Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings

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Andrew Bartolini, Ardent Partners, AribaLIVE 2011
Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings
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  • Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings

    1. 1. Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings Sundar Kamakshisundaram - Ariba Andrew Bartolini - Ardent Partners Rohan Ranadive - BB&T Carl Hernas - Coach Mr. Govind Jaju - Ranbaxy Laboratories Ltd © 2011 Ariba, Inc. All rights reserved.
    2. 2. Agenda <ul><li>Introduction – Opening Comments </li></ul><ul><li>Panel Discussion </li></ul><ul><ul><li>Ardent Partners – Andrew Bartolini </li></ul></ul><ul><ul><li>BB&T – Rohan Ranadive </li></ul></ul><ul><ul><li>Coach – Carl Hernas </li></ul></ul><ul><ul><li>Ranbaxy Laboratories Ltd – Mr. Govind Jaju </li></ul></ul><ul><li>Q&A </li></ul>© 2011 Ariba, Inc. All rights reserved.
    3. 3. Collaborative Sourcing: The Keys to Unlocking Greater Value Andrew Bartolini Chief Research Officer Ardent Partners © 2011 Ariba, Inc. All rights reserved.
    4. 4. Andrew Bartolini Bio <ul><li>Andrew Bartolini </li></ul><ul><li>Managing Partner & Chief Research Officer, Ardent Partners </li></ul><ul><li>Publisher, CPO Rising – www.cporising.com </li></ul><ul><li>Summary </li></ul><ul><li>Recognized expert in sourcing, procurement, and supply management </li></ul><ul><li>Named a “Pro to Know” by Supply and Demand Chain Executive three times </li></ul><ul><li>Former VP of Global Supply Mgmt. research at Aberdeen Group; Benchmarked thousands of enterprises across all facets of their supply management operations </li></ul><ul><li>Experience </li></ul><ul><li>Leadership roles in sales, marketing, and services at Ariba and Commerce One. Rich experience in strategic sourcing (>$500MM), business process transformation, and software implementation. Background also includes consulting and investment banking </li></ul><ul><li>Education </li></ul><ul><ul><li>MBA – Indiana University </li></ul></ul><ul><ul><li>BA – College of the Holy Cross </li></ul></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    5. 5. CPO Rising: The First Independent Site for CPOs www.cporising.com © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    6. 6. Agenda <ul><li>CPO Alignment and Other Business Trends </li></ul><ul><li>Collaborative Sourcing </li></ul><ul><ul><li>Visibility </li></ul></ul><ul><ul><li>Analysis </li></ul></ul><ul><ul><li>Process </li></ul></ul><ul><ul><li>Collaboration </li></ul></ul><ul><li>Summary </li></ul><ul><li>Q&A </li></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    7. 7. Who said it? <ul><li>“ We intend to operate with strict financial discipline, maintaining a maniacal focus on cash. We're also closely managing all of our costs , renegotiating contracts around the world, localizing our sourcing …” </li></ul><ul><li>“ We have worked closely with our strategic suppliers to achieve sustainable cost improvements …” </li></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    8. 8. Who said it? <ul><li>“ We intend to operate with strict financial discipline, maintaining a maniacal focus on cash. We're also closely managing all of our costs , renegotiating contracts around the world, localizing our sourcing …” </li></ul><ul><li>“ We have worked closely with our strategic suppliers to achieve sustainable cost improvements …” </li></ul>~ Indra Nooyi, CEO , Pepsi ~ Olli-Pekka Kallasvuo, President and CEO , Nokia © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    9. 9. Why are CEOs talking about Sourcing? © 2011 Ariba, Inc. All rights reserved. Source: Ardent |Partners Copyright © 2011 - Ardent Partners
    10. 10. CFO Priorities <ul><li>Growth </li></ul><ul><li>Profits </li></ul><ul><li>Stock Price </li></ul><ul><li>Operating Expenses </li></ul><ul><li>Cash </li></ul><ul><li>Risk </li></ul>IN THE PAST <ul><li>Cash </li></ul><ul><li>Operating expenses </li></ul><ul><li>Profits </li></ul><ul><li>Risk </li></ul>TODAY © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    11. 11. CFO Priorities <ul><li>Growth </li></ul><ul><li>Profits </li></ul><ul><li>Stock Price </li></ul><ul><li>Operating Expenses </li></ul><ul><li>Cash </li></ul><ul><li>Risk </li></ul>IN THE PAST <ul><li>Cash </li></ul><ul><li>Operating expenses </li></ul><ul><li>Profits </li></ul><ul><li>Risk </li></ul>TODAY © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners Increasing Alignment between the CFO and the CPO
    12. 12. Business Trends that Will Continue in 2011 <ul><li>Globalization </li></ul><ul><ul><li>Companies </li></ul></ul><ul><ul><li>Customers </li></ul></ul><ul><ul><li>Supply chains </li></ul></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    13. 13. Business Trends that Will Continue in 2011 <ul><li>Globalization </li></ul><ul><ul><li>Companies </li></ul></ul><ul><ul><li>Customers </li></ul></ul><ul><ul><li>Supply chains </li></ul></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners <ul><li>Complexity </li></ul><ul><ul><li>Business Models </li></ul></ul><ul><ul><li>Trading Partner Relationships </li></ul></ul><ul><ul><li>Enterprise/Corporate Structures </li></ul></ul>
