Realize Accelerated Savings Through Effective Category Management + Supplier Collaboration Strategies

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Accelerated Savings can be realized through effective category management strategies and supplier collaboration especially once the simple and low hanging sourcing categories are exhausted. Without a clear strategy on structuring an effective category management program that includes the combination of people, process and tools sustaining savings year over year becomes a daunting task. Successful sourcing programs leverage an optimal mix of Category intelligence, Strategic Sourcing technology and Supplier Collaboration strategies to execute shorter sourcing cycles, maintain bottom-line savings, and extend their sourcing efforts globally.

Attend this session to learn from leading edge companies from various industries how they measure, implement and realize accelerated savings through effective supplier collaboration, strategic sourcing and sound category management practices.

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  • Brief Overview of how we use Ariba in our business process; benefits of tool,
  • As we continue to evolve as an organization, it is important that all of us can clearly articulate our vision.To that end, we have augmented our ES&P Logo with three words that summarize our mission and represent our high-level business goals:As an organization, we are focused on being simple to work with, strategic in delivering value and mitigating risk, and secure in our supplier relationships.
  • Realize Accelerated Savings Through Effective Category Management + Supplier Collaboration Strategies

    1. 1. Realize Accelerated Savings throughEffective Category Management andSupplier Collaboration Strategies© 2013 Ariba, Inc. All rights reserved.May 2013
    2. 2. #AribaLIVEAgenda• Introduction• Panel Discussion• Key Takeaways• Q & A© 2013 Ariba, Inc. All rights reserved.2
    3. 3. #AribaLIVETop Challenges for CPOs© 2013 Ariba, Inc. All rights reserved.Source: 2012 CPO Agenda, Aberdeen Group61% of you will haveincreased costsavings targets44% of these targets willbe greater than5%Creating procurementprocess efficiencies isthe top priority for CFOsand CPO’s
    4. 4. #AribaLIVEThe Panel TeamSpeakers: Dustin Neild, Covidien Eric Noyes– UHGGurdeep Singh– Cairn India Ltd.© 2013 Ariba, Inc. All rights reserved.4Moderator : Sundar Kamakshisundaram,Sr. Director – Solutions Marketing, Ariba, Inc
    5. 5. #AribaLIVEAgenda• Introduction• Panel Discussion• Key Takeaways• Q & A© 2013 Ariba, Inc. All rights reserved.5
    6. 6. Dustin NeildGlobal Program Manager –eSourcing
    7. 7. Integrity, Honesty, Safety and QualityWe will conduct business withintegrityand honesty in compliance with alllawsand Company policy.We are committed to produceproductsthat are safe and of thehighest quality for our customers.7 | Confidential & Proprietary
    8. 8. 8 |is …Covidien is a $12 billion global healthcare products leaderdedicated to innovation and long-term growth. Covidiencreates innovative medical solutions for better patientoutcomes and delivers value through clinical leadershipand excellence.Medical Supplies$1.74B2012 Net Sales by Business Segment - 11.85 BillionMedical Devices$8.11BPharmaceuticals$2.0B
    9. 9. Our Mission and VisionCreate and deliver innovative healthcare solutions, developedin ethical collaboration with medical professionals, which enhancethe quality of life for patients and improve outcomes for ourcustomers and our shareholders.Deliver unmatched value to our customers by providing solutionsthat improve patient outcomes and healthcare delivery throughclinically relevant and economically valuable innovation.Our VisionOur Mission11 |
    10. 10. 51 Manufacturing Facilities in 18 Countries14 |Countries with Multiple FacilitiesUnited States 23 France 2Canada 2 Germany 2Mexico 3 Ireland 4United Kingdom 2
    11. 11. Covidien’s Ariba Footprint:19 |FY12•Ariba Sourcing Professional•$1B SourcedContractMfg10%Direct47%Indirect43%FY13 goals• Capture more Spend/Projects• Better link sourcingproductivity to performancegoals• Measure productivityconsistently & globally• Improve Auditability – linksavings to projects• Categorize Savings better &support more advancedanalytics• Improve global visibility toreal-time savingsperformance (Dashboards)
