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Sustainable Procurement: Driving Diversity and Results into Your Supply Chain

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  • For the last five years, the annual spend with diverse suppliers was approximately $500,000. With a leadership focus, metrics for success, and a continued commitment by employees,

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  • 1. B Sustainable Procurement: Driving Diversity and Results into Your Supply Chain Kaiser Permanente The Walt Disney Company© 2012 Ariba, Inc. All rights reserved.
  • 2. Session Abstract Company objectives, customer preferences, and government mandates have put finding and developing a diverse and relevant supply base on the corporate agenda. In this session, leading enterprises share what works when developing key partnerships as part of their overall spend management strategy.2 © 2012 Ariba, Inc. All rights reserved.
  • 3. Speaker - Kaiser Permanente Dr. Sally Saba Executive Director for National Supplier Diversity Sally joined Kaiser Permanente as the Director of National Product Recall, where she led the initiative to maintain patient and employee safety in the event of recalls for medical and non-medical products across the organization. In late 2009, Sally joined the Supplier Diversity department to advance the program to its next level of excellence. Her leadership in this role ensures that small, minority, women and veteran owned businesses are afforded the maximum opportunity to do business with Kaiser Permanente and that the organization continues to elevate its commitment to these diverse suppliers in continued support of the diverse communities we serve.3 © 2012 Ariba, Inc. All rights reserved.
  • 4. Speaker - Kaiser Permanente Michael Innes Program Director, Supply Chain As a Program Director with Kaiser Permanente (KP) Supply Chain (SC) group, Michael Innes is responsible for identification through to implementation of strategic SC projects that support KP’s SC vision of integrating materials and information flows for Medication, Medical, and Surgical products within the clinical environment. Michael brings over 20 Years of senior level SC experience having worked within the SC practices for Ernst & Young Management Consultants and KPMG LLP Risk Advisory Services as well as other SC related companies. Michael has an MBA from California State University, Long Beach and Bachelors degree in Economics from University of California, Irvine and is a member in good standing of the APICS organization.4 © 2012 Ariba, Inc. All rights reserved.
  • 5. Speaker - The Walt Disney Company Shay R. Conway Shay Conway is Manager, Enterprise Procure to Pay for The Walt Disney Company. In this role Shay is responsible for the overall efficiency and effectiveness of Disney’s global procure to pay lifecycle including process governance, continuous improvement and technology management function. Prior to joining Disney in 2007, Shay held similar positions with leading organizations in healthcare and biotechnology industries5 © 2012 Ariba, Inc. All rights reserved.
  • 6. B National Supplier Diversity Kaiser Permanente Sally Saba, MD Executive Director, National Supplier Diversity Michael Innes Program Director, Supply Chain
  • 7. Kaiser Permanente9 million members THE NATION’S Total16,000+ physicians LARGEST Annual NONPROFIT Revenue HEALTHPLAN $45172,000+ employeesServing 9 states and theDistrict of Columbia AND Billion37 Hospitals Fully integrated health care600 medical offices, and delivery system1,015 office buildings7 | © Kaiser Permanente. All Rights Reserved.
  • 8. Our Mission To provide high- quality, affordable, health care services and to improve the health of our members and the communities we serve.8 | © Kaiser Permanente. All Rights Reserved.
  • 9. Fast Fact: There are nearly 600 Procurement & Supply employees serving this great organization.9 | © Kaiser Permanente. All Rights Reserved.
  • 10. In 2011, Kaiser Permanente committed to achieve an annual spend of $1 billion with Minority and Women Business Enterprises (MWBEs)10 | © Kaiser Permanente. All Rights Reserved.
  • 11. Why should we care about Supplier Diversity?11 | © Kaiser Permanente. All Rights Reserved.
  • 12. A Clear Link Exists Community Health: Economic Sustainability12 | © Kaiser Permanente. All Rights Reserved.
  • 13. Fact: 60-80% of New JOBS come from Small Businesses13 | © Kaiser Permanente. All Rights Reserved.
  • 14. Other Important Factors Maintaining and Building Revenue We are a Prime Federal Contractor Future growth in healthcare industry – market share Healthcare Reform and changing demographics necessitates it Our Customer Groups require it (Disney, Ford, City Group…etc) Our Leadership demands it We want to lead in „Corporate Social Responsibility‟14 | © Kaiser Permanente. All Rights Reserved.