    14. 14. Business Trends that Will Continue in 2011 <ul><li>Automation </li></ul><ul><ul><li>Transactions </li></ul></ul><ul><ul><li>Business Functions </li></ul></ul><ul><ul><li>Holistic Processes </li></ul></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    15. 15. Business Trends that Will Continue in 2011 <ul><li>Automation </li></ul><ul><ul><li>Transactions </li></ul></ul><ul><ul><li>Business Functions </li></ul></ul><ul><ul><li>Holistic Processes </li></ul></ul><ul><li>Technology </li></ul><ul><ul><li>Enterprise Shift from “Systems of Record” to “Systems of Engagement” </li></ul></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    16. 16. One Other BIG Trend <ul><li>Procurement’s Rise Will Continue Unabated </li></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    17. 17. What These Trends Demand of Procurement: <ul><li>More data is available </li></ul><ul><li>More analysis is needed </li></ul><ul><li>Better processes needed </li></ul><ul><li>Wider coverage needed </li></ul><ul><li>Deeper expertise needed </li></ul><ul><li>Superior results needed </li></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    18. 18. What These Trends Demand of Procurement: <ul><li>More data is available </li></ul><ul><li>More analysis is needed </li></ul><ul><li>Better processes needed </li></ul><ul><li>Wider coverage needed </li></ul><ul><li>Deeper expertise needed </li></ul><ul><li>Superior results needed </li></ul><ul><li>Efficient Sourcing is </li></ul><ul><li>“ table stakes” </li></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    19. 19. <ul><li>Visibility </li></ul><ul><li>Analysis </li></ul><ul><li>Process </li></ul><ul><li>Collaboration </li></ul>THE KEYS © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    20. 20. Procurement without Spend Visibility <ul><li>CPOs who manage their operations without spend analysis </li></ul><ul><li>Sourcing leaders who build strategic sourcing pipelines and run sourcing projects without spend </li></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    21. 21. Procurement without Spend Visibility <ul><li>CPOs who manage their operations without spend analysis </li></ul><ul><li>Sourcing leaders who build strategic sourcing pipelines and run sourcing projects without spend </li></ul><ul><li>Are Committing </li></ul><ul><li>Procurement Malpractice </li></ul>© 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    22. 22. <ul><li>Spend under Management </li></ul><ul><li>Sourcing Savings </li></ul><ul><li>Contract Compliance </li></ul><ul><li>Maverick Spend </li></ul>THE VALUE FROM SPEND VISIBILITY © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    23. 23. <ul><li>Data </li></ul><ul><li>Supply Markets </li></ul><ul><li>Category Management </li></ul>ANALYSIS Copyright © 2011 - Ardent Partners
    24. 24. Holistic, Standardized, and Automated Process © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners Supplier Performance Management Supplier Information Management
    25. 25. Closing the Savings Leakage Gap Identified Implemented Leakage Savings © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    26. 26. <ul><li>With Business Stakeholders </li></ul><ul><li>With Functional Partners </li></ul><ul><li>With Suppliers </li></ul><ul><li>With Customers </li></ul>COLLABORATION © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    27. 27. CASE STUDY Visibility Analysis Process Collaboration © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners <ul><li>Global Electronics Manufacturer </li></ul><ul><li>“ Roll-up” of hundreds of companies </li></ul><ul><li>Hundreds of back-end systems </li></ul><ul><li>$16.9 billion in enterprise spend </li></ul><ul><li>360,000 suppliers </li></ul><ul><li>eSourcing/six sigma processes </li></ul><ul><li>30 sourcing teams </li></ul><ul><li>But really, one sourcing team </li></ul><ul><li>200+ initiatives </li></ul><ul><li>Executive sponsorship </li></ul>
    28. 28. CASE STUDY © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners UNLOCKED SAVINGS > $1 BILLION (in first three years )
    29. 29. <ul><li>Visibility </li></ul><ul><li>Analysis </li></ul><ul><li>Process </li></ul><ul><li>Collaboration </li></ul>THE KEYS © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    30. 30. Q&A ( and Contact Details ) <ul><li>For more information, please visit: </li></ul><ul><li>www.cporising.com AND www.ardentpartners.com </li></ul>Andrew Bartolini Managing Partner & Chief Research Officer Ardent Partners [email_address] © 2011 Ariba, Inc. All rights reserved. Copyright © 2011 - Ardent Partners
    31. 31. Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings Rohan Ranadive – BB&T © 2011 Ariba, Inc. All rights reserved.
