Transforming Aggreko to Procurement Leaders. eworld 27 th September 2016 Nick Drewe & Nick Ford

Transcription

1 Transforming Aggreko to Procurement Leaders eworld 27 th September 2016 Nick Drewe & Nick Ford

2 What we shall cover The quest for procurement excellence at Aggreko How Aggreko previously bought Freight Aggreko s chosen strategy & their results to date The Freight emarketplace concept How it was implemented & what made it successful Where else the concept could apply

3 Aggreko s journey to success Nick Ford, Odesma Establishing an emarketplace Nick Drewe, Market Dojo

4 Aggreko Corporate Overview Aggreko plc is the leading global provider of modular, mobile power and adjacent product solutions. Aggreko employs over 7,700 people operating from 211 locations. In 2014 servicing customers in about 100 countries, revenues were approximately GBP 1.6bn (USD 2.6bn or Euros 2.0bn). Aggreko plc is listed on the London Stock Exchange (AGK.L) and is headquartered in Scotland. Aggreko plc is comprised of two business units: Rental Solutions and Power Solutions. In the Rental Solutions business, they hire equipment to, customers who then operate it for themselves, although retaining responsibility for servicing and maintaining it. The Freight emarketplace was first deployed in Rental Solutions NAM and is now rolled out across the globe

5 Aggreko Procurement Transformation Procurement Excellence 2016/17 The initiative was designed to make Aggreko more competitive by reducing overall supplier spend, including: Leveraging global reach to form world-wide supplier partnerships, allowing us to negotiate better prices and better service from our suppliers Reducing number of suppliers to make our supply chain more efficient Changing procurement tools & systems to have access to real time data for supplier management, benefit tracking and to introduce e-sourcing tools Building purchasing team capability to enable them to negotiate more effectively and build strategic supplier partnerships Carole Cran CFO Initiative sponsor Emma Muller Group Head of Procurement Initiative lead

6 Aggreko NAM Freight landscape In 2014/15 they had a significant spend with a very decentralised supply base across 64 locations supported by logistics coordinators with significant purchase order volume There were no formal contract arrangements PSL s/frameworks/engagement arrangements Mainly spot buying on the day to support sales and operations The criteria when choosing a broker or carrier was not defined i.e. relationship, price, service performance and the cost plus pricing model did not drive an aggressive freight negotiation process There was no standard process for freight quotations inside the business i.e. some may allocate work to certain suppliers while others may carry out quotations with multiple vendors Pricing benchmark did not exist

7 Aggreko NAM Freight landscape The freight and sales process prior to the program was a worst case scenario Please provide 1 500kW Machine first thing tomorrow Let me check that we have one available and call you back We have one available I will make sure it is there first thing in the am Can you get me 1 500kW machine to Dallas first thing tomorrow from Houston Absolutely will be $1000 Awesome thanks for that can you make sure I receive the invoice in 24 to 48 hours Broker

8 Cost Of Freight per Mile Aggreko Proposed strategy Move away from spot buying to rapid e-tendering Range Of Spot Market etendering The spot market is the price of the route at that time in the industry when delivery is almost immediate Today Year 1 Year 2 Year 3 Year 4 Time

9 Aggreko Results Maximised savings through increased competition using etenders and centralisation in national logistics Status Implemented Develop logistics pricing methodology for sales to increase profit margin Status Implemented Engage with the business to deliver savings in local logistics Status - Ongoing 3 months etender pilot Ran over 250 bids with sales/ops support Reduced baseline cost/mile significantly Large savings over the 3 months period Built the business case exec sponsor National etender Results over 12 months Ran over 3000 bids/tenders this year Savings range was staggering had big impact on freight bill in North America Invested in team to now manage national logistics centrally and solution implemented Built up freight data base which is now used in sales costing and budgeting Completely changed the Op Model for freight within region

10 Aggreko Customer Success.In addition, they have now completely transformed their freight business through to their end customers Transition to the National Team National Loads > 250 miles~ ~10,000 Transactions per year Primarily trades, large events, MR To remain at Local Area Logistics Local Loads < 250 miles ~35,000 Transactions per year Primarily customer deliveries

11 Aggreko s journey to success Nick Ford, Odesma Establishing an emarketplace Nick Drewe, Market Dojo

12 Freight emarketplace Basic concept Reverse Auction amongst approved vendors to find the market price of each order: vendors = competition = savings Market price This could not be replicated easily via phone & (though some have tried). Besides, who knew if it could, where was the evidence!

13 Freight emarketplace Key ingredients Favourable conditions for spot eauctions, a buyers market Repetitive transactions with many committed orders daily Capacity-driven market, creating a compressible margin Many capable suppliers creating perfect competition Attractive spend values Clear requirements Fluctuating cost drivers Short lead time? The existing process was inefficient loosely following 3 bids & a buy Poor data capture & audit trail of each order

14 Freight emarketplace How to make it work Cultural changes Shifting from local to central procurement Mandating the process Clear message to vendors to solicit their buy-in Fit-for-purpose software Quick to pick up for buyer & supplier Instant cloning of previous tenders Real-time bidding to drive competition efficiently Use of advanced bid templates to capture all route data as well as price Software-as-a-service so it is instantly available to all, 24/7 Smooth implementation Webinar & 2 minute training video for buyers & suppliers Pilot project to iron out kinks followed by national adoption In-house champions guided by external support

15 Freight emarketplace Lessons learned It took a while to get the team onboard: We ve always done it this way It took time to standardise the templates & process, as each local team worked differently Workload for central team increased so recruitment & organisation were needed Educating suppliers that they couldn t buy the business through aggressive bidding! Collaborative software developments required to continually improve

16 XYZ emarketplace Where else could this model of rapid enegotiation apply? Spot Buy Software Buyers Market Senior Sponsorship A viable alternative to aggregated tendering or telephone/ sourcing to improve results, track the market price & capture valuable data

17 Thank you for listening! Any questions? Do visit our stand to speak further with either Nick!