  • 15. Reporting Tracks Progress • Leadership dashboards Actual 2011 • Shared vision Goal 2011 • Addressing key challenges Actual 2010 • Defining strategic initiatives • Celebrating successes15 | © Kaiser Permanente. All Rights Reserved.
  • 16. Key Tactical Drivers to Grow Diversity Spend Existing Diverse Suppliers Clean Data and Tracking Find New Suppliers Use them more Identify who the Find opportunities Keep the good ones suppliers are that we for new diverse (e.g. pay on time) buy from suppliers16 | © Kaiser Permanente. All Rights Reserved.
  • 17. Implementation Facts • Wave 1 – 6 Weeks • Ariba Procurement Content • Ariba PO Automation • >350 Vendors • 14 Catalogs • One vendor transacting >2,000 POs in one week17 | © Kaiser Permanente. All Rights Reserved.
  • 18. Next Steps • Round Trip (PO & Invoice) • High Volume (Capital Vendors) • Medical Implant & Surgical Vendors • Leverage Ariba Diversity Resources Identification of new suppliers Discovery program Data augmentation18 | © Kaiser Permanente. All Rights Reserved.
  • 19. B Catalog Management Transformation at The Walt Disney Company© 2012 Ariba, Inc. All rights reserved.
  • 20. The Walt Disney Company • The Walt Disney Company, together with its subsidiaries and affiliates, is a leading diversified international family entertainment and media enterprise with five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Interactive Media and Consumer Products • Procure to Pay Business Process Velocity • 150,000 employees, 24X7 operations • 1.5 million PO lines, 4.5 million invoices • 22,000 active eProcurement users20 © 2012 Ariba, Inc. All rights reserved.
  • 21. Systems Landscape • On Premise Ariba 9r1 Upstream Toolset • On Demand Ariba Procurement Content (APC 11s3) • Single Global Instance SAP ERP ECC 6.0 • SAP SRM 3.0 eProcurement (upgrade to 7.0 live on May 21st) ASN eEnablement Procurement Content (11s3) Category eSourcing Contract Management (eRFx 9r1) Management ERP Invoice Imaging (ACM 9r1) (ACW 9r1) (ECC 6.0) EDI PCard Data SRM (3.0/7.0) FOH Systems Analysis (9r1) Business Objects Explorer (BEx 3.x)21 © 2012 Ariba, Inc. All rights reserved.
  • 22. Background • Disney‟s eProcurement solution internally branded as eSource was deployed in 2005 as part of the companies enterprise-wide SAP implementation Hybrid SAP Supplier Relationship Management (SRM) and Ariba Buyer (Catalog) eProcurement system • Highly customized Ariba Buyer 8.x catalog solution Known as “Headless Buyer”… Complex content cleansing rules Custom approval workflows • At deployment approximately 425 supplier catalogs enabled Nearly all CIF format >1,000,000 items • Distributed catalog management model deployed Category sourcing teams tasked with managing catalog strategy and content22 © 2012 Ariba, Inc. All rights reserved.
  • 23. Challenges • The eSource catalog was generally well received at deployment however user adoption levels soon declined Catalog count decreased from 425 to 260 between 2005 and 2008 26% (68) had never been used 71% (181) accounted for <2% of total catalog transactions 100% require time and money to manage and maintain • Many high-volume preferred supplier catalogs performed poorly Supplier catalog count decreased from 425 to 260 between 2005 and 2008 Non-catalog transactions exceeded catalog based transactions leading to concerns about spend influence and realized savings goals • Technical and functional support requirements grew faster than resource availability Complex catalog content cleansing rules often required manual intervention and delayed catalog update cycle times Desired functional improvements deemed high risk and cost prohibitive to develop on the highly customized “headless buyer” platform23 © 2012 Ariba, Inc. All rights reserved.