    32. 32. BB&T Company Profile © 2011 Ariba, Inc. All rights reserved.
    33. 33. BB&T Company Profile © 2011 Ariba, Inc. All rights reserved.
    34. 34. BB&T: Beginnings of Spend Management Transformation <ul><li>Lack of spend visibility </li></ul><ul><ul><li>Misclassified spend </li></ul></ul><ul><ul><li>Limited reporting or data mining abilities </li></ul></ul><ul><li>“ Best efforts” approach to sourcing, contracts and procurement </li></ul><ul><li>Decentralized sourcing, procurement and contracts </li></ul><ul><li>Loose link between Sourcing, Procurement, Contracts and Payables </li></ul><ul><ul><li>FTEs: Sourcing: 4; Procurement: ~20; Contracts: 8; Payables: 65 </li></ul></ul>© 2011 Ariba, Inc. All rights reserved.
    35. 35. BB&T Spend Management Program Vision © 2011 Ariba, Inc. All rights reserved. A Clear Purpose and Organizational Commitment The Right Talent Organized for Success A New Approach, Technology, and Process Discipline <ul><li>Executive Steering Committee </li></ul><ul><li>Policies, Standards and Processes </li></ul><ul><li>Communication and Change Management </li></ul><ul><li>Engaging spend management through online portal; transparency to LOBs </li></ul><ul><li>Sourcing strategies and eSourcing, Reverse Auctions, etc. </li></ul><ul><li>Well-defined Buy Strategy (Catalog, non-catalog, spot buy, compliance) </li></ul><ul><li>Organizational alignment (Categories ↕ , Contracts, Business Process, Payables, Performance Mgt. ↔) </li></ul><ul><li>24 FTEs (Sourcing and Contracts, Analysts, etc.) </li></ul><ul><li>3 rd party consulting help to jump start the program </li></ul>
    36. 36. Program Execution Details <ul><li>Introduced the concept of “Spend Under Management (SUM)” and the potential to influence savings </li></ul><ul><li>Demonstrated savings from targeted sourcing events and reverse auctions </li></ul><ul><ul><li>$7.5M or 28% </li></ul></ul><ul><li>Analyzed AP data to show current state and savings opportunities </li></ul><ul><ul><li>SUM: 15%-20%; Loosely managed </li></ul></ul><ul><ul><li>$100M in savings over three years </li></ul></ul>© 2011 Ariba, Inc. All rights reserved.
    37. 37. Program Execution Details <ul><li>Analyzed enriched spend data to recommend sourcing categories and targeted savings opportunities </li></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><ul><li>Hardware, Software, Desktop, Asset Management and Retailer Services, etc. </li></ul></ul></ul><ul><ul><ul><li>Data & Storage; Voice and Mobile infrastructure, etc. </li></ul></ul></ul><ul><ul><li>Business and Professional Services </li></ul></ul><ul><ul><ul><li>Contingent Labor (Temp, Staff Aug, ITO, BPO, etc.), Consulting and other Professional Services, Legal </li></ul></ul></ul><ul><ul><ul><li>Payment processing, Bill Pay, Payment Networks (FIS, FiServ, Visa, Mastercard, STAR, etc.) </li></ul></ul></ul><ul><ul><li>Corporate and Commercial </li></ul></ul><ul><ul><ul><li>Office Supplies, Copiers, Furniture, Travel, Marketing, Advertising, Brand Merchandising </li></ul></ul></ul><ul><ul><li>Real Estate, Capital and Operational Services </li></ul></ul><ul><ul><ul><li>Real Estate Services, Facilities Management (Janitorial and Landscaping) </li></ul></ul></ul><ul><ul><ul><li>ATMs and other banking equipment, Guard Services, Bullet Proof Glass, Armored cars, etc. </li></ul></ul></ul>© 2011 Ariba, Inc. All rights reserved.
