Schedule by Day 3. Select Day 4. Select Session 5. Scroll to Description 6. Click on the Evaluation link Option 2: Browser 1. Go to 2. Select Session (#13) Complete and submit!

27 Session #13 Service Excellence at Dow Corning: Experiences in Outsourcing Source-to-Pay Speaker: David Hirschi Dow Corning bit.ly/downloadameliaapp Tweet using: #SIGspring15

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