  • 24. Transformation Objectives • Improve overall procure to pay efficiency and effectiveness through focused catalog management Develop a catalog management path forward strategy Optimize the catalog-enabled supplier base Reduce non-value add maintenance tasks • Drive maximum value from a lean, high performing and closely managed catalog enabled supplier base in support of business priorities Establish and manage catalog eligibility and format determination standards Maintain high volume and high-performing catalogs Optimize (manage up or out) high-volume but low-performance catalogs Eliminate low-potential catalogs24 © 2012 Ariba, Inc. All rights reserved.
  • 25. General Methodology High Volume, Low High Volume, High Performance Performance (Optimize) (Maintain) Volume Low Volume, Low Low Volume, High Performance Performance (Eliminate) (Eliminate) Performance25 © 2012 Ariba, Inc. All rights reserved.
  • 26. Eligibility Criteria • The table below highlights the most basic criteria to consider when determining rather or not to enable a supplier catalog The goal is not to enable as many catalogs as possible but rather to enable the most effective catalogs possible Transaction volume measures are illustrative only Catalog Eligible Yes No PO Transaction Volume < 25 per month X PO Transaction Volume > or = 25 per month X S&P Managed Contract: Yes X S&P Managed Contract: No X Contract Duration: > 12 months remaining X Contract Duration: < 12 months remaining X Goods Commodity X Services Commodity X26 © 2012 Ariba, Inc. All rights reserved.
  • 27. Format Determination • Once a determination has been made to move forward with a catalog it is essential to enable via the correct format • The table below highlights a few consideration points when determined catalog format however there are many other factors to consider as well Number of Catalog Items Punch-Out CIF <1,000 X >1,000 X Price Change Frequency Punch-Out CIF < or = 1 per month X > 1 per month X Punch-Out Value Add Features Punch-Out CIF Will Call Capability X Custom Quote Functionality X Custom Configurations X Supplier Technical Capability Punch-Out CIF Regular deployment of Punch-out catalogs for X other clients and a dedicated support structure Limited technical and support capabilities X27 © 2012 Ariba, Inc. All rights reserved.
  • 28. Case Study #1 • Challenge A high volume of manual PO change orders and delayed shipments were being driven by frequent price changes and users lack of confidence in Supplier ABC’s CIF catalog content accuracy • Solution Supplier ABC transitioned from CIF to Punch-out catalog format ensuring that price changes are immediately reflected and that catalog content is consistently accurate • Result Immediate increase in catalog performance from 56.8% to 76.1% Sharp decrease in the demand for PO change orders Decrease in catalog maintenance requirements28 © 2012 Ariba, Inc. All rights reserved.
  • 29. Case Study #2 • Challenge Supplier XYZ maintained a CIF catalog that was rarely utilized (<2% of transaction volume) by end users despite high transaction volumes with the vendor • Analysis Nearly all the items purchased through Supplier XYZ required some level of customization based on user requirements • Solution Transitioned Supplier XYZ from CIF to Punch-out catalog format with custom quoting functionality ensuring customized catalog content is easily available • Result Achieved 79.2% catalog performance within 30 days of Punch-out catalog launch29 © 2012 Ariba, Inc. All rights reserved.
  • 30. Overall Results • 425 supplier enabled catalogs reduced to 169 • 802,000 catalog items reduced to 185,000 • Overall catalog performance increased by 5% • Total catalog maintenance resource allocation reduced by >50%30 © 2012 Ariba, Inc. All rights reserved.
  • 31. Conclusions • Strive to enable and manage the most effective and efficient catalog enabled supplier base Establish minimum qualifications for catalog enablement including support for diversity and sustainability initiatives Continuously monitor catalog transaction and spend data against expectations Manage poorly performing catalogs up or out “A lot” of catalogs is neither a measure of efficiency or effectiveness • Engage directly with stakeholders to learn what factors drive purchasing behavior in target categories Don’t assume that simply enabling catalogs will drive spend compliance and transaction automation Drive catalog usage through collaboration and education • Work closely with suppliers to ensure catalog content is enabled via the most effective catalog format Choosing the correct catalog format is critical for long-term success Avoid a policy that dictates a single catalog format for all suppliers31 © 2012 Ariba, Inc. All rights reserved.
  • 32. Q&A Contact info: John Lark JLark@Ariba.com32 © 2012 Ariba, Inc. All rights reserved.
  • 33. 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**33 © 2012 Ariba, Inc. All rights reserved.