    38. 38. Spend Management Transformation The BB&T Journey © 2011 Ariba, Inc. All rights reserved. Platform Implementation Shared Service Implementation Execution 2009 2010 And Ongoing 2011 <ul><li>End-to-End Ariba technology suite </li></ul><ul><li>Integration with ERP </li></ul><ul><li>P2P with custom approval rules and workflows </li></ul><ul><li>Spend Visibility and Sourcing </li></ul><ul><li>Contract Pro and Compliance </li></ul><ul><li>Supplier Performance Mgmt. </li></ul><ul><li>Supplier Enablement </li></ul><ul><li>Time & Expense Mgmt. </li></ul><ul><li>Executive Sponsorship </li></ul><ul><li>Resource alignment within shared service </li></ul><ul><li>Category Management </li></ul><ul><li>Contract Management </li></ul><ul><li>Performance Management </li></ul><ul><li>Business Process Management </li></ul><ul><li>ePayables (Straight through Processing) </li></ul><ul><li>Targeted Sourcing Events (8-10 key categories sourced; others WIP) </li></ul><ul><li>Category Cards </li></ul><ul><li>Contract Assembly and Compliance </li></ul><ul><li>Catalog driven procurement </li></ul><ul><li>Mining spend data to target savings opportunities </li></ul><ul><li>Holistic Supplier Mgmt. Process </li></ul>Communication and Change Management
    39. 39. Key Takeaways <ul><li>Spend management is a journey, not a destination </li></ul><ul><li>Sourcing is the Promise of Savings; Procurement is where savings are realized </li></ul><ul><li>Relationship management with business partners is the key to success </li></ul><ul><ul><li>Executive sponsorship goes only so far </li></ul></ul><ul><ul><li>Value (= Quality ÷ Price) always trumps Price alone </li></ul></ul><ul><ul><li>Understanding business drivers and end-to-end value chain is the key to strategic sourcing and establishing a win-win partnership </li></ul></ul><ul><ul><li>Early intervention and relationship building are vital ingredients for long-term success </li></ul></ul><ul><li>No one platform can meet all your business needs, but an integrated solution does help </li></ul>© 2011 Ariba, Inc. All rights reserved.
    40. 40. Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings Carl Hernas – Coach © 2011 Ariba, Inc. All rights reserved.
    41. 41. Coach <ul><li>Carl Hernas </li></ul><ul><ul><li>Director, Procurement </li></ul></ul><ul><ul><li>With Coach for 2+ years </li></ul></ul><ul><ul><li>Responsible for Non-Merchandise Sourcing </li></ul></ul><ul><ul><li>Worked in consulting and software before Coach </li></ul></ul><ul><ul><li>Current team includes two managers and one analyst </li></ul></ul>© 2011 Ariba, Inc. All rights reserved.
    42. 42. An Intro to Coach <ul><li>Leading marketer of modern classic American accessories </li></ul><ul><li>Multi-channel distribution strategy </li></ul><ul><ul><li>Over 400 stores in U.S. & Canada, 900 department store boutiques in the U.S., 182 international department stores, retail store and duty-free shop locations in over 20 countries,161 department store shop-in-shops and retail and factory store locations operated by Coach Japan, Inc. </li></ul></ul><ul><li>Coach Procurement </li></ul><ul><ul><li>Until two years ago, no centralized procurement function existed </li></ul></ul><ul><ul><li>The journey began with a diagnostic and a multi-year savings target </li></ul></ul><ul><ul><li>A small team was formed to enable sourcing and other procurement disciplines within Coach </li></ul></ul><ul><ul><li>Launched three waves of sourcing projects and added two sourcing managers </li></ul></ul>© 2011 Ariba, Inc. All rights reserved.
    43. 43. Process, Technology and Spend Categories <ul><li>Process </li></ul><ul><ul><li>Implementing overall strategic sourcing process for better supply and spend management </li></ul></ul><ul><ul><ul><li>Discovery is key component in supplier identification </li></ul></ul></ul><ul><ul><ul><li>Every sourcing event that my team executes uses at least one Discovery posting </li></ul></ul></ul><ul><ul><ul><li>Additional areas of the business have reached out to use the technology even if they aren’t in our sphere of influence </li></ul></ul></ul><ul><ul><ul><li>Each posting averages about 10 supplier responses </li></ul></ul></ul><ul><li>Technology </li></ul><ul><ul><li>Ariba Sourcing and Category Mgmt. </li></ul></ul><ul><ul><li>Ariba Discovery </li></ul></ul>© 2011 Ariba, Inc. All rights reserved. <ul><li>Spend Categories </li></ul><ul><ul><li>Non-merchandise categories </li></ul></ul><ul><ul><li>Each of our six non-merchandise spend families includes sub-categories of spend and total approximately $500M in annual spend </li></ul></ul><ul><ul><ul><li>Creative and Marketing </li></ul></ul></ul><ul><ul><ul><li>Information Services </li></ul></ul></ul><ul><ul><ul><li>Shared Services </li></ul></ul></ul><ul><ul><ul><li>Architecture, Construction and VM </li></ul></ul></ul><ul><ul><ul><li>Store and Facility Operations </li></ul></ul></ul><ul><ul><ul><li>Transportation and Logistics </li></ul></ul></ul>
    44. 44. A Sample Spend Diagnostic © 2011 Ariba, Inc. All rights reserved.
