Jump Start Savings and Transform Over Time Kemper Azhar Miah Chief Procurement Executive GEP Ian Cotter Senior Manager, Consulting www.sig.org/eval
March 12, 2015 Kemper Corporation Procurement Journey Jump Start Savings & Transform Over Time 2015 Sourcing Interests Group Conference - Amelia Island, FL Azhar J. Miah Chief Procurement Executive Kemper Corporation Ian Cotter Senior Manager GEP
Agenda 1. Introductions 2. Situation Overview 3. Build or Buy 4. Program Structure 5. Program Progress 6. Takeaways 3
Introductions
Kemper Overview Multi-line national insurer Provides private passenger and commercial auto, home and umbrella in 47 states Provides basic life, accident and health products in 48 states Multi-channel distribution network Strong capital and liquidity $2.1B shareholders equity 26% debt-to-capital ratio 92% of fixed maturity portfolio rated investment grade Insurance subs rated Excellent by A.M. Best History of strategic acquisitions (largely decentralized organization) 5
GEP - Overview Reducing costs and driving savings to the bottom line gets us excited. GEP PEOPLE are distinguished by their drive to do better, go further and achieve more for clients. A global leader in procurement services and technology (Gartner, Everest, HfS, Ardent, Hackett, Spend Matters) Focused exclusively on sourcing & procurement Billions in spend managed annually End-to-end eprocurement technology flexible, targeted, unified, complete Innovative source-to-pay platform purpose built for mobile, touch, cloud Large repository of best practice workflows, tools and templates More than 180 Fortune 500 & Global 2000 Customers Delivery centers in Europe, North America & Asia, supporting multiple languages ISO 9001:2008; SSAE 16, SOC 2 certified NMSDC certified minority owned enterprise Mexico City Clark, NJ Princeton, NJ London Prague Mumbai Shanghai São Paulo Hyderabad Singapore 6
Audience Poll
Situation Overview
Strategic Impetus for Enterprise-wide Change Cost/margin pressures in insurance business Senior leadership s desire to identify operational efficiency opportunities Corporate Strategy team advised Kemper leadership to have a centrally coordinated procurement structure to capitalize on the power of collective bargaining and capture savings on spending for goods and services Leadership response: Don t we already do that? 9
Research Findings Pain Points Processes 1. Processes focused on tactical & administrative purchasing activities 2. Lack of standards, automation and business engagement model 3. Limited use of relevant data to prioritize work and existing processes People 1. Large number of non-procurement professionals performing procurement activities (i.e. hobbyists) 2. Lack of end-to-end procurement skills 3. Fragmented & decentralized org, limited understanding of Procurement Tools 1. Poor quality of spend and procurement related data 2. Few automated systems and tools to support procurement activities 3. Lack of a centralized contracts database or proactive contract management tools 10
Considerations Educating Leadership - Purchasing vs. Procurement End-to-End Strategic Procurement Processes Ongoing Financial Review of $ s Spent 1. Demand 2. Source 3. Contract 4. Purchase 5. Vendor Management Requests for Products/Services Identify/evaluate capable suppliers Negotiate contractual agreements with chosen supplier Manage supplier payments Manage Ongoing Supplier Relationship and Performance Legitimate/ Necessary? Formal purchase request procedures? Formal approval procedures? Define Preferred Suppliers New Supplier Due Diligence? Issue RFP/RFI/RFQ Evaluate proposals Enterprise Wide? Benchmarked? Managed? Legal Outsourced? Payments? Payment Terms? Official Contract Usage? Leakage Tracking? Non-Compliance Implications? Supplier Scorecards? Service Level Agreements? Ensue compliance to Contract T&C s? Kemper s procurement team only performing Purchasing (Step 4) and limited aspects of Contracting (Step 3) 11
Leadership understands the need for transformation $ 12
BUT HOW DO WE GET THERE? BUILD BUY 13
Build or Buy
Need for expertise, people, processes, tools & best practices 1. Build: directly invest in building the people, process and tools. Takes time and money with no guarantee it would be done right. 2. Buy: Purchase the people, process and tools. Accelerates the path to savings and transformation. 15
What capabilities to buy? Strategy Procurement Transformation Process Optimization Change Management Organizational Design Sourcing Category Management Opportunity Assessment Strategic Sourcing Contract Management Supplier Management Tail Spend Management Low-Cost Country Sourcing Category Planning Tracking and Compliance Operations Support Services Spend Analysis Analytics & Reporting Sourcing Support Market Intelligence RFx/Auction Services Technology Spend Analysis Savings Pipeline & Tracking Sourcing Contract Management Supplier Management Purchase 16
Due Diligence and ROI development Kemper leveraged industry research analysts to fast track identifying a shortlist of best Procurement services suppliers Piloted spend analysis with shortlisted vendors Spend analysis helped shape the savings roadmap for big spend categories Contractual savings opportunities based on spend analysis showed ROI of ~3-5X Piloting Spend Analysis is Key to Demonstrating the ROI of the Program & Shaping the Program Strategy 17
What did we look for in a services partner? Procurement Capabilities Resource Model Culture Flexibility Technology Expertise and sole focus in procurement services to help Jump Start Flexible and scalable resource model Great cultural fit Willingness to adapt to client s needs and requests Complete suite of integrated Procurement tools Selected GEP as the services and tools provider 18
Program Structure
Kemper Program Goals 1. Jump start contractual savings / quick wins 2. Implement enterprise-wide contracts with standardized T&C 3. Transform procurement over time: people, processes, tools 4. Implement tools - spend analysis, e-sourcing, contract management Clear Goals & Vision is Crucial to Engaging the Enterprise 20
