Collaborative Sourcing - Unlocking Greater Savings and Value for You and Your Supply Chain

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  • . Low value transactions moved out and focus on strategic spendBottom-line: Procurement organizations are challenged to continue to drive value beyond traditional approaches and categories
  • But in discussing collaboration, we have to understand that social media users have surpassed email users and by a growing margin. It’s not that people are communicating less and that is why email usage is declining - they are actually communicating more but just through an increasing amount of channels. So the era of email isn’t over per se, it’s just evolving as all communication channels have throughout history. The digital landscape just makes those changes happen a lot more quickly, and distinct communication channels will become blurred.We must keep this in mind in our daily jobs especially with younger workers coming into the workforce. The opportunities to consume information are growing which is good and bad. We must consider the best ways to find the useful information.
  • So let’s talk more about collaborative sourcing and the collaborative sourcing framework. As we discussed earlier, it is important to remember that while technology can absolutely enable collaboration (think facebook, twitter, google+, etc.), although we’ll start with technology, a collaborative sourcing framework goes far beyond software.That said, collaborative – or strategic – sourcing usually include some version of four distinct areas:Spend analysis to aggegrate, classify, and enrich, and analyze spend for strategic sourcing decision-makingSourcing ranging from simple rfx’s to auction tools to potentially complex configuration and optimization toolsContract management to assure the terms agreed to during the sourcing process are recorded and observed in requisitioning and invoicing,and Supplier management encompassing both information management – gathering info on the supply bases – as well as performance management – to monitor and track how your suppliers are performing and take resulting and/or corrective action.
  • Company created in 1968. Family culture where customer would just get what they needed not thinking long termCustomers used to doing what they wanted without answering to anyoneCustomers were used to supplier so they never challenge their pricing or look to see if anyone was cheaper with same qualityHad to show customers benefits from having online solutions rather than receiving word documents
  • Business units did not have time to compare pricing to other suppliers to see if someone can do work cheaper without sacrificing qualityCould not advantage of volume discounts since each business unit was buying from different suppliersTo get contract executed quicker customer did not have extensive review of contracts. Exposed company to unnecessary risk.
  • In order for our department to be successful we know we needed the technology solutions to make process efficient and effective.Up until 2007 we have laid out the ground work for what role centralized procurement needs to play.From 2008 to 2010 we implemented system to help us accomplish our vision. Technology help our department take off.Also in 2010 the accounts payable department were brought under the same leadership as procurement to have a complete procure to pay process.
  • Since work a lot with legal we know what they are looking for in the contract and we make these additions to limit our exposure and not sacrifice the time Performing financial review was a big item with the economic situation. We were providing valuable information that customers did not have before.We needed to show the customer that we are not taking away there decision making. We were helping them make a more informed decision.Supplier now needed to enter information in system rather than send an email with word document.Customer always wanted response quick. Had to wait for mail runs. Now we can give responses quicker.Show benefits of using auctions. Demo auctions so they feel comfortable with process
  • Our spend system gave us the ability to supply information from all our source systems. Ability to show how much we really spend with a company and its subs. Ability to show how many suppliers we have in one area.Reactions from customer and upper management is WOW I never knew that.We get alerts if financial stability is downgraded for critical supplier and we are know looked to by our internal customer to provide them with a financial review of suppliersOne of our core values at JMFE is innovation. Need to be innovative in our process. Need to keep up to date with best practices in our area. Like we are doing here at the conference, we also meet with our peers at Toyota and other distributors and with other groups in our area.We now have processes and technology in place. We need to use these to provide more feedback and do more analysis
  • This is significant especially when you consider that of the 40% remaining 20% of that is our marketing area that we may never get an open door to. Since we are not mandated this is a great accomplishment as the majority of this is due to our performance and showing customers what we can do for them.
  • These savings are purely from negotiations. We still have customers that come to us that did initial negations and limits our savings opportunities.
  • We need to continue this trend going into the future but it will not be an easy task. We need to continue to offer superior customer service to our customers.Continue to generate savings opportunitiesOne of our core values at JMFE is innovation which we need to be to be successfulOur founder summed it up well.

Transcript

  • 1. B Collaborative Sourcing – Unlocking Greater Savings and Value for You and Your Supply Chain Sundar Kamakshisundaram – Ariba Chuck Wright – TopSource Ted Artemiou – JM Family Kate Abbruzzese – Nestle© 2012 Ariba, Inc. All rights reserved.
  • 2. AgendaIntroductionPanel Discussion Top Source – Chuck Wright Ted Artemiou – JM Family Kate Abbruzzese – NestleQ&A2 © 2012 Ariba, Inc. All rights reserved.