    45. 45. Coach 7-Step Spend Management Process Check Point #1 Check Point #2 Check Point #3 Check Point #4 Check Point #5 Check Point #6 Check Point #7/Ongoing Develop Sourcing Pipeline and Conduct Wave Opportunity Assessment Source and Negotiate Award Contract and Plan Implement-ation Implement Supplier and Category Management Processes Measure Performance And Continuously Improve Analyze and Identify Opportunity Develop Sourcing Strategy Sourcing Pipeline Management Strategic Sourcing Category and Supplier Implementation and Management © 2011 Ariba, Inc. All rights reserved.
    46. 46. Considering the Variety of Categories and the Opportunity, a Wave Plan Seemed the Most Prudent FY10 FY11 FY13 FY14 FY12 Savings Wave 1 Wave 2 Wave 1 (QW) Wave 2 (12/09-5/10) Wave 3 (6/10-11/10) Wave 4 (12/10-5/11) Wave 5 (6/11-11/11) Wave 6 (12/11-5/12) Wave 3 Wave 4 Wave 5 Wave 6 Wave 7 Wave 8 We are here Wave 7 (6/12-11/12) Wave 8 (12/12-5/13) Savings Realization © 2011 Ariba, Inc. All rights reserved.
    47. 47. Sample of Wave 4 Projects © 2011 Ariba, Inc. All rights reserved. Category Description of Addressable Spend Annual Savings (%, $million) Capital vs. Expense Status Visual Merchandising <ul><li>Results of FY12 Bulk Buy </li></ul>21.7% Combined Completed Commercial Print <ul><li>Review print associated to direct mail and mailing house costs </li></ul>14.3% Expense In Progress Packaging <ul><li>Review all aspects of our global packaging spend including supply market analysis and a review of non-traditional sources of supply for Coach </li></ul>6.5% Expense In Progress Fixtures <ul><li>Review additional opportunities in global fixture production and supply chain efficiencies </li></ul>10.0% Capital In Progress Backroom Shelving <ul><li>Review of Background Shelving purchases for our Stores globally </li></ul>10.0% Capital In Progress Security and Fire <ul><li>Review of our planned Security and Fire related purchases for our Stores globally </li></ul>9.2% Combined In Progress General Contracting <ul><li>Review of our NA GC procurement process and bidding policies in all regions </li></ul>7.1% Capital In Progress Utilities <ul><li>Evaluate options for a review of our Utilities spend in NY/NJ, Jax and our stores </li></ul>8.9% Expense In Progress Inbound Transportation <ul><li>Review inbound transportation opportunities around Air and Ocean shipments </li></ul>1.7% Expense In Progress IS Hardware <ul><li>Support negotiations for the upcoming GPI hardware purchase </li></ul>7.3% Capital In Progress IS Consulting <ul><li>Review of our contracts and potential consolidation options with our current vendors </li></ul>6.5% Combined In Progress Media Buying <ul><li>Review current contracts on a consultative basis to evaluate any opportunities </li></ul>3.5% Expense In Progress HQ Maintenance <ul><li>Review of our HQ Maintenance related spend </li></ul>2.4% Combined In Progress Meetings and Events <ul><li>Negotiate and award our upcoming SMC </li></ul>1.6% Expense In Progress Small Package DM <ul><li>Analyze shipping process to discover potential savings from changing behavior </li></ul>1.9% Expense In Progress Total 6.3%
    48. 48. Example #1 (Wave 2) <ul><ul><li>This project was to competitively bid our lamp replenishment program for the USR </li></ul></ul><ul><ul><li>Baseline/Addressable spend $960K FY10 </li></ul></ul><ul><ul><li>Current provider with Coach for 10 years </li></ul></ul><ul><ul><li>Current specification if for GE bulbs </li></ul></ul><ul><ul><li>During RFI, five companies were selected </li></ul></ul><ul><ul><li>Incumbent came in $200K less than their FY09 prices </li></ul></ul><ul><ul><li>Supplier X and Supplier Y were the lowest bidders in the RFP (approximately $400K in savings from current program), however they utilize Phillips bulbs </li></ul></ul><ul><ul><li>Team decided to award the current business to the incumbent for FY11 </li></ul></ul><ul><ul><li>Plan to test the possibility of further savings in FY12 ($150K) with the use of Phillips bulbs </li></ul></ul><ul><ul><li>Working with Visual Merchandising and Store Design to re-bulb a NYC Store with Phillips </li></ul></ul><ul><ul><li>If Phillips bulbs can be approved, we will re-bid in March </li></ul></ul><ul><li>New pricing with incumbent will be back dated to June 1, 2010 </li></ul><ul><li>Final savings for FY11 will be $200K ($700K including savings from construction and store equipment) </li></ul><ul><ul><li>Estimated FY09 Spend: $0.7M / Addressable Spend: $0.96M </li></ul></ul><ul><ul><li>Target Savings $0.09M (14.0%) / Revised Target: $0.20M </li></ul></ul>© 2011 Ariba, Inc. All rights reserved. Baseline Spend and Category Insights Activities Completed Remaining Activities Results/Savings