    12. 12. Typical Savings Reporting Use Case:20 | User Completed a Strategic Sourcing Project and selected a supplier.The project is scheduled to begin saving $1.2M annually when it begins onJan 1st. The $1.2M is allocated across 2 GBUs and several Locations.Management wants to know:• What’s the “effective” savings – i.e. savings that occur in the presentFY. Note: COV uses an OCT-SEP FY.• What’s the status of this savings?• Is the project on track?• On time to deliver when planned?• Delivering +/- from the estimate?• Is the Team/group/organization on track to FY goals?• Which projects are lagging/require chasing?• Which strategies are most productive?• Which categories are most/least productive?Challenge: How to measure “savings” from non-competitive Sourcing Projects
    13. 13. Insert: Project Pipeline and Savings Tracking21 | Uniform way for all teams to measure Savings/Productivity Links savings reporting to actual projects Creates auditable Approval Process Plots & Forecasts multiple savings measures, over timeLegend: OOTB, Repurposed, CustomOOTB Savings Measures• Estimated• Negotiated• ActualCovidien Savings Measures• Estimated Savings• Negotiated• Implemented• Latest Estimate• Latest_Estimate (for reporting)
    14. 14. New fields:22 |Covidien Savings Form FieldsLegend: OOTB, Repurposed, Custom• Commodity• GBU (Department)• Contract Awarded• Savings Type*• Location• Supplier(s)• Source of Baseline*• Sourcing Lever (execution strategy)• Material Category• Sourcing Lever Region
    15. 15. 23 |Example:
    16. 16. 24 |Measure Definition UseEstimated Savings Initial estimate(sometimesgoal/plan/budget)• Set up initialplan years.• Long term,measure howwell me meet orbeat our initialestimatesNegotiated All Negotiated savings(including any rebatesor potential thresholds)To see if weultimately realize allnegotiated savings(or measure “leak”)Implemented Actual savingsrealized/implementedMeasure overallperformanceLatest Estimate aka: LE – most recentestimateHigh Confidenceforecasting basedon latest data
    17. 17. Some Standard Reports:• Pipeline Report: All Active/planned projects(and what savings, if any, areprojected/reported on them)• FY+ Report: All projects contributing to thisand future FYs (all statuses)• Current FY Allocation detail: Just this year,cumulative.25 |
    18. 18. Typical Dashboard (Director w/ Multiple Teams):26 |
    19. 19. Global Savings FY Allocation Report27 |
    20. 20. ContractMfg16%Direct45%Indirect39%ContractMfg10%Direct47%Indirect43%Then & Now:28 |FY12•Ariba Sourcing Professional•$1B SourcedFY13 (ytd)•Sourcing Pro + ProjectPipeline and Savings Tracker•$1.7 Sourced in FY13*
    21. 21. What’s Behind the Increase?• More Project types are being captured• FY12 Projects (previously uncaptured) havenow been captured to show FY13 impact• Users who want to prove their jobperformance, ensure they havesavings forms!• Managers want their dashboards to beaccurate and complete.29 |
    22. 22. Improved Savings Analysis:30 |
    23. 23. Improved Savings Analysis:31 |
    24. 24. Next Generation:• Use negative savings amounts to createheadwinds• Directors & above will enter headwinds & tailwinds• Tailored Savings form templates fordifferent groups• Streamlining approval process• Measure & Investigate “leak”• Monthly Savings reports / linking savings reportsto performance metrics• Report on outstanding approval tasks32 |
    25. 25. Lessons learned:• Start Early – don’t wait for a new FY• Plan for “Carryover” from prior years• Audit the transfer from prior sources• Get all the “measures” right the first time (updatingmany savings forms is a lot of work)• Use the system approvals process as much as possible• Do have oversight from Sourcing Excellence or anindependent party• Plan for data loads – leave enough time at quarter-end• Use Reports or saved searches for users withmany forms33 |
    26. 26. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.34Enterprise Sourcing & ProcurementUHG Procurement & Sourcing TransformationMay 8, 2013Eric NoyesSenior Director, Enterprise Sourcing & Procurement
    27. 27. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.35UnitedHealth Group is the most diversified health care company in the United States anda leader worldwide in helping people live healthier lives and helping to make the healthsystem work better for everyone.• Serving more than 80 million individuals worldwide with health benefits and services.• Operations in all 50 states in the United States and 20 other countries worldwide.• Headquartered in Minnetonka, MN• 2012 revenues of $110.6 billion• Fortune 500 ranking: No. 22• Named a member of Dow Industrial Average in 2012• Named World’s Most Admired Company in the Insurance and Managed Care sector,2010, 2011, 2012, by Fortune.• 133,000 employees• Founded in 1974UHG at a Glance