  • 3. Procurement Gains Recognition As a StrategicFunction, But Expectations Are Higher than Ever… Expectations of today’s purchasing organizations Transparency of actual spend, visibility Visibility and Cost into sourcing pipeline and resourcing Management requirements Effective common process applied to Improve process all procurement activity, with efficiencies appropriate approvals Deliver fast results Faster turnaround times and rapid transitions to new supply with sustainable long-term relationships …all on a limited budget Full payback in 4 – 8 mos. Add more value… More spend under management, more process coverage, more strategic impact3 © 2012 Ariba, Inc. All rights reserved.
  • 4. There’s Savings…and Everything Else Top 2 CPO Pressures Source: Ardent Partners, 20114 © 2012 Ariba, Inc. All rights reserved.
  • 5. Collaboration Is King Top 2 CPO Strategies Source: Ardent Partners, 20115 © 2012 Ariba, Inc. All rights reserved.
  • 6. How We Collaborate Has Changed Source: Comscore, June 20116 © 2012 Ariba, Inc. All rights reserved.
  • 7. Evolution of Sourcing Community Technology Capabilities CollaborativeBusiness SourcingValue Strategic Sourcing eSourcing Manual Sourcing Timeframe7 © 2012 Ariba, Inc. All rights reserved.
  • 8. Collaborative Sourcing Framework Spend Sourcing Analysis Technology Contract Management SIPM8 © 2012 Ariba, Inc. All rights reserved.
  • 9. B Chuck Wright Director – Procurement and Sourcing© 2012 Ariba, Inc. All rights reserved.
  • 10. TopSource Overview TopSource is a wholly owned subsidiary of Topco Associates LLC and provides not-for-resale (NFR) spend management. For 65 years, Topco has leveraged the scale with its members in procurement to lower product costs. For-Resale Programs NFR Spend Programs  Frozen  Construction  Dairy/Bakery  Equipment  Grocery  Hired Services  HBC/GM  IT Telecom  Rx  Logistics & Distribution  Fresh Meat  Marketing  Branded Meat  Office Products & Supplies  Produce  Packaging & Supplies  National Brands  HR Benefits  Fuel  Utilities10 © 2012 Ariba, Inc. All rights reserved.
  • 11. TopSource Overview TopSource customers represent over $150 billion in sales collectively. Our customer network includes grocery retailers, wholesalers, food manufacturers, food services providers, convenience stores, drug stores and other retail businesses.11 © 2012 Ariba, Inc. All rights reserved.
  • 12. TopSource Overview TopSource manages not-for-resale spend on behalf of our wholesale and retail customers. In addition, TopSource conducts auctions on behalf of all customers across for-resale and indirect spend.  Retail and Distribution Strategic Sourcing Professionals  Broad Scope Spend  Sourcing Leverage – over $13 Billion in potential indirect spend Management  Proven Sourcing Process  Enabling Technology (Spend Analytics, eSourcing, and Contract Management)  Dedicated Auctions team Auction Center  Robust automated online auction capability Of Excellence  Mature process and capabilities  Experience across multiple commodities12 © 2012 Ariba, Inc. All rights reserved.
  • 13. Sourcing Process – eSourcing TopSource utilizes a number of esourcing technology tools to conduct its strategic sourcing process more effectively and to institutionalize their learning. Contract Supplier Sourcing Auction Management Management  Issue RFx and  Negotiate  Standardize  Measure collect responses price contract creation supplier performance  Store profile  Maximize  Store all contract information competition related documents  Drive continuous  Create category  Increase  Generate improvement specific templates speed to notifications to savings buyers and teams  Monitor  Drive process supplier adoption  Consider  Provide robust financials alternative search and price scenarios reporting  Manage price changes13 © 2012 Ariba, Inc. All rights reserved.
  • 14. Implementation - Auctions14 © 2012 Ariba, Inc. All rights reserved.
  • 15. Implementation - RFx15 © 2012 Ariba, Inc. All rights reserved.
  • 16. Implementation – Contract Management16 © 2012 Ariba, Inc. All rights reserved.
  • 17. B Teddy Artemiou Senior Procurement Analyst© 2012 Ariba, Inc. All rights reserved.
  • 18. • JM Family Enterprises, Inc. is a diversified automotive corporation The worlds largest independent distributor of Toyotas and Scions A diversified financial services company One of the largest providers of finance and insurance products in the industry The worlds largest-volume Lexus dealership • Recognitions Number 17 on Fortune’s list of 100 Best Companies to Work For (14th consecutive year on list) Number 27 on Forbes list of America’s Largest Private Companies18 © 2012 Ariba, Inc. All rights reserved.
  • 19. Challenges• Centralized Procurement not mandated Department created in 2003 For 35 years purchasing was done at business unit level• Hard to break old habits Internal customers used to doing things their own way Hesitant to change or challenge suppliers• Getting internal customers to embrace process and technology Show benefits of centralized procurement Change from manual processes to online solutions19 © 2012 Ariba, Inc. All rights reserved.