    49. 49. Example #2 (Wave 3) <ul><li>Global Catalog Production </li></ul><ul><li>Supply market analysis </li></ul><ul><li>Vendor searches through industry contacts, OneSource and Ariba </li></ul><ul><li>RFP executed 12/6/2010 inviting 10 global suppliers </li></ul><ul><li>Evaluation of RFP results and follow-up 1/2011 </li></ul><ul><li>Identified Supplier X as best vendor fit for global production with savings opportunity </li></ul><ul><li>estimated at $492K (22%) </li></ul><ul><li>Retail Window Vinyls </li></ul><ul><li>Supply market analysis </li></ul><ul><li>Vendor searches through industry contacts, OneSource and Ariba </li></ul><ul><li>Executed RFP with 14 participants plus incumbent vendor, evaluating costs, capabilities and client lists </li></ul><ul><li>Invited best six RFP participants to produce tests to directly evaluate quality </li></ul><ul><ul><li>Addressable Spend: $2.9M </li></ul></ul><ul><ul><li>Target Savings: $430K (14.8%); Identified Savings: $732K (25.2%) </li></ul></ul><ul><ul><li>Global Catalog Production </li></ul></ul><ul><ul><li>Identify global partnership for local printing and fulfillment in U.S. and Asia </li></ul></ul><ul><ul><li>Working with CC, CI, CJ to coordinate global RFP of best-in-class capabilities </li></ul></ul><ul><ul><li>Approximate annual spend: $2.2M </li></ul></ul><ul><ul><li>Retail Window Vinyls </li></ul></ul><ul><ul><li>Identify national resource for print, installation and removal for USR </li></ul></ul><ul><ul><li>Approximate annual spend: $0.7M </li></ul></ul><ul><li>Global Catalog Production: Expense </li></ul><ul><li>Improved reproduction consistency, reduction in timelines, freight savings </li></ul><ul><li>Potential prepress savings via centralized vendor </li></ul><ul><li>Potential increased supplier base </li></ul><ul><li>Best-in-Class capabilities </li></ul><ul><li>Retail Window Vinyls: Expense </li></ul><ul><li>Costs savings versus current vendor and cost structure </li></ul><ul><li>Potential increased supplier base </li></ul><ul><li>Ensure market competitiveness </li></ul><ul><li>Global Catalog Production </li></ul><ul><li>Finalize process internally and with CJ, CC and CI for unified global </li></ul><ul><li>production by end of FY11 </li></ul><ul><li>Explore additional opportunities for CJ and CC collateral printing </li></ul><ul><li>Retail Window Vinyls </li></ul><ul><li>Complete on-site visits and vendor meetings </li></ul><ul><li>New price structure and/or vendor in place for May FY11 window program </li></ul><ul><li>with savings opportunity estimated at $240K (34%) </li></ul>© 2011 Ariba, Inc. All rights reserved. Baseline Spend & Category Insights Activities Completed Remaining Activities Results/Savings
    50. 50. Snapshot from our Quarterly Review with Executive Leadership © 2011 Ariba, Inc. All rights reserved. <ul><li>Ariba Sourcing </li></ul><ul><ul><li>Deployed eSourcing solution in December 2009 </li></ul></ul><ul><ul><li>First event launched January 2010 (HQ construction) </li></ul></ul><ul><li>Rollout strategy in conjunction with Wave initiatives </li></ul><ul><ul><li>Waves 2-4 participants trained in a series of monthly classes </li></ul></ul><ul><ul><li>Ariba usage is required for all RFPs in categories addressed through Wave plan </li></ul></ul><ul><ul><li>Reporting in progress to ensure compliance and results </li></ul></ul><ul><li>Summary of Ariba Events to Date </li></ul>
    51. 51. Key to Success + = Lowest Total Cost of Ownership © 2011 Ariba, Inc. All rights reserved. CPO <ul><li>Strategic sourcing, negotiations and contracting expertise </li></ul><ul><li>Supply market analysis and insights </li></ul><ul><li>Rigorous, proven strategic sourcing processes and tools </li></ul><ul><li>Fact-based analysis </li></ul><ul><li>Experience </li></ul>Business <ul><li>Subject-matter expertise </li></ul><ul><li>In-depth understanding of business challenges </li></ul><ul><li>Knowledge of current procurement processes and opportunities for improvement </li></ul><ul><li>Valuable insights into viability of sourcing strategies </li></ul><ul><li>Sourcing solution implementation support </li></ul><ul><li>Event Management </li></ul><ul><li>Supplier Communications </li></ul><ul><li>Supplier Performance Management </li></ul>
    52. 52. Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings Mr. Govind Jaju – Ranbaxy Laboratories Ltd © 2011 Ariba, Inc. All rights reserved.