Jump Start Savings & Transform Over Time Plan Year 1 Year 2 & 3 Jump Start Savings Sourcing Wave 1 Sourcing Wave 2 Sourcing Waves 3-6 Transform Over Time Tools / Tech (Contract, Spend Analysis, erfx, Auctions) Organizational Assessment and Design Supplier Performance Management Category Management Program & Change Management Infrastructure, Savings Tracking 21
Established a Well Defined Program Governance & Management Structure Recurring and active involvement of Executive Team / SteerCo Achieve the objectives of the program Monthly Meetings Steering Committee Performance Trends Escalation of Critical Issues Long-Range Strategies Kemper Weekly Meetings Program Management GEP Performance Metrics Status of Critical Issues Financial Trends Daily Meetings Sourcing Execution 22
Keys to Launching an Enterprise-wide Program 1. Dedicated Cross Functional Program Management team 2. CFO as Executive Sponsor 3. Steering Committee of top Senior Executives 4. Personal briefings to senior business leaders 5. CEO communication Engineer a successful launch to enable program success 23
Branding the Program to Improve Awareness and Increase Buy-in - Procurement Portal - Intranet - News - Webcasts - Contact: procure@kemper.com 24
Program Progress
Jump Start Savings Accomplishment : Together We Completed a Total of... Spend Categories Addressed 6 No. of Sourcing Projects 20+ Spend Addressed Business Stakeholders Engaged 40% 50+ 26
Transformation Accomplishments Kemper s First Time for. Spend visibility across the organization CFO video message Webinar 600 people attending Video tutorials / trainings Enterprise-wide negotiations Centralized contract database Online eauctions Category Councils 27
Change Management CHALLENGES Some functions stuck in their ways / skeptical of the program SOLUTIONS Voice of the customer sessions with key stakeholder groups Getting contracts in a timely manner New process for contract collection with Legal Ego We already know how to negotiate. You can t do better Fact-based decision making and 5-step sourcing process BU Negotiations with suboptimal results currently underway CFO mandate all projects must be reviewed by KEPT Communicate, Collaborate and Educate 28
Case Study: Information Services Suppliers Background Information Services vendor proposed a solution to a Kemper BU prior to the KEPT program claiming there would be annual savings of $1.6 million due to a change in the process and rates Approach/ Solution The KEPT Procurement team performed a detailed due diligence on the CBA analysis and identified that there was actually a cost increase of ~$0.8M instead of ~$1.6M in savings KEPT Procurement team had several rounds of negotiations with Information Services suppliers on Kemper s enterprise wide spend Results Accomplished / Business Impact Delivered Kemper avoided a cost increase of ~$0.8M from not implementing the original proposal on the table KEPT Procurement team identified ~$1.2M of savings on information services through SRM workshops 0.8 0.6 0.4 0.2 0-0.2-0.4-0.6-0.8-1 -1.2-1.4 1 Information Services Spend Baseline 0 0 0 There is a $2M swing in savings between the two different paths shown above 0.8 ~$2M swing -1.2 29
Takeaways 1.Research and assess environment 2.Educate leadership and build business case 3.Design program to fix pain points and enable transformation 4.Build or Buy 5.Pilot services / tools 6.Refine business case 7.Solicit funding 8.Brand the program 9.Engineer high visibility launch leveraging C-suite 10.Establish strong program governance infrastructure 11.Deliver on promises, share successes, promote stakeholders as heroes 12.Sustain communication and education through multiple platforms 30
Contact Information Azhar J. Miah Kemper Corporation (312) 661-4515 Work (312) 802-2308 Mobile amiah@kemper.com 1.E. Wacker Drive Chicago, IL 60601 Ian Cotter GEP +1 (312) 978-1267 Mobile ian.cotter@gep.com 100 Walnut Avenue, Clark, NJ, 07066 31
Azhar J. Miah Kemper Corporation Chief Procurement Executive for Kemper Corporation headquartered in Chicago, Illinois. Joined Kemper s Corporate Strategy group in 2011. During his tenure, Mr. Miah advised Kemper s business units on operational performance management strategies and developed enterprise-wide strategies in the areas of mergers and acquisitions, asset sales, corporate restructuring, global outsourcing, technology, and procurement. Prior to joining Kemper, Mr. Miah was founder and Managing Partner of Envision Partners - a strategy and performance management consulting firm. Over his career he has worked in a broad array of roles as a banker, consultant, and senior executive at industry leading global corporations, including Bank of America, Airbus, Ernst & Young, Honeywell, and General Electric. Mr. Miah holds a B.S. from The College of William & Mary in Virginia, an M.B.A. from The George Washington University, and is a graduate of the International Business Program at Virginia Commonwealth University. He also holds a Six Sigma black-belt certification conferred by General Electric Corporation. 33
Ian Cotter GEP Ian is a senior manager in GEP s US practice and is leading the Strategic Sourcing workstream on the Kemper account Led strategic sourcing and outsourcing programs across multiple geographies for Fortune 500 companies. Areas of expertise include program management and category management. Ian has also been involved in process optimization engagements delivering significant cost savings for his clients. Ian s experience covers a variety of sectors including: FMCG, Insurance, Telecom and Banking. Prior to joining GEP, Ian worked with Accenture in Dublin where he led strategic sourcing engagements and inventory optimization projects. Before his consulting career, Ian worked in the Marketing industry. Ian received his Masters with distinction from National University of Ireland, Galway. 34
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Session #21 Jump Start Savings and Transform Over Time Speakers: Azhar Miah Kemper amiah@kemper.com Ian Cotter GEP Ian.Cotter@gep.com www.sig.org/eval bit.ly/downloadameliaapp Tweet using: #SIGspring15