  • 20. Effects on Company• Limits savings opportunities Pricing from current suppliers was not benchmarked to other suppliers Limited volume discounts and rebates• Business units would cut corners to speed up process Rush contracts through legal review Bypass risk review• No formal approval process No formal contract authorization policy Approvals received after purchases were made• No historical records to refer to No central repository for contracts or sourcing events20 © 2012 Ariba, Inc. All rights reserved.
  • 21. Introduction of Technology • A lot of changes in technology in a short period 2008 – Contract Management and Purchase Requisition systems 2009 – E-Sourcing and Spend Analysis 2010 – Migrate to Ariba Contract Management • A lot to take in for our internal customers Change to centralized procurement and new system to work with • Needed to educate internal customers on benefits of systems Communication was key21 © 2012 Ariba, Inc. All rights reserved.
  • 22. How to Win Them Over• Show added value of centralized procurement Do leg work – research, working with legal and risk, negotiate pricing and performance Challenge supplier pricing and consolidate supplier base Perform financial review of perspective suppliers• Collaboration With internal customers With suppliers• Show benefits of using systems Responses received quicker for sourcing events Auctions drive more savings Access to supplier networks Contract negotiations and approvals are in system Historical information is available22 © 2012 Ariba, Inc. All rights reserved.
  • 23. Continue winning them over?• Spend Analysis Information by suppliers – global supplier information Information by commodities• Supplier information On-going financials evaluations of critical suppliers Evaluate supplier performance• Innovation Bring new ideas to customers Continue to find ways to improve systems• Collaboration With other procurement groups With internal customers With suppliers23 © 2012 Ariba, Inc. All rights reserved.
  • 24. Results• Internal customers want to use us Increased spend managed by centralized procurement from 40% in 2007 to over 60% today Percentage of Spend Influenced to Total Spend 65% 63% 60% 55% 56% Percentage 50% 49% 45% 41% 40% 35% December 31, 2008 December 31, 2009 December 31, 2010 December 31, 201124 © 2012 Ariba, Inc. All rights reserved.
  • 25. Results• Driving more savings Consolidating supplier base Use of e-Sourcing and auctions result in more savings 26,000,000 Cost Savings 22,000,000 18,000,000 Amount 14,000,000 10,000,000 6,000,000 2,000,000 December 31, 2008 December 31, 2009 December 31, 2010 December 31, 2011• Reporting capabilities help management make more informed decisions Spend analysis reports help upper management see how much is being spent with suppliers• Financial Risk Internal customer request more analysis25 © 2012 Ariba, Inc. All rights reserved.
  • 26. Future• Maintaining high level of service to our customers• Generate savings to the company• Innovation• Keep doing it better26 © 2012 Ariba, Inc. All rights reserved.
  • 27. B Kate Abbruzzese Procurement Excellence, eSourcing Manager© 2012 Ariba, Inc. All rights reserved.
  • 28. Agenda • Introduction to Nestlé • Key Requirements in our global, dynamic environment • Further Opportunities28
  • 29. Nestlé at a Glance  CHF 83.6 billion in sales in 2011  328,000 employees  461 factories  10,000 brands  1 billion Nestlé products sold every day29
  • 30. The Nestlé story30
  • 31. Key Requirements in Unlocking Greater Value Globally • Ease of Adoption, Implementation, Sustainability • Appearance about the process, not the tool • Robust Functionality • RFx, eAuction, Collaborative events • Lean • Standardization without limitation in customizations • Broad, Transparent Collaborative Environment • People & Information31
  • 32. Key Requirements in Unlocking Greater Value Globally (continued) • Comprehensive Template Library • Structure, Content - core, customizable, consistent, versatile • Globally Inclusive • Currency, Language Translations, Support • Drives & Further Enables Business Continuity • Auditable & Traceable32
  • 33. Opportunities • Global eSourcing Program Refresh Training & Communication • Core Functionality Enhancements • Reporting Insights • Optimize, Anticipate, Execute, Measure33
  • 34. Results and Early Successes34
  • 35. Questions? Thank you35
  • 36. Summary and Key Take-aways Align Results Align Results to Objectives Executive Obtain Executive Sponsorship from senior leadership Sponsorships (e.g., CFO, Business Unit GM and or Functional Leaders) Collaborative Work on building collaborative relationships with partner Relationships functional groups (particularly Finance) Be Flexible Be willing to make difficult choices and do more with less Take on aggressive goals beyond sourcing Add more value… More spend under management, more process coverage, more strategic impact36 © 2012 Ariba, Inc. All rights reserved.
  • 37. Q&A Contact info: Sundar Kamakshisundaram: sundar@ariba.com37 © 2012 Ariba, Inc. All rights reserved.
  • 38. Share This Session…NOW…from your mobile! • All presentations are posted: Guidebook mobile app – Search Apple or Android app store for Guidebook – Enter code “collabor8” Or at Slideshare.net/Ariba • Share via email or social media **Come back soon – we are syncing #AribaLIVE audio and video interviews to the presentations**38 © 2012 Ariba, Inc. All rights reserved.