    28. 28. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.36• United Healthcare, our Health Benefits platform, serves key markets and geographicregions with a broad range of health benefit products and services for bothconsumers and benefit sponsors. We serve people in employer-sponsored healthplans, those enrolled in Medicare and Medicaid, as well as those who purchase theirown health plans.– Employer & Individual– Community & State– Medicare & Retirement– Military & Veterans• Optum, our Health Services platform, focuses on helping improve the health caresystem itself, including population health management, care delivery and improvingthe clinical and operating elements of the system.– OptumHealth– OptumInsight– OptumRxOur Businesses
    29. 29. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.37Establishing ES&P Governance and Controls were established:• Binding Authority Policy – Updated to Require ES&P Approval• New Supplier Setup – Requires ES&P Involvement and Approval• Mandate Ariba request to engage with ES&P• Created dedicated Vendor Oversight Team ES&P Operations team created within ES&P• Define and Enforce Policies and Procedures• Develop Processes for Procurement Activities• Support and Develop ES&P ToolsES&POperations(18)Commodities(183)M&A(5)
    30. 30. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.38Establishing Enterprise Sourcing & ProcurementOutstanding Customer ServiceMaximize ValueMitigate RiskCommon, Practical Solutionssimple:create a simpleexperience forour customerthat automatesboth value andcontrolfunctionsstrategic:be a strategicpartner in thesourcing andbuying processboth on valuecreation andrisk mitigationsecure:manage therisk introducedto our businessand brandthroughcommerce withsuppliersIn 2010, UnitedHealth Group centralized procurement functions across allbusiness units with a vision and four main business goals:
    31. 31. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.39ES&P by the Numbers~ 12,000 Requisitions per month~ Over 200 employees(Domestic and off-shore)~ $4.5 Billion in Indirect Managed Spend~ 15% of new suppliers require risk assessments~ Run-rate savings targets achieved for2010, 2011 and 2012BuyersAssistanceRFxNewSupplier30 – 40 new supplier setups delivered per month
    32. 32. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.40ES&P Timeline2013:− Deliver 2013 Run-Rate Savings Target− Complete Wave 3 Ariba implementation (Contracts Pro)− Complete Wave 2 Supplier Data Hub Implementation (Data Mart /Reporting Warehouse)− Develop and optimize Strategic Sourcing organization− Complete build-out of offshore team2012:− Complete Wave 2 Ariba implementations (Sourcing Pro)− Complete Archer eGRC implementation− Complete Wave 1 Supplier Data Hub implementation− Continue to build-out offshore teamAlign Build OptimizeQ1 Q220 10Q3 Q4 Q1 Q220 11Q3 Q4 Q1 Q220 12Q3 Q4 Q1 Q220 13Q3 Q42011:− Developed and drove Procurement Business Goals− Delivered 2011 Run-Rate Savings Target− Purchased Ariba Procurement technology suite anddeployed Wave 1 implementation (P2P & SIM)− Built-out offshore staff2010:− Centralized Procurement in Enterprise Operations− Developed and deployed new organizational structure− Built and staffed organization− Built detailed Future State Roadmap− Delivered 2012 Run-Rate Savings Target− Completed Procurement Tools assessmentMaximize ValueOutstanding CustomerServiceMitigate RiskPractical, InnovativeSolutions
    33. 33. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.41ES&P Technology UpdatesRisk ToolContracts SIMP2PSourcingWorkIntakeSourcing – Established centralized Sourcing team to facilitate UHG Sourcing EventsIncreased amount of competitive biddingDrives material run-rate savings andImproves UHG’s ability to leverage scaleDocumentation and formality to award process, eliminates subjectivityA R I B AKey Metrics• Spend amount ($) competitively bid• Amount bid by diverse suppliers• Cost savings ($)
    34. 34. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.42 Dedicated Team: Sourcing Process Expertise Setting sourcing strategy Business requirements definition Process definition Roles & responsibilities for all parties “No-hand-off” model – continuous participation & ownership of commoditymanager and business Continuous connection to our businesses on sourcing events Benchmarking Ariba Sourcing Tool Owner & SME for the Ariba Sourcing Tool Event (RFP, RFI, RFx Auction) expertise Event Management Liaison to the suppliers for tool & process interface First line of system trouble-shooting & triage Management of library of templates, attachments, content etc.Sourcing “Center of Excellence Model” ApproachWhat is our Sourcing Team’s Focus today?