    53. 53. Ranbaxy Laboratories Ltd. Is the Largest Indian Pharma Company with Global Reach and Competencies across Value Chain <ul><li>India’s largest pharmaceutical company </li></ul><ul><li>Sales in over 125 Countries </li></ul><ul><li>Ground Presence in 46 Countries </li></ul><ul><li>Global Team with Global Mindset </li></ul><ul><ul><li>14,000 Employees; Over 50 nationalities </li></ul></ul><ul><li>Manufacturing – DF and API </li></ul><ul><ul><li>Manufacturing facilities in 7 countries </li></ul></ul><ul><li>Strong R&D Capabilities </li></ul><ul><ul><li>Dedicated Facilities for Generics & Innovative Research </li></ul></ul><ul><ul><li>> 1200 R&D Personnel </li></ul></ul><ul><ul><li>Demonstrated NDDS capabilities </li></ul></ul><ul><ul><li>One NCE program in collaboration with GSK </li></ul></ul><ul><ul><li>One anti-malaria NCE program </li></ul></ul><ul><li>Strong Distribution Network and Brand </li></ul>© 2011 Ariba, Inc. All rights reserved. <ul><li>Founded in 1961 </li></ul><ul><li>Headquartered in Gurgaon, India </li></ul><ul><li>Listed in NSE/BSE/Lux SE(GDR) </li></ul><ul><li>Market Cap: Over $ 5 bn </li></ul><ul><li>2010 Global Revenue: $ 1.87 bn </li></ul><ul><li>2010 Net Profit: $ 327 mn </li></ul>
    54. 54. Ranbaxy’s Spend Management Transformation Journey <ul><li>Industry Background </li></ul><ul><ul><li>Generic Pharma sector is one of the most competitive industries worldwide </li></ul></ul><ul><ul><li>Quality is must; To be cost effective is the key </li></ul></ul><ul><ul><li>Highly regulated environment </li></ul></ul><ul><ul><li>Major spend consists of APIs, Intermediates, Packaging & Freight </li></ul></ul><ul><ul><li>Other spends - Stores & Spares, IT, Capital Expenditure, Marketing and SG&A </li></ul></ul><ul><ul><li>Spend profile is skewed heavily towards direct materials as compared to indirect spend </li></ul></ul><ul><li>Ranbaxy’s Journey </li></ul><ul><ul><li>eSourcing journey started in 2002 with the formation of Team “CRUSOE” </li></ul></ul><ul><ul><ul><li>Creatively Releasing and Unleashing Substantial Operating Efficiencies </li></ul></ul></ul><ul><ul><li>After complete due diligence, CRUSOE Team decided to leverage Ariba’s On-Demand Sourcing platform and Sourcing Services in 2004 </li></ul></ul><ul><ul><li>We used Ariba’s Technology and Sourcing expertise to drive cost reduction </li></ul></ul><ul><ul><li>The Team adopted technology and showcased quick gains </li></ul></ul><ul><ul><li>Operating Teams were motivated to adopt and take it to next level </li></ul></ul><ul><ul><li>Now eSourcing is in the DNA of Ranbaxy’s Global Sourcing Team </li></ul></ul>© 2011 Ariba, Inc. All rights reserved.