    35. 35. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.43Three Year Strategy2012 2013 2014StrategicFocus• Understanding theAriba Tool• Developing ProcessMatter Expertise• Mastering theAriba Tool• Forecasting &Planning of Work• Going BeyondRFx: Auctions,Dutch Auctionsetc.KeyDeliverables• Increased Proficiency• Savings• Basic metrics• Even more savings• Integration withAriba Contracts• Improved Reporting& Metrics• Customizablesolutions for ourcustomersInvestmentRequests• Training• DefineCommodity/SourcingRoles &Responsibilities• Build the Team:FTE’s to meetdemand (5 moreFTE’s)• Dedicated SourcingEvent Room
    36. 36. Any use, copying or distribution without written permission from UnitedHealth Group is prohibited.44SummarySummary/Key Benefits– Continue to experience evolution in ourbusiness processes– Visibility into our processes and metrics haveincreased– Increased automation and standardization– Drive additional hard dollar savings– Improved controls and policy compliance► We operate in a highly regulated industry► Driving program compliance is critical to our success
    37. 37. © 2013 Cairn India LimitedMay 2013Cairn’s Procure to Pay (P2P) TransformationCategory Management and Supplier CollaborationGurdeep Singh - Deputy General Manager, Procurement and Supply Chain
    38. 38. 46Agenda Cairn: An overview Our assessment of our procurement capabilities Journey towards becoming a High Performance Procurementorganization Next steps
    39. 39. 47Agenda Cairn: An overview Our assessment of our procurement capabilities Journey towards becoming a High Performance Procurementorganization Next steps
    40. 40. 48Overview“Fastest growing energycompany in the world,2012” - Platts Top 250“Runners up award toRaageshwari Oil Mine byNational Safety Awards (Mines)by GoI”“16 awards in 26th MinesSafety week 2012 underaegis of DGMS, Ajmer”SRI LANKAPR-OSN-2004/1KG-DWN-98/2KG-ONN-2003/1KG-OSN-2009/3INDIASOUTH AFRICAMB-DWN-2009/1CB/OS-2RJ-ON-90/1BLOCK 1RAVVASL-2007-01-001• Amongst top 20 global independentE&P company; Market Cap>US$12bn• Q3 FY 2012-13 average daily grossoperated production of over 200,000boepd; Currently operating ~25% ofIndia’s domestic oil production• Proven and Probable resource baseover 1bn boe
    41. 41. 49Procurement effectiveness is critical to CairnProcurementis a keyfoundation toCairn’sSuccessWe deal with over 2200suppliers, which leadsto over 6400 purchaseorders and 50,000invoicesLogistics50 Cairn FTE’s aredevoted to finding,negotiating &contracting withsuppliersResources400 different peopleare required to interactin the procurementcycleOrganization ImpactAt any one time $1Bnspend is committed withsuppliers to deliver goods& services essential tothe businessSpend Impact
    42. 42. 50Agenda Cairn: An overview Our assessment of our procurement capabilities Journey towards becoming a High Performance Procurementorganization Next steps
    43. 43. 51Cairn – Procurement Maturity Matrix in Apr’12Major ModeratePerformance GapsOrganizationalAlignment / ModelSourcing& Category ManagementOperating ProcessManagementSupplier RelationshipManagementKnowledge/ Information ManagementPerformanceManagementHuman Resources ManagementSupplyManagementStrategyProcess gaps, non-compliance and long lead time were key issuesInadequate transparency and information sharing across functionsSubstantial (and increasing) contracting load – Significant potential for delayLowSource: A.T. Kearney’s House of Procurement
    44. 44. 52Significant challenges through the PurchaseRequisition (PR) to Pay process cycleRequirementsFinalizedPlace PurchaseOrder (PO) /Contract in SAPGoods / Servicereceived by UserGRN/SES Created by UserInvoiceReceived fromSupplierInvoice MatchingSuppliers Paid•No system based end-to-end Sourcing solution available•One way to purchase every item - SAP PR (PurchaseRequisition)•Multiple Tenders for the same/similar material/services•Lack of structured and standard way of communication withvendor•Lack of visibility of Invoice status to VendorPO/Callout in SAP
    45. 45. 53Our challenges were reflected in the metricsProcurement TAT very high~ 50 days (<$50K)~ 150 days (>$100K)Lack of visibility of savings andpotential vendor databaseChallenges in adding new vendorsto the sourcing database% Payments within 30 days ofinvoice receipt at 75%First pass yield of Invoices at 40%Limited Spend review & categorymanagement~80% material codes used once
    46. 46. 54Procurement… the dinosaur