    55. 55. Results Summary <ul><li>Significant Tangible PO cost reduction </li></ul><ul><ul><li>USD 400 Mn Sourced, average 7-8% savings </li></ul></ul><ul><ul><li>Conducted 2,000+ online projects </li></ul></ul><ul><ul><li>Current throughput three projects a day </li></ul></ul><ul><li>Other Benefits: </li></ul><ul><ul><li>Increased operational efficiency, better knowledge management system and transparent process </li></ul></ul><ul><ul><li>Standardized templates across all locations and departments </li></ul></ul><ul><ul><li>Clarity on data, prevents delays, increased productivity in sourcing function </li></ul></ul><ul><li>Diverse set of categories sourced </li></ul><ul><ul><li>Raw Materials, Intermediates, API, Excipients and Packaging Materials </li></ul></ul><ul><ul><ul><li>Institutionalized eSourcing for significant portion of its Intermediates’ spend, like metals and solvents. – We touched the core and most difficult categories </li></ul></ul></ul><ul><ul><li>MRO, Logistics, IT, Projects/Capex, Admin spend </li></ul></ul>© 2011 Ariba, Inc. All rights reserved.
    56. 56. We Innovated and Leveraged This Initiative to Address Significant Portion of Core Spend and Difficult Categories <ul><li>For limited supply base categories like APIs, RMIs, we leveraged Ariba’s unique Dutch auction format </li></ul><ul><li>For large supply base categories, we leveraged other formats </li></ul><ul><li>For Indirect spends like MRO, we leveraged participative formats like Full Disclosure </li></ul><ul><li>We institutionalized e-disposal drive for selling non-reusable recovered solvents by conducting forward auctions </li></ul><ul><li>In logistics, Team addressed major challenges in land, air and sea freight </li></ul><ul><ul><li>Rationalized vendor base and qualified a pool of vendors </li></ul></ul><ul><li>Drove Adoption by motivating Buyers </li></ul><ul><ul><li>Built this initiative as Internal Best Practice </li></ul></ul><ul><ul><li>Now buyers ask “why not eSourcing?” instead of “why eSourcing?” </li></ul></ul>Red – Large Spend Low Savings ; Black – Small spend High Savings © 2011 Ariba, Inc. All rights reserved.
    57. 57. Best Practices… <ul><li>Top Management Commitment - clearly articulated </li></ul><ul><li>Effective Organization Change Management </li></ul><ul><ul><li>Involvement and Ownership of Category Managers </li></ul></ul><ul><ul><li>Open discussion on challenges and ideas to overcome these </li></ul></ul><ul><ul><ul><li>specifically Direct Materials (RM, Intermediates, API) </li></ul></ul></ul><ul><ul><li>Consistent Communication to suppliers </li></ul></ul><ul><ul><li>Continue to nurture supplier relationships while leveraging platform for negotiation </li></ul></ul><ul><li>Structure to Drive eSourcing </li></ul><ul><ul><li>Full-time leader with a mandate to drive &quot;Spend Under Management&quot;, Savings&quot; and &quot;Adoption&quot;. </li></ul></ul><ul><ul><li>Clear targets for each buyer for &quot;Spend Under Management&quot; and Savings&quot; - Linked to Performance Management </li></ul></ul><ul><li>Monthly Steering Committee Review Rigor </li></ul><ul><ul><li>Track &quot;Plan&quot; vs &quot;Actual&quot; </li></ul></ul><ul><ul><li>Analyze, Drive accountability </li></ul></ul><ul><li>Reward and Recognition system – Monthly, Quarterly, Yearly </li></ul><ul><li>Regular Training “Certified eSourcing User” </li></ul>© 2011 Ariba, Inc. All rights reserved.
    58. 58. Questions © 2011 Ariba, Inc. All rights reserved.
    59. 59. “ Safe Harbor” and Confidential Information Statement <ul><li>This information reflects the status of Ariba solution planning as of January 2011. All such information is the Confidential Information of Ariba (per the contract between our companies), and must not be further disclosed, as stated in the confidentiality clause of that contract. This presentation contains only intended guidance and is not binding upon Ariba to any particular course of business, product strategy, and/or development. Its content is subject to change without notice. Ariba assumes no responsibility for errors or omissions in this document. Ariba shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials. </li></ul>© 2011 Ariba, Inc. All rights reserved.
    60. 60. Collaborative Sourcing: Achieving the Next Wave of Sourcing Savings © 2011 Ariba, Inc. All rights reserved. Sundar Kamakshisundaram - Ariba Andrew Bartolini - Ardent Partners Rohan Ranadive - BB&T Carl Hernas - Coach Govind Jaju - Ranbaxy Laboratories Ltd

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