    47. 47. 55Agenda Cairn: An overview Our assessment of our procurement capabilities Journey towards becoming a High Performance Procurementorganization Next steps
    48. 48. 56Initiatives towards areas of improvementProcurement Dimension Key initiativesSourcing &CategoryManagementRequisition toPay processProcurementTechnology1 Improving spend visibility23Multiple buying channels4Electronic supplier collaboration5E-sourcing and visibility at eachstageEasy data availability for analytics
    49. 49. 571. Improving spend visibility 80,000+ materials re-codified [UNSPSC - preferred classification structure& eOTD - preferred codification dictionary]
    50. 50. 58MIS – PACE(e-Passport)SAP ECCSupplierInteractionwithindividualbuyers/usersManualPurchaseRequisitionExisting IT LandscapeMDM
    51. 51. 59MDMMISSAP ECCSupplierCollaborationReq. -To –Pay (RTP)SRM Module(On Premise)Contract Management (CM)(On Cloud)eSourcing (On Cloud)UserPortal*CatalogsA combination of SAP SRM and Ariba chosen todrive the change(On Cloud)(On Premise)
    52. 52. 602. E-Sourcing and Visibility at each StageKey benefits Online submission providingmore time for bid submission(saves on courier delivery time) No need for physicalsignatures, print-outs, courier Re-submission / clarificationsresponse is easier More opportunities for suppliers;enabling better supplierparticipation Fast Track implementation within 2 months Spend adoption at 90%+ 500+ projects completed with $1.8 Bn spend in pipeline 2700+ Vendors on boarded
    53. 53. 613. Easy data availability for analytics e-Sourcing tool helps capture thedetails on categories, vendors andspends Web reports can be accessedanytime, from anywhere Standardized reports configured in SAP Implementing SAP BI/BO for accessingrelevant information in future
    54. 54. 624. Multiple buying channelsMultipleBuyingChannelsPRF- LowvaluepurchasesCreditCardCatalogUser LedProcurementPurchaseRequisitionInitially, primary channel of procurement was a PR-PO process [requisition to order]SimplifiedProcessSimplifiedProcess
    55. 55. 635. Electronic Supplier CollaborationARIBAContracts1B2B Integration2Vendor Portal3Standard Contract templates & Faster Buying Channel Standard Terms; Transparent and faster negotiation Reduce To utilize the suppliers’ feedback to have more market-aligned terms &conditions to shortening the sourcing cycleEstablish business integration with other vendors Seamless integration of backend ERP systems with keystrategic suppliers by using Quadrem Data transfer (PO, SES, invoices) – expected to ease invoiceprocessing & enable on-time paymentOn time information to all Suppliers everytime Enabled vendor portal using SAP SRM for all vendors Suppliers get information on PO, GRN/SES, Invoice status, Invoice deductions Ease invoice processing & enable on-time payment
    56. 56. 64Cairn – Current Procurement Maturity MatrixMajor ModeratePerformance GapsOrganizationalAlignment / ModelSourcing& CategoryManagementOperating ProcessManagementSupplier RelationshipManagementKnowledge/ Information ManagementPerformanceManagementHuman Resources ManagementSupplyManagementStrategyProcess gaps, non-compliance and long lead time were key issuesInadequate transparency and information sharing across functionsSubstantial (and increasing) contracting load – Significant potential for delayLow
    57. 57. 65Agenda Cairn: An overview Our assessment of our procurement capabilities Journey towards becoming a High Performance Procurementorganization Next steps
    58. 58. 66Next Steps Codification of materials for Projects and codification of Services Continued focus on ensuring 100% sourcing through Ariba Bring on-board more strategic suppliers through integration with Quadrem Greater usage of e-auctions for relevant categories in due course Leverage the building blocks to ensure more focused categorymanagement and strategic sourcing
    59. 59. 67ThanksGurdeep SinghDGM - PSCMCairn India LtdNinth Floor | Tower-B | Paras Twin Tower | Golf Course Road | Sector-54 |Gurgaon122002Email: gurdeep.singh@cairnindia.comM: +91 8527594802; D: +91 124 459 4353
    60. 60. #AribaLIVEPlease Complete Session SurveyGo to Surveys© 2013 Ariba, Inc. All rights reserved.68Select SessionClickChoose oneRate SessionThank you for joining us
    61. 61. Questions?Contact info:Sundar Kamakshisundaram: sundar@ariba.com© 2013 Ariba, Inc. All rights reserved.69

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